Good site - The article below is an interesting one
in light of the recent Board appointment.
biz.yahoo.com
Some longer-term 'possibilities' are:
1. ERP Alliance? (Microsoft)
2. Acquisition trail? (IBM)
Food for thought!
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Enterprise Computing
March 15, 1999 (Vol. 21, Issue 11)
Eyeing ERP
The industry holds its breath as Microsoft and IBM move toward the ERP arena
By Stannie Holt, Ted Smalley Bowen, and Bob Trott
As business gurus like to remind us, companies need to constantly keep an eye out for
their next competitive opportunities or they will end up like horse-drawn carriage builders
in the 1920s.
So these gurus probably think it odd that two of the largest companies in IT, Microsoft and
IBM, have not yet established themselves in one of the largest, most lucrative fields:
packaged enterprise applications. Microsoft and IBM do not appear among most lists of
the top 10 or even the top 100 vendors of the software that does workaday -- but vital --
business tasks such as calculating a factory's optimum production, buying materials, cutting
paychecks, and dispatching sales representatives.
But the market abhors a vacuum, and now both companies are starting to take roles --
albeit small and somewhat passive -- in business applications.
Whether this activity bodes well for established application vendors depends on if they see
Microsoft and IBM as friendly giants that will help them out with platforms and services to
accompany their products, or as 800-pound gorillas that want to kick them out of their
chairs.
One of IBM's more obvious moves toward the business application market came in 1998
when it started a new subsidiary called Corepoint. This unit was charged with making
applications for sales, call centers, and customer service (known collectively as front-office
applications), and offering technology and services to link buyers and sellers in supply
chains.
Microsoft has factored itself into this market more subtly with its Windows NT operating
system and Component Object Model, pitched as shells upon which business applications
are built. Many of these programs were showcased at two recent Microsoft events -- its
DNA [Distributed interNetworking Architecture] for Manufacturing launch in late February
and its Extensible Markup Language-based electronic-commerce platform announcement
in early March.
Speculation periodically bubbles up that in addition to these behind-the-scenes moves,
Microsoft will start selling its own applications, perhaps by buying a faltering vendor such
as Baan.
A golden field
Despite the years of success that IBM and Microsoft have enjoyed without completely
entering the business application market, the lure of this segment is obvious.
"Quite bluntly, it's where the money is," said Steve Cole, a senior analyst at Forrester
Research, in Cambridge, Mass.
Although the market has cooled off in the past three quarters as prospective customers
have become preoccupied with year-2000 fixes, most analysts expect demand to rebound
after next January.
In 2000, the market for all enterprise applications -- front-office, supply-chain planning,
manufacturing, financial, and human resources (the last four known collectively as
enterprise resource planning, or ERP) -- should be at least $16 billion, according to
Forrester's estimates. And it should keep growing at least at low double-digit rates for the
next several years, if not necessarily at the 30 percent per year Forrester predicted in 1997
-- its most recent overall study, according to Cole.
Another reason for these two IT giants to enter the business application market, Cole
pointed out, is to drive demand for their existing offerings -- notably operating systems,
hardware, databases, tools, and services. IBM's AS/400 system is at least as popular in
some industries as Unix, and its RS/6000 and OS/390 platforms have loyal fans.
But the impact of Windows NT, which is grabbing larger market shares every year, is
impossible to ignore. AMR Research, in Boston, estimated that two-thirds of all enterprise
applications will be running on NT platforms by 2002.
With that in mind, IBM's Windows NT strategy guarantees it a portion of the platform,
middleware, and service revenues generated by ERP applications on that OS.
And IBM has its own ace in the hole: its massive mainframes, such as Deep Blue, and the
researchers who build them. Imagine all of that processing power turned loose on, say,
supply-chain planning, which is really just a huge number-crunching problem, Cole said.
"If [IBM] can forecast the weather, surely [it] could figure out how many boxes of
Wheaties I ought to stock," Cole added.
Experts warn that one major reason not to jump into ERP and front-office applications is
that they require a great deal of knowledge about business workings, such as the most
efficient way to route a $50,000 purchase order or lay out a car factory.
But Cole said industry giants such as IBM and Microsoft can build messaging frameworks
and components that can handle the underlying transactions while letting partners handle all
of the business content.
"That's backing into applications, rather than approaching by the front door," Cole said.
By that analogy, IBM is entering the enterprise application field through both doors.
IBM: We're here; get used to it
IBM is involved in a complex web of competitive and cooperative relationships. Its
hardware and software platform groups do brisk business working with established ERP
players, as does the company's huge professional services group.
Although not offering a full suite of ERP wares, its Corepoint division competes with
customer relationship management products from Baan and Oracle, as well as with
front-office-only powers such as Siebel, Vantive, and Clarify. IBM also supplies the
building blocks from which software makers can construct targeted, competitive ERP
systems.
Those building blocks include the San Francisco Java frameworks of business application
modules and infrastructure, as well as its WebSphere server platform.
Although IBM is sympathetic to the needs of its partners in the ERP camp, the market is
changing and all bets are essentially off in getting to the next stage, according to Joe
Damassa, vice president of application development marketing at IBM, in Somers, N.Y.
"In some cases [the San Francisco components] will allow our partners to compete with
the established ERP vendors. We make no bones about it; we're an arms dealer in that
race. We're trying to support the growth and emergence of a new market," Damassa said.
"Our portfolio will grow as components become more mature, and that will put us at odds
with our traditional partners. We move a lot of ERP systems on IBM hardware and
software. We may step on some toes, but they're evolving, too," Damassa continued. "As
long as we keep customers' needs in mind, the market leaders will come and go."
Microsoft: Jump on our hay ride
In contrast to IBM's position, Microsoft comes across as downright mild-mannered
toward established enterprise vendors.
At Microsoft's DNA for Manufacturing (DNA-M) showcase on Feb. 23, President Steve
Ballmer reiterated the company's longstanding public position that it is happy to provide
architecture that third parties can use for their solutions, but it has no intention of getting
any deeper into vertical ERP markets.
Microsoft's goal is to let its customers create Windows-based, yet legacy-friendly,
platforms to integrate previously separate applications without new infrastructure
investments, Ballmer said.
"We are still not getting in the manufacturing industry," Ballmer said. "We will provide the
infrastructure that lets those in the manufacturing industry do their jobs."
Microsoft's partners and customers appear to endorse this approach.
Mike Smith, national manufacturing systems manager for Ocean Spray Cranberries, based
in Henderson, Nev., said his company is embracing DNA-M because it is flexible across
all of Ocean Spray's divisions and is easily extended with small dabs of code to add new
functionality.
"We don't have to redevelop new solutions from scratch," said Smith, whose company
uses SAP's R/3 ERP suite and Intellution technologies on NT Workstations.
"For us, [Microsoft] provides a tremendous effect of leveling the field," said Mike
Ehrenburg, CTO of manufacturing application maker Marcam Solutions, in Newton,
Mass. Microsoft's support gives Marcam, which reported about $100 million in revenues
in 1997, the capability to square off with SAP -- which is 30 times its size -- by taking
care of integration and other issues while Marcam focuses on the needs of the food,
pharmaceutical, and other process-production industries, he said.
Marcam is not a pure-Microsoft play -- its flagship Protean ERP suite also runs on Unix
and works with Oracle and IBM databases -- but its architecture and application servers
are straight out of the Windows DNA book, Ehrenburg said.
An even stronger backer is all-Microsoft shop Pivotal Software, in Kirkland, Wash. This
front-office software maker "bet the farm on Microsoft" five years ago when it was starting
out, according to Bob Runge, vice president for worldwide marketing. The company has
offered its applications on only Windows NT platforms and embraces the BackOffice
suite, he said.
"We sell very serious enterprise solutions. There are higher-order problems to solve, so the
less we have to worry about lower-level problems -- every detail of the platform -- the
better," Runge said.
Pivotal has no fear that its giant partner will become a competitor.
"There is no indication that Microsoft is going to enter the packaged enterprise applications
market," Runge said. "They have been adamant about their neutrality as a platform vendor
to ISVs .... We don't see them as a competitor."
Will they or won't they?
Industry observers and odds makers are divided on this issue.
Forrester's Cole takes the position that Microsoft does not want the trouble and expense
of amassing all of the business knowledge necessary to write effective enterprise
applications. The company knows that its strength lies in providing infrastructure and tools,
he said.
"My impression is [it will] continue to do that. I don't see Microsoft Manufacturing or
Microsoft Payroll in the near future," Cole said.
Sam Wee, an analyst at Benchmarking Partners, in Boston, agreed that Microsoft is
unlikely to launch an ERP suite that competes with SAP or Baan. But he said he believes it
might show an interest in the functions users generally add on top of ERP, such as sales,
customer service, and supply-chain planning.
Of course, moving into this field creates the risk of antagonizing partners, Wee
acknowledged.
"But we've seen this sort of thing with ERP vendors all the time: partners one day,
competitors the next," Wee said.
The classic model of such "coopetition" is Oracle, which entered the application field a
decade ago by building financial applications that work only with its databases.
Oracle is now one of the largest application vendors in both ERP and front-office
packages. It often finds itself walking a tightrope with vendors that are its customers for
databases, design tools, and so forth, but rivals for packaged applications.
And what if Microsoft chooses to take a similar approach?
"I think we'd be in the same situation [with Microsoft]. That might be a bit unpleasant,"
Marcam's Ehrenburg said.
Inching closer to enterprise resource planning
Here is a sampling of the steps that IBM and Microsoft have taken toward establishing
their roles in the packaged-applications field.
IBM begins offering supply-chain support Early 1990s
Microsoft launches DNA for Financial Services December 1997
IBM establishes front-office subsidiary Corepoint November 1998
Microsoft launches DNA for Manufacturing February 1999
Microsoft launches XML-based BizTalk framework March 1999 for electronic commerce
Copyright (c) 1999 InfoWorld Media Group Inc. |
