Advertisement

Member Login

Advertisement
Advertisement

JonERP Newsletter Invitation

Get the JonERP Bi-Monthly Special Events Newsletter!





Advertisement

JonERP.com Podcast Feedback

"I listen to all your SAP podcasts in my car, until my kids get mad at me and make me put on music for them instead. Keep up the good work!"

- Robert Max, 2007 Solution Manager Community of Interest, and Systems Management Special Interest Group Chair for the Americas' SAP Users Group -

More JonERP.com Site Feedback

"I have been reading your SAP newsletters for over a decade now... It's remarkable that you have now embraced the Web 2.0 delivery methods - Podcasts, Twitter etc - without sacrificing the in-depth nature of your analyses!" - Dave Sen, SAP Enterprise Architect -

JonERP.com Visitor Feedback

"Jon, let me congratulate you on building a site which exclusively caters to SAP skills and careers and answers a lot of doubts young and senior SAP consultants have about what skills to have and get trained on."

JonERP.com Reader Feedback

"I visit JonERP.com almost everyday to check out whether there is something new and what the future trends hold for SAP skills and careers."

More JonERP.com Site Feedback

"I was struggling with career direction a few years ago and you provided me with some extremely valuable advise. I've been very satisfied with my career direction which was influenced in large part by your coaching. Thanks again!" - Keith

New JonERP Feedback

"You have always been there with a prompt reply when it matters the most. You have really been a mentor in true sense."

- Hussain Sehorewala -


SAP Article Classics from JonERP.com

Jon has been writing about SAP consulting trends and answering SAP career questions since 1995. Over the years, he's published many popular articles online that have disappeared from the Internet. In this section, we are reclaiming the "best of the archives" and sharing Jon's classic SAP articles from years gone by.

In each case, Jon will write a new introduction explaining the highlights of the article and how the market has changed since it was published. We're hoping to track down some of the interview subjects in these articles and get their updates on how the market has changed since these classics were first published.
Jon Reed Interviews Bobby Cameron of Forrester on the Future of SAP, 1999 PDF Print E-mail
Article Index
Page 1
Page 2
Page 3
Page 3 of 3
  
January 31, 1999 

Reed: Your new theory of where innovative companies are ultimately headed is called “dynamic trade.”  Your vision of dynamic trade involves the strategic use of leading edge apps, working towards a new kind of extended supply chain with Internet-enabled, demand-driven forecasting. Define the term “dynamic trade” for us, and then we’ll look at how the ERP market might be affected by dynamic trade. 

Cameron: “Dynamic trade” is the leveraging of technology to satisfy current demand with customer response. It’s a pretty simple statement, but it’s got a far-reaching impact. It will vary by industry, but there are three rules of dynamic trade.  

One rule is that services eclipse products. In high tech manufacturing for PCs, you can compete on price, but Dell is trying to be able to do online, custom sales to make sure you’ve got good service capabilities, so if you have any trouble you can respond to them directly. At Compaq, if you’ve got to fix a problem, they don’t ship the PC all the way back to Texas; they actually can do the repair in a distribution center run by Fed Ex. We’ve also seen utilities companies talking about selling 71 degrees Fahrenheit, instead of selling power at so much per kilowatt hour. The utilities companies would partner with Johnson’s Control to put in the HVAX system and operate it, and they would sell the temperature, and essentially the customer pays to keep it at 71 degrees.


For banking, we think that for the emerging affluent (people earning over $55,000 a year), the financial services industry will create --is creating-- a new class of product which combines lots of instruments -- investment, insurance, banking -- and gives a performance analysis and advice about what to do. In all these cases, services become a more important differentiator than the product itself. Merrill Lynch, with its very upscale clients, differentiates itself by how it services those clients, and it’s therefore able to charge more. 

Reed: And your second rule of dynamic trade is “demand drives production.”  

Cameron: Yes, and that is specific, custom product delivery.  

Reed: And right now, even the most sophisticated software planning tools don’t enable demand-driven production...  

Cameron: Most do not. In particular, if it’s anything to do with an extended supply chain they don’t.  

Reed: And the third premise of dynamic trade is...  

Cameron: “Prices match the current market.” That would mean instead of getting weekly, or daily price tables, having information that is much more immediate and much more current.  

Reed: And at this time, you don’t see a suite of cutting-edge applications that are enabling these changes, right? It’s still a best of breed situation with companies patching together their own solutions...  

Cameron: Right, and where you’ve got stable suites of products from a single vendor is where the business process has been around for a while and pretty well understood. At the leading edge, you and I could argue for hours about what the right business process is. I argue with automotives and high tech manufacturers who say, “The best thing I can do is to reduce the total amount of suppliers I’m dealing with, and get long term contracts so we all work together.” And I’m saying, “No.” VW cut its supplier network by 30%, and two thirds of its suppliers went out of business as a consequence, and now when VW gets under price pressure, who are they going to turn to if one of their suppliers doesn’t respond? So we don’t know what the best practice is because it’s not been proven; it’s brand new, and the packages are all over the map.  

Reed: And for companies, it’s not just a matter of getting the right software, it involves organizational and cultural changes.  

Cameron: Yes. I class it into four things: the relationships themselves -- the contracts among suppliers, customers and partners have to change; the processes themselves have to become more flexible, more agile; of course the technologies themselves have to become more tolerant of change, more supportive of change; and then the organization themselves have to be change-oriented, including managing outsourcing as a core competence.  

Reed: I guess that results in your quote: “The key to dynamic trade is agility, and that’s where ERP stumbles.”  

Cameron: That’s exactly right.  

Reed: So you see ERP as fitting somewhat uneasily into this new, change-oriented business spectrum.  

Cameron: That’s right, that applies to the bulk of ERP that you can buy today... the only exception I can think of is in the process industry -- it’s Marcam’s brand-new product.  

Reed: So would it be fair to say that your take on ERP for customers right now is: implement ERP if it will deliver a pre-defined value related to transaction-oriented work; otherwise, focus on the outward-facing apps, the cutting-edge apps like extended supply chain, Internet commerce, and customer management, and use a component-based strategy to drive the whole thing?  

Cameron: That’s absolutely correct.  

Reed: So will there be a shift in focus where ERP systems, drawing on transaction-based functionality, don’t seem as cutting edge to buyers as dynamic trade apps? Are we going to see a time when companies will want to spend more of their time and money on these cutting edge areas, paying less attention to ERP and less money for ERP implementations?  

Cameron: It’s cliché, but I believe it’s true. We haven’t done any hard evidence on it -- it’s hard, actually to measure it, because people lie. But the dissatisfaction or the surprise as far as users go -- users who, having completed a big R/3 installation, are surprised that they didn’t get any further than they got -- is pretty intriguing. And I believe, in essence, what we’re seeing is the user community waking up from this honeymoon as you called it, a period of the ERP era and realizing “Oh, I was just doing some hard work to clean up my crap.” In fact, if you look at some of the smarter companies, they figured it out in the process of putting R/3 in and backed out -- if you look at where PP’s in, it ain’t in a lot of places. It just isn’t.  

I can name you some of the top SAP accounts, and the plant guys turned around and said “You want me to do what? Why?” And I believe that sort of questioning is what’s at the heart of it and the same thing is true for supply chain. We got very a clear message from users in general, not just an SAP base, that they believe supply chain’s not going to be ERP’s strength. And if I come back to my model of SAP, supply chain on the APS side has been around forever, and SAP will do well there, absolutely. That is SAP’s strength and they’ll do it well. And as for the rest of the supply chain, as it matures, SAP will do a knock-down-drag-out job of it. They’ll whip people’s asses.  

But when you consider the leading edge stuff such as drive and demand forecasting, not to mention doing it all in a creative way that’s real, SAP’s got its hands full. When you consider the extended ERP world, with the ramifications that come from the dynamic trade model, which starts to imply real coordination, starting with the logistics part and extending into the entire optimization, planning and execution phases -- SAP’s going to have a real challenge getting that business. And if you add outsourcing to that loop then you need some God-awful good component technology. You need products that are built from the get-go to integrate.  

Reed: And do you need a new kind of professional?  

Cameron: Now that is absolutely true! I believe the class professional is one who’s agile -- it’s actually what SAP’s been breeding. The opportunities out there are for people who understand business process, who are able to drive solution at that process and who understand that the opportunity is for flexibility not for stability. There’s been this orientation that manufacturers are about increasing velocity while driving greater efficiency. Now you hear people say “Let’s add in responsiveness along with velocity.” So I think that’s the right direction and with dynamic trade, we’re now talking about agility. I define agility as changing direction at speed without rolling the Isuzu over. If you’ve got agility, you can execute dynamic trade. 

The technology side of that is only a piece. There’s the organizational side, a huge process side, and a relationship side. Technology is key to making that happen. To execute dynamic trade, companies are going to have to have in place a very good set of technology. And the best thing to look at is someone like a Dell, with all the postponement strategies, the merge-in-transit stuff that’s going on...those are exactly the model. They don’t do a good job of extended supply chain, but no one does. 

Reed: Not yet. It’s such a new frontier. That’s a bit of a cold shower, though, for the aspiring ERP professional trying to get into the field right now, as the rates may start to go down when companies turn their resources to other areas. You’re espousing a slightly different model for IT professionals, which is “Don’t just focus on what you can do well right now if it looks like those skills may be obsolete next year -- push for new technology exposure.”  

Cameron: Right. Take your skills to market. And the skills that ERP people have, especially SAP guys, is that they think process. And they are used to working with tools that have process at the core.  

Reed: So you think that ERP professionals have a new thinking pattern because they’re not thinking in terms of silo-functional responsibilities, but in terms of overall business process. And you’re saying “Take your skills to the next level and just expand them beyond the boundaries of the enterprise and into the partners and suppliers and the extended supply chain...” 

Cameron: I was working with the CIO of about a $30 billion company earlier this week and a team --  a cross-divisional team -- that was chartered with coming up with a new architecture. The methodology they were trying to adopt is one that has, at its core, trying to understand what the business drivers are and what the processes need to be to support that, and then what the capabilities are that the company has to have to satisfy that or implement that and then obviously what the architecture has to be to support that. This is an excellent approach. Out of twenty people, the three who understood what that was about were the SAP people. Everybody else who was locked away in engineering or somewhere else didn’t understand that and that’s a huge asset.  

Reed: Bobby, thank you for giving us such a thorough assessment of the ERP marketplace.    
<< Prev - Next
 

What is Jon Up to Now?

Track Jon in real-time on Twitter!
Advertisement
Advertisement

Reader Poll

Which Vendor Will Be SAP's Biggest Competitive Threat in the Future?
 
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

The Latest JonERP Feedback

"I have referenced your articles on JonERP.com for my internal Fujitsu colleagues on how the functional skill set is changing. It's not just theory, but real life change and the need for new SAP skills."

- Ranjan Baghel, Associate Director, Fujitsu America -

JonERP.com Site Feedback

"I can't imagine any SAP professional who is serious about their career not utilizing the JonERP.com website. I know I used it frequently when I did SAP consulting. I use it even more now and I know my colleagues go there quite frequently to increase their knowledge of the SAP market, it is a source of great information."

- David Dawson, SAP Direct Hire Consultant, Acsys -

More JonERP.com Site Feedback

"Jon, you are definitely spot on with your analysis of the SAP market. I've been using your websites for over five years now. Instead of buying all the SAP books, I use your stuff to catch up with what's new in the ever-increasing SAP market." - Mark

JonERP.com Reader Feedback

"I've kept up with your JonERP.com site for a long time and your articles via SearchSAP.com and elsewhere. I just realized a few months ago that you were also the author of the first SAP Consulting book that I read when I decided to take the leap from working at a Utility company to becoming an SAP Consultant. The SAP Consultant Handbook is a staple for any SAP consultant, new or experienced. I just wanted to thank you for the quality work."

- J. Michael Peace, Independent SAP Consultant -