How to Evaluate a Sales and Operation Planning System

Sales and operations planning (SOP) is one of the more critical functions an organization must undertake, as its effects span across various departments, and have the potential to directly influence the organization’s profits. A successful SOP department harmonizes the different beats of each division into an agreeable melody. It is definitely a challenge to find an effective tool that can merge the data from different systems to create a coherent picture of the organization.

An SOP system is used by the most important departments of an organization: finance, sales, marketing, and operations. This is why a powerful SOP system can make the difference between the success and failure of an SOP cycle. SOP systems are very useful to senior management, as they allow a “bird’s eye view” (an overall view) of the health of the whole organization. With its graphical representations and dashboards, an SOP system is an indispensable tool for any organization.

The software market is becoming increasingly competitive, which is having a positive effect on the SOP products available. Today, SOP systems have many advanced features, such as real-time dataflow and intuitive user interfaces. A couple of years back, many features like these were considered “nice to have,” but today they are essential. Also, vendors have streamlined their products so that implementation times are more manageable, making the return on implementing an SOP system more attractive. Today, a typical SOP implementation—assuming that the organization is already running an enterprise resource planning (ERP), supply chain management (SCM), and business intelligence (BI) system—should take around three months worth of labor hours.

Predefined Key Performance Indicators and Metrics

Standard key performance indicators (KPIs) and metrics already built into an SOP system is a particularly useful feature that offers many benefits to an organization. Standard KPIs and metrics could be based on popular models, such as the supply chain operations reference (SCOR) model, and they can drastically reduce the implementation time of an SOP system. Most SOP system implementations take a long time to develop reports based on SCOR-based KPIs, so this capability should be a fundamental feature of any SOP system. If this capability is not supported by the SOP system, then a considerable amount of time will go to identifying KPIs and then building reports for them, be they financial or operational.

If the KPIs on budget, inventory norms, sales forecasting error, etc. are built in, then they do not need to be configured from scratch. Furthermore, a visual representation of KPIs in graphs and dashboards helps top management to keep tabs on various “numbers.”

Integration with Different Systems

An SOP system should be able to integrate with different systems. Most organizations have a transactional system, which is usually an ERP system. Such systems are rich with data that organizations could use to their benefit. An SOP system should be able to draw data from these systems to show a realistic value of the KPIs and metrics through internal benchmarking of their historical data.

An SOP system should also be able to integrate with the SCM system. Integration of these two systems gives organizations the flexibility to modify data in the SOP system if certain organizational objectives are not being met. For example, a sales manager might need to change the sales forecast figure of a certain product in order to meet organizational objectives for that product. With the two systems integrated, instead of logging into the SCM system to make this change, it can be made directly in the SOP system, and the information will be updated in the SCM system as well.

An SOP system should be able to extract data from the BI system, such as historical data and calculated metrics. To do this, the SOP system should be sitting “on top” of the ERP, BI, and SCM systems. It is preferable that the dataflow from these systems is bidirectional, but still today, in some cases, technological limitations severely restrict bidirectional flow. For example, data changed in the SOP system may not be automatically updated in the BI system. For an SOP system to have this capability, it should be built on a platform that can integrate with heterogeneous systems seamlessly. This should be a fundamental feature of an SOP system.

In the case of a stand-alone SOP system, the system should be able to load data from files directly so that transactional and historical data can be loaded into the SOP system directly. The system should also be able to download the data into files, and then upload them back into the ERP, BI, SCM, and other systems (see figure 1).

Figure 1. The bidirectional exchange of information between an SOP system and other key enterprise systems.

Drill Down

The drill down feature of an SOP system is one of its most important, as upper management can view KPIs at various levels, and take prompt action if required. The manager, for example, can look at inventory turns at the national, regional, or branch level. The manager can also look at the metric at a product level or at a product group level. If proper hierarchies are maintained, then a drill down feature, which is similar to BI reports, can help senior management make appropriate business decisions. The drill down feature greatly increases the efficacy of an SOP system.

Hierarchy Building

Building up a hierarchy across dimensions can enhance the power of the SOP system. Hierarchies can be built directly into an SOP system, or they can be imported from other systems, such as the ERP or SCM system. If a hierarchy is built directly into the SOP system, then it should be possible to map the SOP’s hierarchy with that of the SCM or ERP hierarchy.

The number of dimensions over which a hierarchy can be built in today’s SOP systems is limited. The dimensions most used across industries are the product, customer, and geographical dimensions. The ability to modify these hierarchies is important, as they can change as the business grows or if the nature of business changes. In today’s competitive environment, changes like these can be frequent, and any restrictions in the SOP system on this front will be viewed negatively by the user company.

Simulation

The features discussed above help the SOP team perform simulations using different figures (i.e., revenue objectives). These features also help to monitor KPIs in different business scenarios. Thus, the SOP team can simulate various scenarios, and agree on a figure. These figures can be arrived at after a consensus on a planning cycle is reached among various departments, and can be published for top management. Also, if a drill down feature is available in the SOP system, the KPIs can be built either top down or bottom up. For example, after the KPI values are fixed at the top management level, they can be broken down to the other levels using the hierarchy that has been built into the SOP system. The reverse can also be followed, where the KPIs can be rolled up after the values from the field are taken and finalized. This feature is important because it helps top management test various scenarios.

Built-in Task and Process Management System

The more advanced SOP systems have built-in task management modules. These modules can have built-in workflows that are integrated with a worker’s tasks. Hence, the system can send a mailer to the next person in the workflow once a particular task has been completed. It can also monitor the status of a task by showing what percentage of it has been completed, which gives a visual representation of the amount of work that remains to be done. Tasks can be built into a hierarchy, which can thus help to define tasks at various levels. These levels can be mapped to the levels in the organization hierarchy. A hierarchy of tasks also helps to coordinate the various tasks in the SOP planning cycle as a whole.

In Closing

SOP helps organizations build upon their tactical plan after strategic planning has been done. A broad SOP system can streamline the planning cycle and the flow of information between different entities within the organization. SOP systems are slowly evolving into complex systems, as new features are constantly being added to them. SOP systems today are an integral part of any organization. In some cases, the basic functionalities of an SOP system come bundled with a transactional system (ERP) or an SCM system. These functionalities cover the basic requirements of an organization, but they lag far behind a full-fledged SOP system.

Table 1 shows which features user companies consider to be essential in an SOP system, and which features are seen as nice-to-have.

Functionalities	Essential Functions	Nice-to-have Functions
Predefined KPIs and metrics	Y
Integration with different systems	Y
Drill down capability	Y
Hierarchy building	Y
Simulation	Y
Built-in task and process management system		Y

Table 1. Rated functions of an SOP system.

Organizations should carefully evaluate different parameters when selecting an SOP system. They need not add complexity to the SOP system if their business requirements are relatively simple.

Choosing the Right Electronic Medical Record System for Your Health Care Organization

Electronic medical record (EMR) systems come in two different models: on-demand and on-premise.

An on-demand EMR solution is a Web-based application that the health care provider accesses through the Internet. The solution is administered remotely by a third-party vendor that oversees data management, software upgrades, and security functions.

An on-premise EMR application resides in house, whereby an internal IT department administers and maintains all software, hardware upgrades, and all actions pertaining to the support of the network infrastructure.

The size of the health care organization (is it a small practice or a large hospital?) will usually determine which model is the better fit and what methodology is needed to manage, collect, store, and administer patient health records.

Advantages of an On-demand Solution

On-demand solutions’ chief benefit to health care organizations is that they can minimize the amount of resources applied to IT, allowing a greater concentration to be spent on patient care.

Doctors generally do not have the knowledge, interest, or resources to deal with IT infrastructures; they tend to prefer on-demand EMR systems for the following reasons:

* An infrastructure and specialized IT staff is not needed.
* Software upgrades are performed regularly and automatically.
* A Web-based system can be accessed 24/7.

Being Web-based applications, on-demand solutions are easier and faster to implement because there is no software to install. Data can be accessed from any computer, anywhere in the world, with an network connection.

Generally speaking, on-demand applications have a much lower setup cost because an operating system license is not being purchased for each workstation. On-demand applications are billed as a recurring service, either in monthly, quarterly, or yearly billing cycles. The payment cycle is dependent on what features or services the vendor is offering and the user organization’s negotiating position. Lease costs can be allocated as a business expenditure, allowing the health care organization a tax break by leasing out the software. By contrast, the cost of an on-premise model must be amortized over a specified period of time.

An on-demand application provider may be able to offer clients a more sophisticated security system for less cost than one would be from an on-premise applications vendor. This is because although each client pays a relatively low monthly fee to the on-demand solution provider, the combined revenue gives the provider the financial resources to provide a quality security system acceptable for large hospitals and health care organizations.

Disadvantages of an On-demand Solution

An on-demand solution relies on a third-party provider—an arrangement that places any business at the provider’s mercy. If the vendor that a health care facility has been depending on goes out of business, it will take the organization a substantial amount of time to find another vendor with another solution, which results in a loss of productivity during staff retraining.

An on-premise solution requires the user organization to maintain an internal IT staff, with its attendant costs and administration requirements. This on-site IT staff must perform all equipment and software maintenance, as well as provide support and system maintenance, such as daily backups, security scans, and patches (software upgrades).

It is a common misconception that on-premise applications are safer in terms of data security because they are local applications, and this is often the sole reason health care organizations do not consider implementing an on-demand EMR system. But the safety of an organization’s data largely depends on the security precautions enabled by the internal IT staff. It is possible that a health care facility’s network administrators may be less than vigilant in placing a high priority on data security, and they can leave sensitive patient data exposed.

Vendor scalability is another concern with on-premise solutions, because technology is constantly changing, and software could become obsolete in as little as a couple of years. In other words, what works today may be lacking tomorrow. And once a health care organization purchases an on-premise application, it is stuck with it. By contrast, with an on-demand solution, if the software no longer fits the organization’s needs, the organization can simply select another that does.

As mentioned previously, the on-premise solution that is purchased outright becomes a fixed asset for the health care facility. However, if the health care organization does not have the means to buy the application outright and needs to finance the purchase, then the application becomes a liability until the debt is paid off in full.

Conclusion

Selecting an EMR system comes down to making a choice between an on-demand solution and on-premise solution. If vendors such as salesboom.com and small business experts such as Small Business Notes are correct, then generally speaking, clinics and smaller practices use on-demand solutions, and larger practices and hospitals use on-premise solutions. But this is not carved in stone, and exceptions to this generality can be found.

Usually, smaller health care organizations have neither an IT infrastructure nor an IT staff to manage the network infrastructure of an on-premise EMR system. But to a large extent, neither is necessary, since health care providers in small-scale organizations are dealing with only a few computers in the entire office. An on-demand EMR system usually suffices, and it offers simplicity and convenience. However, if a user organization is not comfortable having its data handled by a third party, then the only other option is an on-premise EMR system.

An on-premise EMR system may be the better option for large health care organizations, as they have the means and budget to acquire an infrastructure and a dedicated IT staff to maintain both the hardware and the software. This allows for the flexibility to modify the system as changing circumstances require it. It also allows for a rapid, in-house response to hardware and software problems, as well as the capacity to create custom-made software to address the special or evolving needs of the organization.

Although the software used for each model is similar, health care organizations (be they small community clinics or large metropolitan hospitals) will lean toward the software solution that is tailored to their particular infrastructure and to the size of their practice. One model is not necessarily better than the other. At the end of the day, the health care organization must make a decision based on its core business needs.

An Analyst’s View of Process Industry SMB Challenges

The process industry provides many of the products we use in our daily lives for food, shelter, and health. Such products are created when materials are transformed through the use of energy resources and chemical products. In addition, the process industry manufactures products that are essential to advanced industries such as computing, biotechnology, telecommunications, automotive, scientific, and space exploration.

These industries are facing major pressures not only to meet the present needs of our global economy, but also to do so without compromising future generations by ensuring that processes

* meet environmental guidelines
* optimize energy resources efficiently
* result in products that are safer, more reliable, and more functional
* provide features that meet both industry and consumers needs

This article focuses on how enterprise resource planning (ERP) vendors are helping the process industry meet both the needs of today and deliver on anticipated functional requirements that will help meet the needs of tomorrow.

Process Industry Manufacturing Challenges

Manufacturers in the process industry are at a difficult crossroads. Although the industry is not facing any imminent substantial decrease in its overall profit margins, there is concern in the industry according to a recent study by the Canadian Manufacturers and Exporters Association, which cites the following issues:

* increased global competition
* foreign currency fluctuation
* changing patterns of customer demand
* escalating business costs
* problems in implementing new technologies
* competitive business pressures
* shortage of skilled workers

To address these issues, process industry manufacturers and distributors must manage the following key activities, and ensure they use an enterprise system that supports these activities:

* Planning production for both materials and capacity—to develop a production plan, manufacturers must ensure that there are sufficient available resources and materials, production capacity, and labor.
* Inventory tracking and controlling work-in-process (WIP)—monitoring material consumption and tracking work order progress is the basis of manufacturers’ being able to meet sales order, demand, and delivery dates.
* Replenishment and demand planning—the ability to review variances between forecasted and actual sales is the basis of managing vendor lead times and raw material replenishment.
* Managing the supply chain for order fulfillment—reviewing the global supply chain provides manufacturers with the ability to coordinate logistics and operational activity to meet customer order fulfillment expectations.

Specific Requirements of an ERP System for the Process Industry

Here’s an overview of how some of the functionalities of an ERP system for process industries help manufacturers better perform the activities listed above.

1. Conversion process capability
In the process industry, the bill of materials (BOM) used in discrete manufacturing is replaced by the master product formula, or simply the formula. The formula requires a conversion table for measures, such as weights from grams to pounds, and must have the ability to record liquid units of measure, in both metric and US-standard. The formula must also record specific information related to product characteristics that can affect manufacturing processes. For example, in the blending process, the system can record product information such as percentage calculations of raw materials, and the effective specific gravity, potency, density, and number of reactives of those raw materials.

2. Interface to other modules
The master formula can also be linked to submodules like quality assurance (QA), procurement, inventory, and accounts payable (A/P) for government compliance and safety issues. Also, the manufacturer must be able to trace products in order to manage dating of inventory lot control and the amount of inventory available at the distribution level. Furthermore, there are government and regulatory concerns that deal with the nature of the materials, as there may be a controlled substance with specific shipping, handling, and storage regulations. Or, the manufacturing process may emit hazardous by-products. Or, there may be logistical concerns within the manufacturing process itself.

3. QA module and flexible formula adjustments
A process industry ERP system must also have a formulation-balancing operation based on the premise that the QA group tests random samplings of production batches. The system needs the ability to adjust, through a program logic control (PLC) interface, any variations in materials used and external factors such as humidity, temperature, cool-down speeds, etc. Also, the material flow and consumption is recorded back into the ERP system. The system’s routing functionalities reflect those capabilities as a requirement or not, depending on the user’s specifications.

4. Reworking all co-products and scrap materials
As a result of manufacturing processes, residual materials (by-products) may be created. These by-products can be collected as waste and reused. This is the case within the plastics industry, for which the collection and re-entry of materials into process creates very specific criteria. In the process industry, due to a continuous production flow operation, the production process generates a theoretical production yield, which may be calculated by the downstream packaging operation as units for case-pack quantities. The residual amount generated from the production process may vary within a percentage point, but in the downstream conversion process, the residual quantities may be aligned to complete full, case-size box quantities. By using flexible formulas, process ERP systems can demonstrate how the residual materials can be reworked from waste back into materials used in production.

5. Supply chain management (SCM)
Collaborative forecasting and planning are essential features of the process industry ERP system, especially for the automotive and consumer products industries. Some the most important functionalities include

* visibility over inventory across the global supply chain
* enterprise-wide planning in the areas of sales and marketing, procurement, and production
* the ability to integrate planning for what-if scenarios
* the ability to benchmark quality and vendor performance issues
* detailed reporting that highlights areas where parameters may be out of scope
* real-time available-to-promise (ATP) information for customer service

6. Process industry costing
The financial system for the process industry must also be able to provide for multiple-level formulas on the same production work order, and for outside processing at subcontract facilities. Given the nature of process industry products, most plants must operate on a continuous basis, which drives maintenance costs up. As a result, maintenance costs usually comprise 30 percent of a process industry plant’s operating budget. Thus, an ERP system must integrate with some type of best-of-breed system to meet the requirements of the operation, and with some form of asset management system, which takes into account predictive and preventative maintenance.

ERP System Constraints in the Process Industry

For lack of an available solution designed for their needs, some process manufacturers have attempted to implement an ERP system for discrete manufacturing. As there are several fundamental differences between the operations and practices of process and discrete manufacturing, opting for such a stop-gap measure is not always effective. Process manufacturers have no doubt noted the constraints that are placed on their operations as a result of using a system that was not designed for their needs. The nature of the process manufacturing business is such that it is difficult to manage inventories and profits. Process manufacturers experience large quantities of finished product in transit and of raw inventory. The products often have low yields with substantial scrap (fine chemicals, pharmaceuticals, or plastics).

Business dynamics is putting demands on ERP systems to help with

* maintaining a lead over competition
* simplifying the product lines
* responding to shorter product life cycles
* providing mass customizations (car options, computer system accessories, etc.)
* complying with regulations compliances

In an attempt to meet these demands, many manufacturers have looked at ways to improve supply chain optimization by re-examining manufacturing processes, relocating closer to markets, and looking at cheaper energy, transportation, and labor. The businesses’ needs are such that an ERP system must be powerful enough and diverse enough in functionality to do more than simple process manufacturing.

With ingenuity, many of the raw material manufacturers have turned to vertical market integration, moving from pure process manufacturing to mixed mode. Their factories now produce raw product for industry and sell finished goods by the item (counting). An example is toothpaste, where the finished good is sold by the pallet, case, or individual package. The ERP system must allow manufacturing processes to batch products in order to achieve product consistency (two examples are textiles, with “dye lots and finishing,” and bakeries, with oven scheduling, and aerospace, with electroplating, etc.).

That some factors are out of the control of process manufacturing vendors is exemplified by the retail industry. In this industry, the vendor has a many-stop supply chain, and plays a role almost like that of the caboose at the end of a long train.

For example, chain stores track sales at the cash register, and use that information to replenish inventory from branch warehouses. The warehouses get their product from distributors. In the case of multilevel distribution networks, this explosion process percolates upward through the various levels from the retail store to regional warehouses (master warehouse, factory warehouse, etc.). The demand is input to the master production schedule at the level of the manufacturer. The process is not always real-time, meaning that a lot of product is out in the supply chain. This process of upward percolation is most common in the pharmaceutical and retail grocery industries. Since everyone in the supply chain strives to minimize and frequently turn inventory, any ERP system has to manage with these constraints.

As a side note, some manufacturers are trying to use real-time reporting to determine product consumption and demand. The information is more accurate and allows total reduction in the field, increased inventory turns, tailoring production to market preferences and better cash management.

Mixed-mode ERP systems are used by the processing industries for several reasons. First, there is no need to duplicate the data. For example, mature discrete ERP systems have well-optimized modules addressing finance, production planning, inventory management, sales, shipping, etc. The benefits of moving to a mixed-mode ERP product such as Syspro stem from the use of a common module to support production, sales, inventory, supply chain, finance, and analytics. These sophisticated discrete modules, adapted to accept process data, can go a long way toward helping the manufacturer reduce inventory, improve cash flow, and improve manufacturing yields.

The optimization of manufacturing and distribution processes for larger enterprises often involves business intelligence (BI) and business performance management (BPM) functions. These new ERP functions are typical of large manufacturers’ systems, and are generally not affordable to SMBs.

Therefore, the SMB-oriented ERP system for process manufacturing needs to have extra capabilities that provide data for BI functionalities. The dynamics are such that this data is often industry-oriented (food versus chemical). ERP systems need to provide dashboards providing what-if scenarios to allow the manufacturer to improve competitiveness, while avoiding the cost of a full BI/BPM operational group.

Finally, a pure process ERP product has quantitative variables with large variations in values, leading to statistically large standard deviations. Statistical analysis for process optimization requires small standard deviations in order to make useful manufacturing recommendations. (Large standard deviations are indicative of large inventories in the pipeline, or variations in raw material quality.) Constraints on the quality of input data are essential to achieve any business improvements.

Following is a summary of constraint requirements of the ERP systems for process industries:

* have sophisticated data conversion algorithms (liters, gallons, and weights of mixes), allowing packaging size variations to be accurately reflected in the calculation of production batch sizes
* be real-time in execution on the production floor
* quickly create a new production schedule from new orders, allowing for extra production runs of the same product
* be responsive to changes in raw product concentrations
* provide a dashboard that gives management real-time views of pertinent business processes
* allow for varying manufacturing methods, such as continuous, make-to-order, make-to-forecast, and engineer-to-order
* Function equally well in discrete and process industry modes, with reliable software bridges between the two

The extremely specialized nature of the process industries means that, among other factors, their regulatory compliance issues, best-practice scenarios, and concomitant enterprise software needs can vary greatly. Further, there are great differences amongst these factors for process manufacturing and discrete manufacturing, which means that process manufacturers are getting short shrift if they choose a solution designed for discrete. Though perhaps these are some of the reasons why vendors have sometimes shied away from providing ERP systems for SMB process industries, it seems that change is not only on the horizon but is well underway. If vendors continue to offer solutions that are versatile enough to address the needs of process, discrete, and mixed-mode manufacturers, the benefits will surely be experienced by vendors and manufacturers alike.

TEC’s I&CM Evaluation Center (Slowly but Surely) Gaining Traction – Part I

A number of earlier TEC articles and blog entries have analyzed the nascent sales performance management (SPM) or enterprise incentives management (EIM) software market, which has also been one of those areas with a significant uptake of on-demand deployments.

Indeed, companies of all size increasingly use software packages for sales compensation and other incentives management, to more accurately and strategically model and forecast commissions and other incentive-based costs and benefits, calculate commissions and bonus earnings, and gain more real-time visibility into employees’ performance metrics.

Broadly speaking, SPM is an area of performance management focused on incentive compensation calculation and management, quota planning, territory management and performance analytics. As “pay for performance” programs continue to grow in importance, incentive pay remains one of the largest variable expenses for organizations. To that end, SPM spans across many groups of individuals receiving variable compensation such as sales force, management, employees, distribution channel, etc.

Yet today most SPM processes and technologies remain used in a standalone manner. Namely, corporate performance management (CPM)/business performance management (BPM) solutions that are focused on profitability are administered by the finance department, whereas the human resource management system (HRMS) that focuses on employee information is administered by the HR department. Also, the customer relationship management (CRM) system that focuses on contacts and leads is administered by the marketing staff, while sales reporting and analytics tools that focus on revenue (top line) are administered by the sales and support departments.

EIM/SPM represents the next generation of software category and best practices for filling the wide gap between all these departments. Its advent has prompted TEC to publish the pertinent Incentive and Compensation Management (I&CM) Evaluation Center. As discussed in my earlier series of articles entitled “Thou Shalt Motivate and Reward Workforce Better,” current incentive compensation issues are largely based on use of inadequate spreadsheets and in-house systems.

The idea of incentive compensation may seem very simple: pay “X” for achieving “Y.” Yet in practice each company has its own specific approach to compensation plans, managing approvals, resolving disputes and paying out compensation earned. Spreadsheets, custom coding, and simple commission calculation engines automate these processes to some degree, but do not address the increasing sophistication and complexity of many of today’s incentive plans and processes.

That inadequacy then translates into incorrect payments (many analysts estimate that four to six percent of incentive compensation doled out by businesses is wrong, according to CFO.com), delayed plan development and payments, and increased ongoing administration and maintenance burdens (whereby direct costs can exceed $1,500 per commissioned employee, according to Aberdeen Group).

Other unfortunate consequences are the failure to keep up with business strategies, the lack of adequate financial controls, and insufficient modeling, reporting and analysis capabilities. In fact, according to PricewaterhouseCoopers (PwC), 30 to 90 percent of all spreadsheets suffer from at least one major user error.

In a nutshell, today’s manual and spreadsheet-based incentive compensation calculation processes are slow, rigid, error prone and thus plagued by overpayments and errors, whereby sales folks don’t trust the system and create their own “shadow accounting.” These recurring payment disputes consume significant time and effort (besides costing internal trust and goodwill).

Furthermore, in addition to too much time and effort being wasted to administer and maintain SPM processes, there are limited ad-hoc reporting and analysis capabilities. This means that managers cannot analyze the impact of proposed plans, cannot accurately forecast incentive pay and revenues, and cannot keep “tight” links between incentive pay, sales territories and quotas/business metrics.

Enter Varicent Software

This “green field” market opportunity has created a number of relatively “young” vendors and solutions. The latest entry in TEC’s I&CM Evaluation Center is Toronto, Ontario, Canada-based Varicent Software. Since its founding in 2003, the company has been offering its flagship product, Varicent SPM [evaluate this product].

The privately-held company has been on an ascending path since its inception, with four consecutive years of triple-digit revenue growth. In 2004 the company developed the first release of Varicent SPM and signed its very first customer.

In 2005, Varicent SPM 2.0 was launched with a new quota planning module, and the vendor recorded triple digit revenue growth. While this might not be a big deal for a weakling company at the time, Varicent currently has approximately 100 direct employees and a growing partner network of global consulting firms and technology partners.

To that end, 2006 seemed to be a banner year, marked with a consulting partnership with Watson Wyatt and business performance management (BPM) technology partnership with Applix (now part of IBM Cognos). In the same year, Varicent launched Varicent SPM 3.0 as the first complete SPM suite (in terms of its current functional footprint) and introduced on-demand offering. Additionally, the company signed the first Fortune 500 customer, Starwood Hotels and Resorts (NYSE: HOT), and the first Fortune 200 customer, Waste Management (NYSE: WMI).

2007 was not a quiet year either, given the launch of Varicent SPM 4.0, the launch of the first mobility solution for the SPM market (in a partnership with Vaultus), and integration with Salesforce.com CRM. The company then also contracted its first overseas reseller, Tridant Pty in Australia, expanded its management team, and landed the first Fortune 100 customer.

Today, Varicent has approximately 100 customers ranging from mid-size to Fortune 500 customers. Varicent SPM is a horizontal application, sold and marketed primarily to organizations with about US$200 million in annual revenues and up. Some smaller companies with complex incentive compensation programs, global needs and other unique business requirements might also be a good fit for Varicent. Customers’ payee numbers typically range from several hundred to tens of thousands.

While Varicent’s customers currently represent a variety of industries, there is a concentration of customers in high-tech, health care, insurance, financial services and a few other verticals. Some other high-profile customers that use Varicent SPM for managing their complex variable compensation programs across a variety of vertical industries would be: KLA-Tencor (NASDAQ: KLAC), Rogers (TSX: RCI), About.com (a New York Times company), AAA, Sonus Networks, Manpower, American Century Investments and Pacific Blue Cross.

Varicent SPM – Surprisingly (or not) a Comprehensive Solution

Due to the financial background and focus of its founders (and of many Varicent employees), the Varicent SPM suite aligns sales performance with strategic objectives through its pay-for-performance footprint that spans across sales, employees, managers and channels. The broad EIM solution natively encompasses the following modules:

* Territory Management;
* Quota Planning;
* Incentive Compensation Management; and
* Performance Analytics.

This footprint is rare in the EIM market. Namely, even the presumptive market leader (in terms of revenues and public trading visibility) Callidus Software had to recently partner for the territory management functionality.

In other words, Varicent SPM delivers technology that automates the assignment of territories, the collection and approval of quotas, the administration and calculation of incentive compensation plans, and then examines sales performance and evaluates the effectiveness of incentive programs.

From a strategic value aspect of revenue generation, integrating and optimizing territories, quotas and incentive plans leads to more effective market coverage and steady increases in sales. According to Gartner, companies currently lose nearly 10 percent of total sales through poor fiscal management of territories, quotas, incentive and compensation plans.

Part II of this blog post will continue with Varicent’s most recent developments, its product architecture and competitive positioning. Your views, comments, opinions, etc. about Varicent and abut the EIM/SPM category per se are welcome in the meantime.

We would also be interested in hearing about your experiences with this nascent software category (if you are an existing user) or your general interest in evaluating these solutions as prospective customers.

Ask the Experts: Data Purging and System Migration

One reader recently wrote in with this question:

“… I wondered if you can point me at any related sites/groups/publications for more established users that discusses, for example

* migrating between ERP systems,
* purging ERP data,
* integrating data from acquired companies into ERP and PLM”

We thought we’d take this on ourselves—but see the bottom of this post for more resources!

Introduction

When migrating between systems, it is crucial to define the scope of implementation, as well as to outline each stage of the project and the resources that will be needed. A failed implementation will paralyze the operational capabilities of an organization, but the right methodology will help ensure a successful implementation.

In the issues related to the areas of ERP and PLM integration, we’ll highlight relevant areas of consideration. Furthermore, you’ll learn what steps can be taken to safeguard purging and data retention. This is a legal and mandatory business consideration.

We’ll assume for the purposes of this blog post that a new system exists, and that we are migrating data from an existing legacy system to a new ERP/PLM system. This can be viewed as an in-house system upgrade, or as migration of data from a purchased company.

Purging and Data Retention

When production databases become too large, they impact productivity by slowing access to information, and by extending the time required for system backups or for system restores.

Depending upon the industry (for example, medical, government, etc.), the need for data retention varies based on regulatory compliance. Some industries have long duration product guarantees, which results in the necessity to retain data.

Archiving has evolved into a discipline known as information lifecycle management (ILM). ILM helps organizations maximize the business management of storage from creation to disposal. Management is understandably reluctant to perform data purges due to the unknown operational risks, and it is therefore often done in stages.

Unstructured data populates file servers and typically includes e-mails, drawings, and user- and application-generated files in hundreds of unique formats. Purging can be by date, by type (internal or external), and by inbound or outbound status. Nevertheless, while many IT shops are only archiving e-mail to a less expensive tier of storage, they are still unwilling to permanently purge e-mail for legal or operational reasons.

The usual approach consists of transfer of data from active tables to online historical backups on a monthly basis. Since historical data is essentially invariant for long periods, it does not require being re-backed up if it had no changes. The backup facility may also make a second copy to non-rewritable storage. In the process of creating archives, an accompanying step is often taken to create summary data into a data-warehousing product for business intelligence studies. Summary data allows a look at a product’s sales figures for a given time period, by examining a single entry in a table rather then summing up individual sales order lines.

System Migration

Defining Your Needs
A migration project often starts with a feasibility study, which takes place before an implementation project gets off the ground. The approval process can include the board of directors or a high-ranking officer who sponsored the feasibility study for the project. Subsequently there is a lengthy process to build a cutover plan. This is necessary because errors or oversights at the beginning of an implementation project can be very costly to the organization down the line.

The feasibility study will address the following considerations:

System Upgrades
Upgrades are the migration from an older version of a product to a newer one. The vendor will usually provide a set of utilities (for example, to move from version X to X+1), but not always. A “not-always” situation would be in the migration from version X to version X+3 or X+4, where intervening versions must be jumped over.

Interfacing with a new system requires the maintenance of the old system along with major testing of the new system. Don’t neglect the importance of ensuring your web interfaces are also up-to-date. As I mentioned, the old system will have valid data for some time.

It may be that the switchover is done on a midnight when the decision taken is to remain on the live system, and not do a fall back. In this case, you will need to address the problem of what to do with your web site interfaces if something goes wrong. For this reason, you should only update these interfaces once you are sure the implementation is a success.

(Yes, some go-lives fail the first time. This happens mainly with large systems because they are of a more complex product design).

Historical Data Migration
Normally, ERP systems have a built-in provision for creating historical data. When is data transferred to historical archives? Some businesses archive data 24 months old, others do it at 36 months.

The move to historical tables is to reduce the number of records in “active tables” so that system response times are reasonable and system backups can be done in the window of time reserved for this operation.

Documentation and training
This is an important critical part of the migration or upgrade process. The usual practice is to make the key users responsible for guaranteeing the training of their respective groups. Any vendor-based courses deemed necessary are held a week or two before going live, sometimes on-site or at other times, off-site.

The last stage prior to “going live” is user acceptance testing (UAT) where the client tries out the system to ensure that everything is working properly and that the developer has fixed all the application bugs.

Once the cutover has been completed, the employees begin to work with the new system, performing their day-to-day tasks. If problems arise at this point, the key users/champions will be informed immediately. It is likely to take some time for the solution to work properly; in the meantime workarounds will be set in place until the problem is resolved.


Post-migration Review
After go-live, a post-project assessment is performed. This assessment is a checkpoint to determine if the system’s performance aligns with the project charter, as well as a way to audit the vendor. Did the vendor meet the requirements stated in the request for proposal (RFP)? If not, additional enhancements may be recommended as a secondary phase of the project. (Often it is not possible to deliver all software in the migration process.) The priority is given to completing migration rapidly and with essential software only, to mitigate the financial drain surrounding migration activities. In the post-implementation period, the applications or reports that are not mission-critical are evaluated, and coding can be scheduled for these deliverables.

The finance department examines the costs; if the migration is amortized over several years, implementation costs are accrued, and life starts. There may be a period of time when transactions such as sales order entry are “frozen” (i.e., orders are manually held for entry in the new system after the implementation).

Data Integration Considerations
Integrated system configuration is an area common to both ERP and PLM. Data compatibility with the combined PLM/ERP system requires common units of measure (UoM) and decimal precisions.

A UoM converter identifies how items are stored and how items are converted. Converters are introduced as pairs or words with multipliers (e.g., hammers are purchased by packages of 12, but sold individually). Sample UoM conversions are “dozen to each” and “gross to dozen,” “box24 to ea,” etc.

In the migration process, the source quantity is converted to the target quantity, with a corresponding change to costs and re-order amounts. If the target quantity is not defined, the item will be rejected and have to be reprocessed after corrections are made.

Other preparatory work is required before importing the source data. It includes part numbers, customer details, bills of materials, and finance mappings from source system values to the target system standards. The system has to be able to incorporate these changes as part of its functionality.

There are a number of departments affected by the system implementation. Co-ordination of open sales orders, as well as open purchase orders and open production orders, must be completed prior to go-live.

Open production orders are works in process, and existing open production orders are allowed to complete on the old system in order to maintain a level of operational control for the business. New material requirements planning (MRP) runs may be done in the new system, to insure inventory is correct, by taking into account the open production orders active in the shop floor.

A Final Thought
We have only touched the surface concerning the topics of data purging and system migration. With our overview we hope you’ll gain an idea of the complexity of the processes and considerations involved.

Optimizing the Supply Chain: Back to Basics

As economic conditions worsen, organizations are stumbling on variety of customer demands ranging from superior services to lower costs. These extra requirements not only cause added strain on the organization’s supply chain, but makes achieving financial goals difficult. Already many organizations are struggling to respond to customer demands due to shrinking margins caused by competition and slack in supply chain.

Companies are looking at additional ways to

* maximize profit through manufacturing, planning, and scheduling best practices
* deliver products on time and reduce finished goods inventory
* reduce work in process by improving manufacturing response time by building on lean manufacturing models
* capitalize on resource utilization across the organization

It’s not easy to uphold an excellent manufacturing organization. Poor manufacturing shows throughout the organization with unavoidable cost in areas of operations, customer service, and product manufacturing.

To overcome these issues, organizations have to react quickly to customer needs while maintaining low costs. To meet customer needs, organizations have adapted inventory optimization techniques. And depending on the nature of the business, optimization techniques could involve optimal stock levels or optimal staging.

Whether optimal stock levels or optimal staging is implemented, it’s necessary to use proper tools to evaluate information and optimize operations, which will help in making right decision at the right time. The tools could range from ERP system implementation to a standalone inventory optimization tool.

The supply chain of any organization starts and ends with the customer in mind; starting from customer demand and ending with delivery to meet the demand. The following are the key areas of supply chain network in most of the industries:

* Customer: Customers start the process in the chain, when they wish to purchase a product from the company. The customer contacts the organization’s sales department to either get a quotation or place a purchase order for a specific quantity for delivery on a specific date. If the product requires manufacturing, the sales order will generate a requirement for the manufacturing facility. Distributor have to look at the seasonal demand, inventory levels should not run short or be in excess of short term demand.

* Planning: As soon as the requirement is created by the customer’s sales order, the planning division will generate a production plan to manufacture the products needed to fulfill the customer order. To produce the products, the organization requests raw material which needs to be received in sufficient time for manufacturing.

* Purchasing: To purchase the raw material for manufacturing, the purchasing division of the organization gets all the requirements from the MRP system. Once all the requirements are gathered, the purchase orders are placed with selected suppliers to deliver the required material to the manufacturing plant at the requested date.

* Inventory: Once the raw material is received from the supplier, it’s verified for quality and accuracy. The supplier sends an invoice with the shipment or later, depending on terms of the agreement signed with the purchasing department. The raw material is stored until the manufacturing plant or shop floor needs the material for consumption. Many organizations put in place just-in-time (JIT) or kanban processes to control the flow of material.

* Manufacturing: Depending on the production plan, the material is ordered from the warehouse for the shop floor. Once the product is manufactured, the final finished goods are returned to the warehouse or shipped to the customer, depending on the delivery date.

* Transportation: Finished goods which need to be delivered to the customer are sent out for delivery via the most cost-effective mode. Once the goods are shipped an invoice is sent for the delivered products.

For the optimization of the whole supply chain network, each portion of the network needs to be performing at its highest level of efficiency. For example, customer demand is so volatile in today’s economic conditions that the organization needs to have a flexible system in place where it can move the demand inward and outward like a spider web. As the demand changes, the planning and the purchasing team needs to work parallel to each other to provide better lead times from suppliers and offshore vendors.

Many techniques can be used to manage the inventory, including a consignment process or vendor management inventory methodology. Doing so helps an organization focus on its core competency while the VMI provider manages inventory efficiently, and cost effectively. Another area where companies must show flexibility is in transportation, especially with fluctuating oil prices—many organizations are considering managing the transportation of inventory and finished goods through a 3PL.

Bottom line: optimization lies in the entire supply chain, not just in one piece of the puzzle.

Because information is critical to the performance of any business, companies (especially those operating with and within supply chains) cannot neglect the optimization of information. Information needs to be gathered, organized, and saved in one place for easy access and analysis. To achieve high revenue and greater customer satisfaction, companies are now using high tech tools by implementing supply chain management processes and enterprise level software to gather, mange, and utilize information in the most efficient way.

For an optimal supply chain network, the organization needs to remember a few key things about supply chain IT:

* Choose an IT system which targets the company’s main success drivers.
* Take baby steps when implementing IT systems and make sure each step brings value to the entire supply chain.
* Management should understand that every IT system has a degree of complexity.
* Many organizations wrongly think that once a supply chain system is put in place, they won’t have to manage any supply chain issues. This is a completely incorrect approach. Management should keep focused on the supply chain at all times due to changes in the customer landscape and competitive market place.
* What the future entails nobody can predict. That’s why when selecting an IT system managers need to include the future state of the business in the decision process.

Organizations need to synchronize the supply chain including production, logistics, material, and other resources across the entire supply chain network. To reduce waste in the manufacturing process, it is necessary to have the appropriate tools and technology in place. Reducing inventory and lead times across the supply chain can drastically improve the performance of the organization. As companies around the globe look towards internal processes for reductions in cost, they are adopting more synchronized manufacturing to gain a competitive edge.

May a New Day Begin for Mature Enterprise Applications – Part 2

Part 1 of this blog series outlined the trend of enterprise applications vendors’ attempts to win their users’ hearts and minds (as well as wallets) via more intuitive and appealing user interface (UI) and user experience (UX) design. What that means is that users can now more quickly obtain all of the relevant information they need in a personalized way, with drill-downs and other slick navigational Web 2.0 gadgets.

For users, personalized screens and forms provide immediate access to issues that require immediate action or reassurance that situations are under control. Such intuitive UI allows users to diagnose the most critical business situations they face and immediately drill into the source transactional systems to get the data they need and decide on appropriate actions.

The analysis then focused on Infor and its Open SOA framework, which is the enabling linchpin for the vendor’s delivery of next-generation interoperable value-adding solutions. About two years ago, Infor espoused its so-called “Three E’s” strategy (“Enrich, Extend & Evolve”) to deliver agile and adaptive software components on top of the Infor Open SOA platform.

Infor’s “Three E’s” Approach

The “enrich” part of the strategy refers to adding value to Infor’s raft of current products (solutions or assets). Infor has released over 100 product upgrades and feature (service) packs free of charge for customers on active maintenance contracts. It is also important to note that there is no forced march imposed upon customers here; these feature packs can be enabled or disabled by turning the appropriate switches “on” or “off” in a parameterized setup.

The “extend” part of the strategy refers to extending functional footprint via OSGi standards–based interoperability within Infor’s portfolio of applications in order to meet the growing complexity of global supply chains. Customers will receive ongoing service-oriented architecture (SOA) integrations. On one hand, these product connections represent cross-selling opportunities for Infor, on the other hand, they should also enable customers to extend their current solutions and build a broader foundation for future capabilities that might be required.

For example, Infor’s enterprise resource planning (ERP) users will be able to leverage, e.g., Infor’s supply chain management (SCM), business performance management (BPM), or enterprise asset management (EAM) products. But in contrast to the “extend” feature packs (and new individual product releases), these new functional capabilities are logically available for an additional license fee.

Finally, the “evolve” part of Infor’s Open SOA strategy follows along the lines of developing brand new products that will solve some particular business problem and improve users’ competitiveness (and thus will not become obsolete for quite some time). These new components promise to feature universal interconnectivity to major Infor products.

Depending on their nature, they will either be free of charge (e.g., Infor MyDay) for eligible customers or for a commensurate license fee. For more details, see TEC’s previous article entitled “Ambitious Plans and Promises: An Enterprise Software Provider Keeps Its Word.”

At the Inforum 2008 user conference, Infor touted about 20 new “evolve” components to be generally available (GA) , i.e., tested on limited release with real customers for several months) by the end of 2009 (and many more to come afterwards). In addition to the MyDay role-based portal (which will be described soon), are Infor Decisions and Infor Order Management are already GA.

Infor Decisions brings real-time, enquiry-driven business intelligence (BI) to line of business (LoB) managers. These folks have been inundated with data coming from disparate sources such as financial management systems (e.g., actual vs. budget), customer service systems (e.g., customer and product profitability), external systems (e.g., a customer’s financial performance) and operations (e.g., inventory status).

But this overflowing data has unfortunately not traditionally been linked to the context of business. To that end, Infor Decisions drives a “train of thought” inquiry, which transforms users from transactional to information workers and facilitates informed decision-making and action.

For its part, Infor Order Management provides multi-model pricing and time-phased inventory reservation right across supply chains. The solution was built to enable the true and unified order experience, i.e., how companies really sell and how customers buy (and not how the system “thinks” the trade happens).

For example, order capturing and inventory reservation can take place centrally, while the actual delivery and customer service takes place in a certain local division. Infor Order Management was designed with flexibility in mind to accommodate ever-changing business practices.

Evolution Continues

The upcoming Infor Advanced General Ledger (formerly also known as Multi-Books Accounting) module is an “evolve” component that should give global companies the ability to conform to multiple, country-specific accounting standards and currencies. The module can either run concurrently with an existing general ledger (G/L) system or serve as the primary accounting module.

The idea behind the multi-books accounting capability is to enable the system to work alongside financial management systems to help companies cast their financials in multiple ways. If, for instance, a corporation has an operation in China, India, or Brazil, and it has to follow these governments’ rules on what one precisely refers to local accounting concepts and regulations, like “salary,” “wage,” or “value-added tax” (VAT) or “sales tax,” how do users get a system without having to rip and replace what they already have in order to work in China, Latin America, the US, and Europe? Advanced G/L and about a few dozen other upcoming “evolve” components, such as, e.g., Pricing, contracts & promotions; Actual costing; Multi-echelon inventory control, and Sales & operations planning (S&OP), are slated for delivery by the early 2010s.

So, What’s The Big Deal with Infor MyDay?

Typically, when I attend vendors’ annual events, I ask their staffers to tell me what in their mind is the highlight of the conference. I was a bit dismayed after hearing the strangely named MyDay feature as the major theme of the Inforum 2008 event.

Namely, IFS Enterprise Explorer (IEE, part of the ongoing Project Aurora), Microsoft Dynamics Client for Office (DCO), Lawson Smart Office, Epicor Productivity Pyramid, IQMS Smart Page UI and so on revolve around themes like role-based portals, contextual analytics, KPIs, alerts, dashboards, shortcuts, favorite/recently used pages, etc. In addition, the role-based UI was implemented with common controls and gadgets, and delivered for basically all of the Microsoft Dynamics enterprise resource planning (ERP) products after introducing it and testing first in Microsoft Dynamics GP.

Thus, I wondered what I was missing at the time within MyDay that was making me a bit indifferent (and why I should not have been indifferent). To be fair, Infor MyDay is designed to deliver persona-based content to over 150 roles Infor has identified in its customers’ businesses. Infor’s blog post explains as follows:

“…What do we mean by persona-based? A persona is a composite of a user within an organization. A lot of vendors talk about role-based interfaces. A persona takes this concept to the next level. A role is generic, designed for a departmental role such as the “finance user.” A persona is specific to an individual user within that department, such as the VP of Finance or Controller. A persona also adds texture to that individual. At Infor, we’ve given them names and faces and built stories around their life. These are imaginary people, but they are based on the hundreds of users we studied to understand the real needs that real people need to get their jobs done. From conception, design and development to sales education and marketing, this gives us the understanding we need to build and deliver great content for people.

Let’s take a look at one of the 16 persona roles we are delivering with this first release, Bob the Production Planner. Bob is a composite of the typical production planner. He is the choreographer of the manufacturing shop floor, managing planning and production. He determines what to produce, how much and when it’s needed. He acts as the go-between between the shop floor and the corporate side of the firm. He has a degree, probably business or engineering, and about 10 years experience with manufacturing. He knows how to use applications but he’s not an IT gearhead.

Bob has to deal with unexpected events – late purchase deliveries, machine downtime or last minute work orders. He wants to be more proactive, but the reality is that he is in ‘reacting mode’ much of the time and plans are always changing. He has to deal with inaccurate inventories and bill of materials, and he has an avalanche of unstructured information that he needs to gather, format and assimilate to take action on.

From our research, we have learned Bob’s typical responsibilities, his skills, his working environment, pain points and goals. We have learned how he uses his ERP software, the other applications he uses and the value he needs to get from them. We learned all of this because we’ve done our homework. A lot of it. We started in early 2007, logging thousands of hours of research into the personas of the people using our software. We’ve built-in the content they need to make their lives a little easier, so they can focus on strategic activities instead of looking for information…”

While an impressive and thorough exercise, persona-based profiling (and subsequent UI tailoring) is not necessarily a unique practice. Namely, TEC’s recent article entitled “Application Giants in Duel—and Duet—for Users’ Hearts, Minds … and Wallets” explains at great length Microsoft’s rationale for its elaborate approach to UX, including role centers (based on numerous interviews of real-life users and their needs).

It’s About Making the Users’ Day (and Less about Impressing Analysts)

The just-announced availability of Infor MyDay for Infor ERP Adage [evaluate this product], the renowned process manufacturing ERP solution, has given me an answer to my quandary. After Infor MyDay was unveiled at Inforum 2008, this represents its first GA for one of many Infor ERP solutions.

As the recent Infor blog post explains, one issue that almost all of the process manufacturing companies can relate to is cost to service customers. In most process ERP systems, actual cost of production, post invoice rebates, disallowed discounts, non-salable allowances, and return data are just some of the data captured over time.

“…This data often resides in ERP modules or disparate, standalone systems. Most companies struggle to pull this information together with customized reports, spreadsheets or complex general ledger allocations. The problem is, by the time you sort through all the noise, the information is months old and the impact is diluted.

With Infor MyDay, the information is immediately at your fingertips, without having to call IT to develop a custom report. This information is built into the Infor MyDay personas for finance and sales managers, who receive these reports on their personalized page and can now better control cost to service and ensure their most profitable customers get the most profitable products…”

For all this time, I was thinking as an industry analyst (rather than a user of a specific product), and comparing MyDay to what other vendors are doing, thinking about the possible market differentiation. On the other hand, to a user of an aged Infor ERP Adage instance, which has been a very functional product but with a rudimentary UI (to put it mildly), MyDay will likely feel like time travel to at least two decades in the future (or as if they were participants in ABC’s Extreme Home Makeover show).

And who might then care about what other vendors might be doing in this regard? The Infor ERP Adage MyDay Datasheet is available at the company’s web site here.

Now I get that MyDay, being free of charge and exhibiting a unifying, dynamic, and snazzy UI, should resonate with Infor customers on antiquated and diverse products. The UI enhancement has also very recently been made GA for Infor ERP LN, Infor ERP SyteLine, and Infor ERP Visual to provide these users as well with visibility into the “why” and “when” and not just the “what” of business operations. As mentioned in Part 1, Infor MyDay does this by filtering data by job function and relevancy and delivering it in a condensed home-page format.

Agresso + CODA, VITA + Link (+ CODA 2go): What’s the Sum? – Part 2

Part 1 of this blog series described Unit 4 Agresso’s (or Agresso in further text) dual product strategy following its acquisition of CODA in 2008. The post then went on to analyzing (and reinforcing if you will, given a number of previous blog entries on the same topic) the post-implementation agility capabilities of Agresso Business World (ABW) [evaluate this product].

The blog post attempted to explain how the product’s underlying VITA architecture differs from contemporary service-oriented architecture (SOA)-based architectures. Part 2 of this blog series analyzes the CODA Financials product and its underlying Link architecture. Contrary to Agresso VITA, CODA Link (a.k.a. CODA 2link) architecture is indeed SOA-based and supports superior connectivity.

Enter CODA Link Architecture

For its part, CODA’s value proposition is in being a best-in-class financial management solution with possibly unmatched connectivity (i.e., it plays nicely with others, if not almost everyone in the yard). By the very nature of its narrow functional scope, CODA’s financial management software provides a stand-alone solution that simply must fit into customers’ existing IT infrastructure to work with other business systems without negatively impacting them.

CODA focuses on solutions targeted at chief financial officers (CFOs) and controllers. The “best-in-class” financial management designation comes from the single Web browser-based general ledger design that accommodates the “multi-everything” mantra (i.e., multi-currency, multi-country, multi-dimension, multi-subledger, etc.). This way CODA is able to meet both local and global requirements, and the system is compliant with the Sarbanes-Oxley Act (SOX), Generally Accepted Accounting Principles (GAAP), and International Financial Reporting System (IFRS).

CODA’s customers have been raving about the vendor meeting their needs for consistent and accurate data, and an up-to-date “single version of the truth.” In addition, they often talk about improved financial processes (e.g., purchase-to-pay, invoice-to-collection, record-to-report, etc.), more streamlined and effective financial period closing practices, complete audit trails, and flexible enterprise reporting and analysis capabilities.

CODA-Financials is targeted at midsize and large companies across all public and commercial sectors, while CODA Dream targets small and medium enterprises (SMEs) , primarily in the UK. Both products have a long heritage, and CODA certainly has a remarkable reputation in the UK’s CFO/controller community.

CODA-Financials has a similar number of customers as Agresso, and has customers in all geographies (about 2,800 customers in over 100 countries). CODA has local sales and service & support hubs in the US, Europe, and Singapore.

The current Release 11 of CODA Financials (code-named Neon) has seen significant research and development (R&D) investment (the vendor estimates around 300 person years) to meet its customers’ changing needs. These are along the lines of helping organizations to achieve superior finance processes and improve business visibility (e.g., performance by company, location, product, line of business, etc.), regulatory compliance, and corporate governance.

In recent years, CODA has expanded its offerings beyond accounting transactions into other areas relevant to CFOs, such as financial analysis, financial consolidation, cash management (through the acquisition of OCRA), and financial governance solutions/business process control. This has enabled CODA to cross-sell these solutions to existing customers and even to organizations that do not necessarily use CODA’s financial management applications. However, the effort has not realized significant increases in revenue. For more on these events, see TEC’s 2005 series entitled “Best-of-breed Approach to Finance and Accounting.”

Superior Connectivity

The underlying Link architecture provides the backbone for CODA’s sophisticated and interoperable enterprise financials solution. Link’s capabilities give financial executives’ applications’ change management capabilities in terms of fast implementation, “low-impact” integration, and pain-free upgrading.

CODA’s standalone specialist financial management software has been designed to work with other surrounding IT systems, thanks to its notable system compatibility and easy integration. For one, the vendor’s stand-alone components fit into existing infrastructures due to their support for the following platforms (per each architectural layer):

* Hardware – Windows/Intel (Wintel) ; HP-UX servers; SUN SPARC; IBM pSeries (formerly RS/6000); and IBM System i (formerly iSeries and AS/400)
* Operating systems (OS) – Microsoft Windows; UNIX; Linux; and OS/400
* Databases – Microsoft SQL Server; Oracle; Sybase; and IBM DB2
* Web servers – Internet Information Services (IIS) and Apache HTTP Server
* Web browsers – Windows Internet Explorer (IE) and Mozilla Firefox
* Integrated development environments (IDEs) – Microsoft .NET Framework and Java Platform Enterprise Edition (formerly J2EE).

Moreover, integration with other key business systems can take place via either CODA 2link, a user-friendly integration tool (with more structure to it), or simply Web Services that capitalize on SOA principles. CODA 2Link offers a choice of appropriate toolsets for integration, starting with table-based batch loading integration. Integration can also be done via online remote procedure calls (RPCs), via extensible markup language (XML) in a distributed manner, or via a combination of XML interfaces and Web Services.

That is to say that this architecture blueprint provides both simple integration (via Microsoft Excel uploads) and advanced integration options. The latter options include Structured Query Language (SQL) batch uploads, Visual basic .NET and/or C language application programming interfaces (APIs) for legacy systems. Last but not least, and as said before, integration can also be programmatic via XML and Web Services.

User access is via a pure Web client or embedded within Microsoft Office (CODA also has its own implementation of AJAX called APE). Moreover, personal digital assistant (PDA) devices and mobile delivery of personalized reports are also supported.

The Web-based deployment and infrastructure for effective data management provides secure and personalized access to an up-to-date “single version of the truth.” The system ensures that everyone is “on the same page” by keeping functional updates “in sync” for all users, and by gathering, unifying, and analyzing data from systems across the entire organization, in a timely manner.

The system offers wide-ranging automation capabilities for data entry and processing, reconciliation, reporting, and financial processes. Personalization capabilities are also at the core of the architecture, with users driving configuration and tailoring of forms, inquiries, reports, and so on. There is a single graphical user interface (GUI) and look-and-feel for all CODA products, and users can redesign CODA’s processes and screens that come “out of the box.”

But the “Future Proofing” feature is the ability to decouple users’ personalized interfaces from the underlying CODA version on the server side, which provides for minimal impact on interfaces when moving to the latest CODA release. In other words, all user-driven customization and integration is preserved and protected through the upgrade process.

So, How is CODA’s SOA Better Than Other SOAs?

In addition to the aforementioned support for multiple platforms and personalization capabilities, I was wondering whether the CODA 2link SOA-based architecture is any different and better than other SOA counterparts, and how. In other words, SOA is known for plugging pieces together, and most SOA platforms are fairly evenly matched in that regard.

If there is something that differentiates the Coda 2link’s performance from, say, SAP NetWeaver, IBM WebSphere, or Oracle Fusion Middleware (OFM) connection capabilities, then users need to know that, and why it is better. CODA believes that its unique selling proposition (USP) with CODA Link is the extent of its coverage. Namely, all of the granular functions within CODA are available as Web Services, which means that anything that users can do within CODA’s finance system can be easily integrated to and accessed via another application – a front-end business system, or another back-end system, for example.

This feature also means that users can achieve a greater level of integration than with other systems, and avoid the normal pitfalls of enterprise application integration (EAI) and middleware products such as having to duplicate customer records or other data, for example. We should also note that OFM, WebSphere and NetWeaver are really middleware offerings that require extensive certification processes for best results. What CODA is providing is standards-based (the WS-I or Web Services Interoperability organization) service entry points into its business applications.

The vendor is not supplying a middleware solution per se, but rather a finance engine that can sit at the heart of an enterprise-wide, integrated, best-of-breed applications suite that meets the unique requirements of the customer in a way that no broad homogenous application suite could. The organic use of Web Services provides

* the ability to upgrade CODA but not have to change users’ screens;
* the ability to use the same development methods irrespective of the underlying hardware and software platform;
* integration with other systems independent of location (i.e., intranet or outside the firewall, at subsidiaries, affiliates, business partners, etc.);
* a single point of maintenance (repository) for financial business rules and security.

Furthermore, the entire Link infrastructure has full version support, so that CODA can guarantee that any integrations made using any of the technologies it offers within its architecture will continue to work through future upgrades of CODA. This versioning support, which enables consumers to maximize their investment in R&D around solutions they build even over multiple upgrades from CODA, is possibly a unique proposition that should resonate with some prospective customers.

Back to Agresso + CODA

The merger with Agresso has certainly given CODA a safer harbor from less friendly acquirers, while Agresso now has a two-prong product strategy along the “change” theme. On a somewhat negative note, despite Agresso’s ongoing success, its revenue is still centered on Europe, with only 9 percent of 2008 revenue coming from outside the region.

However, North America is the fastest growing part of Agresso—in just four years, revenues for Agresso North America have moved from 1 percent or less, to 5 percent of the company. This is not unsubstantial for a now half-billion-dollar company.

Prospective customers should consider Agresso or CODA products based on business requirements (post-implementation agility in a homogeneous environment vs. interoperability in a heterogeneous environment), industry segment, and geography. Dear readers, how do you find Agresso’s positioning of its products? What are your comments and opinions about post-implementation agility vs. interoperability and Agresso’s dual product strategy?

The Steel Manufacturing Industry: What Use Is an ERP System, Anyway?

TEC regularly works with companies to identify the right software vendors for their industry and particular needs. I’m going to provide you with information about ERP systems and how they relate to steel industry requirements (note: you can always consult our Vendor Showcase to find out more about specific software vendors).

An ERP system is typically considered to be a company’s IT data backbone application, and helps integrate business activities across multiple departments and sites (or across the entire enterprise). ERP modules range from product planning, parts purchasing, inventory control, and product distribution, to order tracking, and provides business application modules for finance, accounting, and human resources as well. Tier-one vendors such as SAP and Oracle provide full suites of ERP business applications.

ERP applications have evolved with new technological innovations such as client/server architecture and service oriented architecture (SOA), which provide more flexibility to configure a system for your particular requirements. With the help of SOA, for example, it’s easier to “break” an ERP application into small modular components which use industry-specific processes to communicate, interact, and operate. SOA has helped ERP vendors move away from the “one size fits all” methodology—as we all know, no two organizations have the same requirements.

In the steel manufacturing industry, the ERP application typically sits on the top levels of the business IT/manufacturing framework. See the diagram below for the different application layers within a steel manufacturing company; this diagram is very similar to a diagram contained in a document produced by IBM Global Business Services (see page 9), which I have modified slightly for the purposes of this blog post.

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Integration of ERP with other business processes is key for the success of steel manufacturing organizations.

Here’s an example of a typical process flow in a steel manufacturing plant:

A customer order is entered in the ERP module, which communicates with the supply chain management (SCM) module to figure out which orders can be met by on-hand inventory or by creating a production plan. This information is fed back and forth between levels 4 and 5 on one hand, and levels 3, 2, and 1 on the other, so that a promise date can be sent back on customer orders.

The supply chain application provides a rough-cut planning from the demand planning module, which results in the creation of a production plan. Once the production plan is in hand, the work orders are created and marked against available stock on hand.

As the work orders are created, they are communicated to the MES application for load balancing and to make sure each production line is optimized according to the order sequencing. It’s crucial to convert the planned order from the SCM application right before the production starts, as that will feed into the ERP system, which will transfer all the requirements to the MES layer. The MES layer will define what quantities of orders will be converted into pieces of slabs, coils, etc.

The steel manufacturing framework described above helps organizations identify gaps among their different departments. Information must flow from level 1 to level 5 in for successful business operations. To find the “best ERP fit” in the steel industry, it is very important to understand the multiple layers of operations in steel manufacturing, as well as to understand which system needs to communicate with which layer, and at which point of the process.

ERP solutions satisfy a broad range of requirements, from financials to the supply chain, but when it comes to manufacturing execution, most ERP solutions have gaps in fulfilling the requirements. Areas such as financials, human resources (HR), customer relationship management (CRM), forecasting, planning, order management, inventory management, asset management, distribution, and transportation can be facilitated with an ERP system. However, detailed operations of scheduling, quality, production tracking, constraints planning, capacity planning, multi-dimension, grades, etc., can only be performed efficiently by industry-specific manufacturing execution system (MES)/advanced planning and scheduling (APS) applications.

The steel industry is so competitive in nature that it’s hard to imagine a steel manufacturer doing without an ERP application to manage day-to-day processes, ensure efficiency within the production plant, and provide real-time reporting visibility into the organization’s overall performance.

As there are many ERP software vendors for the steel manufacturing industry, it’s very difficult to say which one is the “best” ERP vendor. The most effective way of knowing which ERP software will fit your needs is to compare your business requirements against the functionality of the ERP software.

However, finding the best-suited ERP application for your organization can be an overwhelming process. So now the question is this: How to find the right ERP application for your particular needs? Unhelpfully enough, every vendor solution has its own strengths and weaknesses. It’s best to evaluate a solution based on how capable it is of providing features and functions that match your business needs and internal processes out of the box. Customization of any enterprise software is always expensive, usually risky, and probably not the best path to implementation success.

What do you think? If you’re in the steel manufacturing industry, do you think you require an industry-specific solution? Leave a comment below!