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January 3, 2007

Best Practices in Extending ERP: A Buyer's Guide to ERP Versus Best of Breed
From Capgemini
Capgemini is sponsoring a new report produced by Aberdeen that identifies best practices for ERP. The report examines ERP strategies, usage and implementation of over 1,200 enterprises in Aerospace and defense (A&D), Automotive, High-tech, Industrial products, Consumer Products, Food and Beverage and other industries.

Aberdeen's 2006 ERP in Manufacturing Benchmark Report explored how ERP (Enterprise Resource Planning) strategies are evolving as enterprises strive to derive more and better business value from their implementations. That often means driving the use of ERP deeper into their organizations or broader across more of the enterprise. It means utilizing more functionality, extending the footprint beyond the core ERP functionality and making decisions between ERP vendors and pure play or "Best of Breed" solutions.

The trade-off between Best of Breed functionality and ease of integration is no longer as simple as it once was. Over the generations, Enterprise Resource Planning has continued to expand, blurring the boundaries of core ERP functionality. The number of modules and the extent of functionality offered in the ERP suite have steadily grown over the past two decades. At the same time, the consolidation within the software industry is having a broader effect than just on ERP itself. ERP companies have also been gobbling up pure play or Best of Breed vendors that offer extensions to core ERP functionality. This is having a profound effect on the enterprise application vendor landscape and also on how ERP versus "Best of Breed" decisions are fundamentally made. More and more companies are exploring the limits of these boundaries and weighing decisions that balance integration efforts and the ability to upgrade to new releases against extended features, functions and advanced technology.

The three most important factors to consider in ERP versus Best of Breed decisions are functionality, integration and the ability to upgrade to new releases. While functionality is a key driver of the majority of software decisions (68%), on average companies use only about 43% of available ERP functionality, implying the right fit is just as important, if not more important, than the number of features and functions available. Yet while the original ERP selection process may have been a two dimensional decision, weighing features and functions of various ERP vendors against each other, a third, and possibly a fourth dimension is added to the evaluation in deciding to extend ERP.
The third dimension is the added complexity of integration, resulting in the following questions which need to be answered.
1. How tightly must the functions be integrated?
2. How much data must be shared or replicated?
3. How much duplication of functions exists between ERP and the extensions?
4. If data must be shared by two or more applications, which application "owns" the data?
5. Do the architectures of your ERP and any extensions being considered easily support integration and interoperability?
The fourth dimension is the potential impact on upgrades and migrations to new releases.

When considering an extension to your ERP solution, business functionality is of primary importance, but beyond features and functions, evaluate the following capabilities:
Technology architecture
Partner status
Ease of application upgrades
Support approach
Integration capabilities
Financial viability of all software vendors involved
Ownership of and maintenance of customized integration.
Download the full report "Best Practices in extending ERP" from: http://www.capgemini.com

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The Value of Working Together: 2006 Manufacturing Value Report
From Capgemini
The consulting firm Capgemini reports on what is happening in manufacturing, the challenges others in your industry are facing and how Capgemini with its global organisation and competence is helping companies overcome them.
Through its extensive experience of working with manufacturing companies, Capgemini is uniquely placed to understand and address the industry's key challenges, which can be summarised as follows:
Product diversification
Price pressure
Greater customer demands
Ongoing consolidation
Large, outdated application portfolios
Compliance
Time to market
Increasing competition from new entrants around the globe
Globalisation and standardisation
Operating in a new network of partners and suppliers every company will, at some stage, face some or all of these challenges. Our approach is to look for solutions that not only address the immediate problem, but which can be sustainable over the longer term. For example, diversification often requires a new business model centered on service provision and the need for a Service Level of Agreement (SLA)-centric business model. The pressure on price comes from two sources: higher energy and raw material costs and increased competition from low-cost operators, so we look at the company as a whole to see where streamlining can occur. Greater customer demand means a shift towards selling capabilities rather than products as well as improved channel management, so changes in mindset as well as processes are often the way to deliver results. Keeping the customer satisfied has never been easy, and that is when customers were on the doorstep. Today, customers are harder to please than ever before. They're more savvy, more demanding, more price conscious and they could be based anywhere in the world. And if you can't meet their expectations, in every respect from ordering through the channel of their choice to delivering when and where they specify, they buy from someone else.

Capgemini is a recognised leader in manufacturing and has successfully assisted hundreds of clients in transforming their IT and business process capabilities and operations. With a long-term, proven track record, we understand manufacturing and how to apply that experience to enable profitable growth.

Capgemini currently works with the world's leading manufacturers, helping them optimise business operations, streamline expenses and generate profitable revenue growth. Capgemini's 1,000+ manufacturing clients across the globe include:
70% of the largest diversified manufacturers
90% of the largest manufacturers and suppliers in the high-tech industry
14 of the largest auto manufacturers and 13 of the largest tier-one suppliers
Eight of the largest networking and telecom equipment manufacturers
Eight of the top 10 consumer electronics manufacturers
Seven of the top 10 aviation, aerospace and defence companies

Capgemini has a suite of tried-and-tested tools, methodologies and best-practice examples. Our long-standing partnerships with the world's top technology companies bring unsurpassed IT expertise to the table--which enhances strategy as well as implementation. All of which means Capgemini's clients gain the advantage of having an integrated team working with them to provide best-in-class solutions.
In the full version of the Manufacturing Value Report you can read about:
Our Global Rightshore Solution
Building a Service Oriented Environment
Some of our case studies in the Manufacturing industry:
Philips SPEED: Accelerating Global Integration.
Schneider Electric: Harmonising business processes through outsourcing.
ABB Robotics: Streamlining the business process by implementing a standardised SAP solution.
Siemens Power Generation: Creating a new supply chain that improves efficiency and lowers costs.BlueScope Steel: Addressing the changing environment through Business Process Outsourcing.
Mölnlycke Health Care: Enabling Mölnlycke Health Care to offer 24/7 support.
Technology Solutions Leader: Transforming a major supply chain to reduce costs and enhance its competitive positioning.
Download the full version of our 2006 Manufacturing Value Report from: http://www.capgemini.com

What's on CIO agendas in 2007: A McKinsey Survey
From the McKinsey Quarterly/Janaki Akella, Kishore Kanakamedala, and Roger P. Roberts
Two trends in information technology will become increasingly important to CIOs in 2007: a migration to service-oriented architectures and the introduction of lean-manufacturing principles to data center operations. These are among the results of our most recent survey of senior IT executives. The survey asked CIOs and other senior executives in North American companies about their plans for the coming year.

New technologies and trends constantly compete for a share of the enterprise IT budget, and during each cycle, one or two rise above the others to become a major focus for CIOs. In 2006 two areas of critical focus have been software as a service and server consolidation and virtualization--two trends that CIOs, a year earlier, had cited as important.

As those technologies gain traction, executives are also signaling interest in two further trends to improve efficiency and effectiveness. Sixty-four percent of the respondents to the 2006 survey told us they plan to implement service-oriented architectures in the coming year. This strong response suggests that the thinking about IT architectures is shifting to embrace global standards for interaction, both internally and with external partners and suppliers. Advocates of service-oriented architectures expect them to make IT more flexible, open, and efficient by facilitating communication and interaction between systems. Under this design, common IT tasks, called services, can work smoothly together, regardless of an organization's underlying technology platform. The concept has been around for years, but as more organizations adopt Web services standards, interest in these architectures has grown. That interest persists even though many executives have been unclear about the precise meaning of the term--a confusion made worse by some vendors' propensity to label every product as "service oriented." Despite this confusion, the compelling benefits of service-oriented architectures--easier communication and interaction among applications--and the increasingly mature offerings from vendors are enticing more IT executives to give it a close look.

Just as interesting to us, 48 percent of the CIOs we surveyed in 2006 said that they plan to implement service-oriented architectures for integration with external trading partners in 2007. Traditionally, companies pilot any new integration technology within the firewall, and broader adoption for integration with trading partners follows a few years later. The fact that so many IT departments are already moving beyond the internal pilot stage means that enthusiasm for this trend is high. What's more, the wide-spread adoption of software as a service promises to encourage the spread of service-oriented architectures, because they make it easier to integrate enterprise systems with applications from third-party vendors.

The second trend poised to strengthen in 2007 is the application of lean-manufacturing principles to data centers. In our recent survey, 28 percent of the respondents said that they had already applied or decided to apply lean principles to improve their data center operations. Lean, of course, isn't a technology but rather a methodology applied to processes--originally in manufacturing operations but increasingly within services, including IT.

Data centers have grown tremendously over the past 10 to 15 years as IT spending has increased and cost-conscious CIOs have consolidated smaller centers into fewer and larger ones. A data center for a typical large enterprise has hundreds of millions of dollars in capital equipment (server farms, mainframes, networking gear, and storage devices), consumes large amounts of electricity, and requires hundreds of highly skilled engineers and technicians to operate. In particular, the labor costs have grown significantly with the commitment of resources to processes such as incident response, problem management, and change management. Applying lean principles can help reduce waste and improve labor productivity by as much as 40 percent in some processes. Nearly one-third of our survey respondents aim to apply lean principles in these centers--a significant share, suggesting that the initial positive results from early adopters are encouraging a wider field of IT organizations to explore this methodology. We will continue to track these trends--and their implications for business and IT leaders--
About the Authors: Janaki Akella, a principal and a coleader of McKinsey's global IT architecture practice, is an expert on architecture and infrastructure. Kishore Kanakamedala, the practice manager of the IT infrastructure practice, is an expert on IT management, outsourcing, and offshoring. Roger Roberts, a principal, is a coleader of the global IT architecture practice and an expert in technology strategy and infrastructure. All three are members of the global IT practice. They are based in the Silicon Valley office.
http://www.mckinseyquarterly.com

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Holiday Shopping Top 40 Online Retail Satisfaction Index Rates Leading E-Commerce Sites
From ForeSee
Online shoppers are slightly more satisfied this holiday season than last, according to the Top 40 Online Retail Satisfaction Index produced by ForeSee Results in partnership with FGI Research. Aggregate customer satisfaction with this group of leading retailers rose one point (1.4%) to a score of 75 on a 100-point scale. The research was conducted using the methodology of the University of Michigan's American Customer Satisfaction Index (ACSI) and surveyed more than 10,000 online holiday shoppers.
Among the findings of the second annual holiday edition of the Top 40 Online Retail Satisfaction Index:

Top rated websites include perennial favorites Netflix (86), Amazon.com (84), LLBean.com (80) and QVC.com (80), followed closely by Apple.com and Old Navy.com (both 79). Bottom scorers include CompUSA.com (69), Costco.com (69) and CDW.com (68). Department stores racked up huge improvements: Websites for JC Penney, Sears and Target all racked up huge improvements from last year's holiday satisfaction scores.Of the sites that were measured during the holiday season in both 2005 and 2006, an impressive 24 have higher customer satisfaction scores this year than last. Only seven sites saw their scores decline from holiday 2005.

Shoppers more satisfied by apparel sites. In the aggregate, people were more satisfied with apparel websites (average satisfaction of 76) than with mass merchants (74) or electronics retailers (74)
"What's remarkable is that the leaders are really working hard to remain the leaders," said Larry Freed, President and CEO of ForeSee Results and an online customer satisfaction expert. "The top eight retailers from last season either maintained or improved. They aren't resting on their laurels or giving other retailers a chance to erode their customer base."

In the week leading up to the holiday shipping deadline, customer satisfaction with online retailers rose slightly from last week, according to the ForeSee Results' weekly Holiday Online Retail Benchmark. As measured from December 11 to December 17, 2006, aggregate customer satisfaction with online retailers in the benchmark rose .2 points from last week to a score of 76.7 on a 100-point scale. This slight upward trend is a reversal from 2005, when satisfaction started to dip at this point in the holiday shopping season.
"We've noticed this year that retailers have been able to keep their promotions fresher throughout the holiday shopping season, which is definitely a factor in higher satisfaction," said Larry Freed, President and CEO of ForeSee Results. "And, there seems to be less of an issue this year with hot gift items being out of stock, which has hurt satisfaction in the past."

Despite a minor uptick in satisfaction for all aspects of the online shopping experience, customer satisfaction for the sub-group of customers who actually purchased a product has fallen .5 points this week. "This drop in customer satisfaction really isn't surprising when you consider the stress and time crunch many shoppers feel as they realize it's 'now or never' for finishing their holiday shopping," said Freed.
http://www.foreseeresults.com


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