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Oracle launches sourcing software on demand: Why market adaptability may ultimately derail the transition (Part 2)
Written by: Jon HansenArticle Overview: In this second of our two part review of the April 9 announcement by Oracle that they are now going to offer their Strategic Sourcing and Sourcing Optimization applications on a Software as a Service (SaaS) or on-demand basis, I will focus on the more technical elements of their decision. Specifically, the potentially devastating “weak links” within their current offering that may create an unbridgeable chasm to market acceptance.
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Oracle launches sourcing software on demand: Why market adaptability may ultimately derail the transition (Part 2)
“Recognizing that adoption or end-user compliance is one
of the main barriers to a successful program, the ability for project champions
to leverage user comfort with known applications such as Excel to access
certain functions within the SAP architecture could stimulate stakeholder
buy-in, at least internally.
By promoting the utilization of SAP through a familiar,
easy-to-use interface, the overall level of possible resistance may diminish to
the point of making the SAP PPS offering more viable.
The key of course will be the degree of dynamic
connectivity that Duet offers between the MS software and the SAP application
relative to an organization’s procurement practice. Given that one of the many benefits of Duet
being advocated by Microsoft and SAP is the purported short implementation time
lines and lower corresponding costs, means further investigation would seem
warranted.”
From the Procurement Insights “SAP Procurement for Public
Sector” White Paper
In this second of our two part review of the April 9 announcement by Oracle
that they are now going to offer their Strategic Sourcing and Sourcing
Optimization applications on a Software as a Service (SaaS) or on-demand basis,
I will focus on the more technical elements of their decision. Specifically, the potentially devastating
“weak links” within their current offering that may create an unbridgeable
chasm to market acceptance.
Do not get me wrong, what I am referring to is not an issue of
technological expertise as I am certain that traditional ERP-centric vendors
like Oracle or SAP have relatively deep talent pools in this area. What I am talking about centers more on the
issue of market or end-user adaptability.
An issue that cannot be overcome by the “re-working” of a cost model.
In fact user resistance has represented what has become one of the
insurmountable barriers to the acceptance of traditional ERP-centric solutions
at the operational “real-world” level.
This in turn has subsequently contributed significantly to the high
degree of failed initiatives.
Gleicher’s Formula and the Mendocino Objective
In my soon to be published white paper “Utilizing an Intelligent Filtering
Platform to Enhance Contract Performance,” I make reference to Gleicher’s
Formula. Specifically, and citing
various sources, Gliecher’s formula “illustrates that the combination of
organizational dissatisfaction, vision for the future and the possibility of immediate,
tactical action must be stronger than the resistance within the organization in
order for meaningful changes to occur.”
I go on to state that “a resistance to change is often referred to as
the cost of change,” which is then “subdivided into the economic cost of change
(monetary cost) and the psychological cost of change.” My review found that even if “the monetary
cost of change is low, the change will still not occur should the psychological
resistance of employees be at a high level and vice versa.”
Perhaps recognizing the validity of the principles behind Gleicher’s
formula, coupled with the desire to “spare workers” from the “redundant entry
of data” while simultaneously keeping “the companies’ systems in sync,” the collaborative
effort that was originally launched as the Mendocino Project in 2005 fueled the
“partnership” between Microsoft and SAP after the former’s efforts to acquire
the German-based ERP giant a year earlier had failed. (Note: Microsoft made a second attempt to
acquire SAP in 2007, a story that I covered in the December 5, 2007 Procurement
Insights post titled “Microsoft Acquires SAP? (A Commentary).”
By the time the project’s name was changed to the present day “Duet”
moniker, the objective of the collaborative effort was further clarified in a
February 14, 2007 article which stated that “the solution addresses the
inefficiencies and inconsistencies inherent in the gap between desktop
productivity tools and enterprise business applications.” The driving force behind achieving this
objective was based on “the pressing need to connect information workers with
enterprise processes in the context of their standard work environment.” In this case, the “Microsoft Office System.”
If you read between the lines, what Duet represents is an acknowledgment by
SAP that a chasm exists between the core ERP application and the effectiveness
of their indigenous user interface. A
problem that also exists for Oracle as well as any traditional ERP-centric
solution provider.
Duet therefore represents the effort to address the “pressing need” to
create an interface that reflects the way in which the end-user operates in the
real-world. Unfortunately, the key
tenets or principles behind the application development model of traditional
ERP solutions are not conducive to a SaaS or on-demand world.
As a result, and similar to Service Oriented Architectures such as Oracle’s
Project Fusion or SAP’s Safe Passage, Duet faces challenges in terms of being
confined to an antiquated platform that reflects an equation-based versus
agent-based development model.
Equation-based versus Agent-based
In my 2005 white paper titled Acres of Diamonds: The Value of Effectively
Managing Low-Dollar, High Transactional Volume Spend, I made the following
observation; “A true centralization of procurement objectives requires a
decentralized architecture that is based on the real-world operating attributes
of all transactional stakeholders . . . in other words, your organization gains
control of it’s spend environment by relinquishing centralized functional
control in favor of operational efficiencies originating on the front
lines. This is the cornerstone of
agent-based modeling.”
The above referenced conclusion was the result of extensive research (part
of which was funded by the Government of Canada’s Scientific Research and
Experimental Development Program), in which an agent-based model was utilized
to develop a solution framework that would effectively operate within a
Metaprise architecture.
In the January 26, 2009 post I explained that a Metaprise or centralized
private hub is the “intelligent conduit that connects and manages the seemingly
disparate relationship between various internal and external stakeholders on a
real-time, real-world (re on-demand)
basis to achieve the desired collective “best value” outcome at that particular
point in time.”
I stressed the fact that “solutions that are developed in accordance with
an agent-based methodology,” otherwise referred to as meta-enterprise
applications, “deliver an on-demand
capability that provides the purchaser with the needed insight to consistently
make the best spend decisions possible.”
Unlike the equation-based models or platforms upon which traditional,
ERP-centric applications have been built, on-demand
solutions represent the future of eProcurement/supply chain application
development.”
This is a critical distinction in that it highlights just how daunting a
task traditional ERP vendors such as Oracle and SAP face in terms of being able
to effectively compete with the original on-demand solution providers, whose
applications have been developed using an agent-based model.
And while Microsoft continues to dabble on the periphery of becoming a new
age ERP player through overt efforts to acquire an SAP, or as a partner in
Duet-type projects, the jury is still out on whether they will be able to
effectively leverage their application ubiquity in terms of end-user comfort
and acceptance to emerge as a dominant “front line” vendor.
The Oracle View
What does this all mean relative to Oracle’s on-demand announcement?
It means that undertakings such as Project Fusion, Duet-type partnerships,
or acquisitions of companies within the current on-demand world represents a
patchwork approach to a rapidly evolving market. A market with which the company is becoming
increasingly out of sync.
How Oracle’s senior management respond to these seminal shifts will
ultimately determine the company’s mid to long-range future. In short, they are going to earn their paychecks
over the next few months.
That said they should keep in mind the recent turn of events within the
automotive industry. After all, who in
their right mind 10 or 15 years ago would have predicted GM being on the verge
of bankruptcy today. Or Kodak’s fall
from the ranks of elite enterprise because of their unwillingness to fully
embrace digital technology – even though they held the early leadership in
terms of research and product development.
Perhaps Larry Ellison should ponder Caesar’s Rome in the context of the
fact that empires never last forever.
Whatever the outcome, we do indeed live in interesting times.
Oracle launches sourcing software on demand: As life imitates art, so too does business imitate politics (Part 1)
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Hello Everyone!!!
- Hi,
After 4 years of professional experience in procurement/strategic sourcing, I am planning to start my own venture by providing services in the areas of spend file management, market research (commodity markets) and other sourcing and commodity management related functions.
Please suggest some ways to kick start my venture. Most of the services that I am planning to offer are internet/computer based.
I have placed an ad on Craigslist, any other suggestions are welcome.
Thanks
Lavi
Re: Marketing ideas?
- [quote="harjos":sstbjbsx]Hi
I am from a software company. We have developed software like payroll software, time attendance software and HR software. Now we are focusing in marketing. Can you share some best marketing ideas?[/quote:sstbjbsx]
No matter what you do consider, market yourself as well as the business. Having your face and personality out there makes the company more human.
Re: Launch of Social networking software package...Needs inp
- Hi Ashish,
I think you should market the unique benefits of your social networking software package. However, I'm still a little unsure of what that is exactly. You've mentioned before that it's "customizable", but what does that exactly mean? Can you give us an example?
Moreover, what's the difference between downloading the software like MSN Messenger versus visiting a website like Facebook? How much space would your software take up?
People are always skeptical about downloading and using new software on their computers in the event it might be spyware, etc. (especially since no one has the patience to read through a lengthy "Terms and Conditions of Use" page). Have you thought of ways to combat this?
Re: Startup blogs
- I agree with David blogging is a good way to get a feel for the market and discover whether your product is something that will be in demand or not. You can also begin to brand yourself or your product and warm your market up so that they will be more receptive when you launch.
MichelleJ
Re: Onpage Optimisation
- That is a good point and one I hope to use to my advantage with my software. I use the very latest technologies and I'm not constrained by previous versions. Having said that, I am new to the market and being better than my competitors isn't enough, I have to convince people that my software is better than my competitors.
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