Many executives are interested in insights on how to achieve success

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1 InSide Gartner This Week Vol. XIX, No. 11, 12 March 2003 Management Update: CRM Success Lies in Strategy and Implementation, Not Software Many executives are interested in insights on how to achieve success with their enterprises customer relationship management (CRM) initiatives. A CRM software package doesn t ensure success. Success lies not in software but in sound strategy and precise implementation. Critical Elements That Drive CRM Success The assertion that the secret to CRM success lies in software is dangerous for enterprises and vendors alike, because it ignores the critical strategy and implementation elements that truly drive success. When one analyzes the causes of CRM failure, software-related failure is not among the list of usual suspects. Nevertheless, in CRM Magazine, a senior executive of a CRM software company recently made the following statement: Management Update: Gartner s 2003 B2B CRM Suite Magic Quadrant (continued on page 2) Gartner s assessment is that through 2005, no customer relationship management (CRM) suite will give a large enterprise a complete solution in the business-to-business (B2B) segment. Gartner s 2003 B2B CRM Suite Magic Quadrant evaluates suites that will form the core of a wider CRM ecosystem. The CRM Market Is Changing CRM applications as stand-alone products are fading in relevance as customers look increasingly toward enterprise applications to automate their cross-enterprise functions, cutting across the traditional silos created by such individual solutions. The market is moving toward process-focused solutions that enable enterprises to unite multiple areas more easily for (continued on page 5) In This Issue... 1 Management Update: CRM Success Lies in Strategy and Implementation, Not Software A customer relationship management (CRM) package doesn t ensure success. Success lies not in software but in sound strategy and precise implementation. 1 Management Update: Gartner s 2003 B2B CRM Suite Magic Quadrant Through 2005, no customer relationship management (CRM) suite will give a large enterprise a complete solution in the business-to-business (B2B) segment. Gartner s 2003 B2B CRM Suite Magic Quadrant evaluates suites that will form the core of a wider CRM ecosystem. 9 Management Update: Gartner s SCP Magic Quadrant and Options for Process Manufacturers As Gartner s Supply Chain Planning Magic Quadrant for Process Industries matures, new solutions for process manufacturers focus functionality on industry-specific needs, rather than providing generic tools that have limited support for unique requirements. 13 Management Alert: Be Aware of 10 Myths Plaguing U.S. Enterprises in Wireless Procurement The majority of enterprises have just begun to evaluate how to manage and control their wireless spending. Ten myths add to the confusing nature of managing wireless service plans. 16 At Random

2 Management Update: CRM Success Lies in Strategy and Implementation, Not Software (continued from page 1) I do think that it is true that most CRM implementations fail and it is true that virtually all [software vendor name withheld] CRM implementations succeed and that kind of works to my advantage. The implication is that purchasing CRM software from any vendor other than the one quoted will result in failure. The truth is that software and project failure are not strongly linked. That is probably because software vendors are rarely involved in the development of the enterprise s CRM strategy, and only about 25 percent of the time does the software vendor perform the implementation. Regardless of who manages the development of the strategy and implementation, it is critical that they be done both carefully and thoroughly. Seven Key Reasons for CRM Project Failure Gartner has outlined the seven key reasons why CRM projects fail (see Figure 1). What is striking about the seven key reasons is that none of them is related to software they are all related to implementation and strategy. In light of the analysis of why projects fail, it stands to reason that software is not named as one of the key reasons for failure. If a project is undertaken with a flawed or incomplete strategy and implemented with no attention to details, such as data integrity, unity of purpose among IT and business organizations, or user adoption, the project is likely to fail. Ironically, it will have been deemed a failure and probably abandoned long before the software can be adequately tested and evaluated. The Eight Building Blocks of CRM Imperative: Enterprises should use a strategic CRM framework to estimate, plan and promote their CRM initiatives, while building up their capabilities in small, piloted steps. Gartner has created the Eight Building Blocks of CRM (see Figure 2) a framework to help enterprises see the big picture, make their business cases and plan their implementation. Enterprises need capabilities in all eight areas for successful CRM: CRM Vision: Building a market position against competitors with defined value propositions based on requirements, personified by the brand and communicated CRM Strategies: Turning the customer base into an asset through the delivery of customer value propositions, gives objectives (for example, development) and how resources will be used in interaction Valued Customer Experience: Ensuring constantly that the propositions have value to customers and the enterprise, achieve the market position and are delivered consistently Organizational Collaboration: Involving the changing of culture, structures and behaviors to ensure staff, partners and suppliers work together to deliver what is promised Processes: Managing customer life cycle processes (for example, inquiry, welcome, complaints and win back ) and processes in analysis and planning that build customer knowledge Information: Ensuring the right data is collected, and the right information goes to the right place Technology: Involving data and information management, customer-facing applications, and supporting IT infrastructure and architecture Metrics: Involving internal and external measures of CRM success and failure A Six-Step Approach to CRM Strategy CRM strategy guides how an enterprise turns customers into assets, beginning with an understanding of the current customer base in relation to the market. Because fewer than 15 percent of enterprises understand this relationship, most skip this vital 2003 Gartner, Inc. and/or its Affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. Additional subscriptions may be ordered for an annual fee ($500 in the United States for 50 issues per year; higher pricing may apply elsewhere). Multiple reprint prices are available on request; contact Gartner at Comments can be ed to: inside@gartner.com. 2 Inside Gartner This Week

3 Figure 1 Seven Reasons Why CRM Projects Fail Reason for Failure Failure Point What Software Can't Solve Remedy 1. Data quality is ignored. 2. Organizational politics are driving departmental or totally disconnected initiatives. 3. IT and business organizations can t work together. Implementation: Call center users as well as sales users will walk away from the application if the data is suspect. Strategy: Implementation is likely to implode before users ever see the solution. Ifitdoessurviveto implementation phase, the politics will have diluted the customer focus to where sales and customer service users may reject the solution. Strategy, Implementation Data hygiene software can address some issues but does not address missing data and erroneous data or compensate for a flawed data capture process. There is no software solution for political in-fighting or "not invented here" behaviors. There is software to facilitate collaboration, workflow and virtual teams, but only among organizations that want to work together. 4. There is no plan. Strategy, Implementation Project management software can capture a plan and help in managing to it but cannot create a plan. Human input is required. 5. CRM is implemented for the enterprise, not the customer. 6. A flawed process is automated. 7. No attention is paid to skill sets. Source: Gartner Research Strategy: Users in sales and customer service will revert to manual or prior systems unless they perceive incremental benefit. Implementation: The essence of CRM is improving customer-facing processes. Sales as well as service users won't want to learn a new solution that enables the same bad process. Implementation: Rejection of a CRM solution by sales or service personnel may not be a conscious decision if they simply don't have the skills to operate or understand it. Software cannot provide customer focus or fix a flawed process. It may automate an alternative process, but thought is required to optimize a process. Software can facilitate distance learning and some interactive training but cannot change management or organizational dynamics. Project plan should allow for data cleansing and testing prior to deployment. CRM strategy must encompass customer touchpoints across the entire enterprise. Both organizations must be jointly responsible for the strategy and accountable to the project sponsor for every step of the implementation. Don't undertake any initiative until an articulated multiyear vision, a business case including baseline metrics, and a project plan are in place. Involve stakeholders from across the enterprise in evaluating which processes must be improved to eliminate the "rubs" that exist between the enterprise and the customer. Ensure that employees understand why CRM is being implemented, that CRM tools are aligned with their skill sets, and that adequate training is provided (a final and critical step, where many enterprises attempt to cut corners or save a small amount of money). 12 March

4 Management Update: CRM Success Lies in Strategy and Implementation, Not Software (continued) Figure 2 The Eight Building Blocks of CRM 3. Valued Customer Experience Source: Gartner Research planning step. They begin instead with tactical initiatives which becomes the primary reason for CRM failure. CRM benefits are achieved when customer insight is captured, analyzed and applied to increase the quality of communication and to deliver relevant value-added services. Technology and the Internet economy are increasing the opportunity (and the expense) of understanding customer needs. Therefore, knowing what is possible and managing available funds to optimize benefits are crucial. Gartner considers CRM an evolving creative science and advises a sixstep methodology to develop CRM strategy: Audit the current market position and customer position. 1. CRM Vision 2. CRM Strategy 5. CRM Processes 6. CRM Information 7. CRM Technology 8. CRM Metrics 4. Organizational Collaboration Segment consumers and customers and identify target segments. Set customer objectives (that is, acquisition, development and retention) for each market objective. Define metrics for monitoring the execution of the strategy and for evolving it. Outline by segment the strategy to customize products, pricing, communication and channels, as well as how to manage service customer and contact, thus creating the customer value proposition and desired customer experience. Specify required customer capabilities and infrastructure (such as people, IT and data). Action: Use Gartner s methodology as a starting point customize and enhance it to develop a meaningful strategy for your enterprise. Bottom Line Despite the claims of software vendors, the key to CRM effectiveness is not the purchase of software. Enterprises that will succeed in CRM initiatives are those that have a well-laid-out CRM strategy and adhere to sound principles of deployment in addition to wellsuited software. Software vendors can play a greater part in helping their clients to succeed by diminishing the magic software rhetoric and building on the foundation of strategy and implementation. Written by Edward Younker, Research Products Analytical sources: Dale Hagemeyer and Scott Nelson, Gartner Research For related Inside Gartner articles, see: Management Update: A Case Study of CRM Excellence, 5 February 2003 Management Update: The Importance of Developing a CRM Strategy, 30 October 2002 Management Alert: How to Salvage or Perhaps Avoid a Failed CRM Initiative, 20 February Inside Gartner This Week

5 Management Update: Gartner s 2003 B2B CRM Suite Magic Quadrant (continued from page 1) example, billing, provisioning, parts logistics, inventory and service history. That requires application integration skills and platform skills that will challenge many enterprises. As a result, the difference between Type A technology enterprises (those that prefer to build a cutting-edge capability or buy a best-of-breed application) and the mainstream Type B and Type C enterprises (that will forgo early adoption for reduced risk) is becoming more pronounced. The danger for the Type B and Type C enterprises is that they will mistakenly think a lower-cost application is a proven solution which is not always the case. Vendor Dynamics The vendors coming from an ERP (enterprise resource planning) or back-office application heritage (for example, SAP, PeopleSoft and Oracle) have CRM offerings that are often immature in comparison with those of the established CRM vendors, such as Siebel Systems. However, the ERP vendors are tapping into a deepening trend: Enterprises are increasingly realizing that many core sales and service processes require tight integration with an ERP, supply chain management (SCM) or legacy system (such as billing, activation systems or check adjustment) to complete a customer transaction quickly and accurately. Shift to Architectures Foundation architectures will assert themselves as critical evaluation 12 March 2003 criteria. Some vendors, mainly SAP and Oracle, believe that the key is to offer a complete set of enterprise applications for ERP, SCM and CRM. Others, such as Siebel, prefer to partner to arrive at the complete solution. Either way, this will begin to shift the market from pure features/functions to architectures, as business process flow will be just as important as any individual piece of functionality. Increased emphasis will be placed on middleware, the database, standards and interoperability. CRM suite vendors that assist in this endeavor will lead in the marketplace by Candidates for CRM Suites Large-enterprise sales, service and marketing organizations that emphasize minimizing the number of solutions in the enterprise application portfolio are candidates for CRM application suites. Further decisions must be made about the appropriateness of extending an installed enterprise application system such as SAP, PeopleSoft or Oracle, compared with a more pure-play CRM application suite from companies such as Siebel. Unique attributes of the B2B Magic Quadrant (as opposed to the Business-to-Consumer Magic Quadrant) include: The ability to support many-tomany relationships, including partner-to-partner collaboration Scalable applications for a large mobile sales teams or field technicians Embedded sales methodologies, support for service life cycle management Proposal generation Integration with contract and entitlement management systems Compensation and incentive management To assist enterprises in making their evaluations and selections, Gartner has developed its 2003 B2B CRM Suite Magic Quadrant (see Figure 3). Leaders Quadrant: Only One Leader Through 1H04 Gartner s criteria for leadership are: Ability to move markets. Enables a competitive advantage. CRM functionality for all business models within B2B as proved by customer references and Gartner Magic Quadrants. Proven application scalability. Ability to participate in enterprisespanning business processes. Sufficient trained implementers (including business process consultants) in three geographies for the specific industry and functional requirements. Satisfied customers with a deployed and integrated CRM suite showing measurable benefit from each supported industry model. Siebel Systems continues to surpass competitors in selling CRM applications, even in a down economy. To compare Siebel with its main competitors, Gartner estimates that Siebel had $675 million in CRM software revenue in That compares to 5

6 Management Update: Gartner s 2003 B2B CRM Suite Magic Quadrant (continued) Figure B2B CRM Suite Magic Quadrant Ability to Execute Challengers SAP Oracle Amdocs Onyx Software E.piphany Niche Players Source: Gartner Research PeopleSoft, which sold more than $500 million for all of its enterprise applications, including CRM, ERP/ human resources, procurement, SCM, portals and analytics. Oracle had perhaps $600 million for all of its enterprise applications, and SAP, with $2.2 billion in software revenue overall, allocates $450 million of its license revenue to CRM applications. The individual Magic Quadrants that comprise the CRM research at Gartner consistently find Siebel as either a leader or challenger, with rare appearances in the niche player category (incentive compensation). The company continues to outspend Leaders Siebel Systems PeopleSoft Completeness of Vision As of February 2003 Visionaries and outmarket all enterprise rivals for its sales and service applications. Key to its success through 2004 will be the results of its Universal Application Network (UAN),.NET and IBM initiatives. Siebel will move to support multiple, standard platforms and standards to help protect customer investment. To do that, Siebel (like SAP) is retrofitting its tools and metadata to be compatible with other platforms. With that transition will come an additional performance burden on Siebel. The development team will be stretched as the company does the following: Supports additional layers of abstraction (this will only become clear as future platform decisions are revealed) Works to maintain equality of support, performance and stability on both platforms (Microsoft and IBM) Continues to provide transparent release migration The pace of upgrades from early versions of Siebel to the new platform is evidence of the inflexibility and complexity of the current platform and tools. Despite such challenges, the broad product set and strong integrator partnerships will help Siebel push through this transition. Siebel will continue to thrive through a combination of an extensive set of CRM applications, strong partnerships and marketing expertise, yet rivals such as SAP will erode Siebel s dominance in specific industry verticals (for example, process and discrete manufacturing) during the next 24 months. Through 2004, Siebel will continue to lead the CRM suite market in ability to execute, outpacing the competition in delivering CRM application modules that can be integrated for the front office (0.8 probability). Visionaries Quadrant: Short Supply of Vendors PeopleSoft will continue to pressure Siebel and the ERP vendors, now that its basic CRM application architecture is solidified for mobile sales and service (although scale and stability will only be proven later in 6 Inside Gartner This Week

7 2003) as well as for contact centers (but not for partner relationship management, or PRM). The references to date have not been plentiful or complex. Gartner expects growing success in head-to-head competition with Siebel, especially in transportation, financial services and government. PeopleSoft is recommended most strongly for enterprises looking for moderate best-of-breed sales or service application requirements, for customers considering PeopleSoft s business application suite, for enterprises that are already PeopleSoft customers whose requirements span multiple sales and service channels, and especially for those interested in adding analytical capabilities. By 2005, PeopleSoft will trail only Siebel in the services and banking industries, and it will have the third-largest market share among CRM suites (0.7 probability). Niche Players Quadrant: Many of Them SAP is the strongest of the CRM application suite vendors in the Niche Players Quadrant. Changes in SAP s position will result only from an ability to provide sufficient functionality for more of its installed base with mysap CRM v.4.0 and beyond, and to produce more live references during the next 24 months, especially in the industries where it has its mysap installed base. In the long term, SAP has the opportunity to evolve as the most serious enterprise application vendor for midsize and large enterprises, and the only serious large-enterprise challenger to Siebel. 12 March 2003 Beyond the functionality gaps (for example, improvement is needed in PRM, field service, complex contact centers for the nonmanufacturing sector, a more scalable mobile platform and unified interfaces among the modules) lies the challenge to win over the large system integrators that determine the pace of adoption of large CRM systems. A substantial difference exists between the CRM revenue numbers given by SAP and the size of the referenceable SAP CRM user community. Only 40 percent of SAP customers acquiring their CRM applications during 2003 will implement the products within two years of purchase (0.7 probability). The extent, timing and user experiences of the other 60 percent of customers will determine SAP s market acceptance in Gartner recommends SAP CRM to SAP customers seeking benefits from tight front-office/sapback-office integration. Oracle has improved its vision with the breadth of its Oracle 11i enterprise customer data model. Oracle customers like the potential benefits of an integrated set of applications, such as increased customer visibility during the entire prospect-to-cash process. The challenge is for Oracle to bring the products into production at a sufficient number of referenceable customer sites. Organizational change has slowed Oracle CRM application development, although the change is positive and will lead to product improvements. Although the development team, several project managers, the head of the CRM program and the sales organization have all undergone significant transition, Oracle benefits from strength in global distribution and implementation, a broad sales and service application presence, and an integrated technology stack. There continues to be too few large and complex references, inadequate external service provider partnerships and limited integration with non-oracle legacy systems. Oracle has not proved it can support a mobile workforce on laptops. Oracle 9i database and 9iAS application server customers will benefit most from this product, because the CRM applications run only on the Oracle application technology stack. As with SAP, Oracle is to be considered most strongly by Oracle business application customers seeking benefits from tight front-office/backoffice integration with Oracle. Through 2004, limited referenceable products and customers will result in Oracle achieving higher ratings for market vision, yet the lowest ability to execute of the major CRM application vendors (0.7 probability). Amdocs offers the ClarifyCRM products, which have continued to improve since the purchase of Clarify from Nortel Networks in late The Clarify team has consistently beaten competitors (and extended its lead) with superior products in the core market of customer service contact center solutions to the telecommunications and hightechnology manufacturing industries, where the focus is on problem resolution and integration with 7

8 Management Update: Gartner s 2003 B2B CRM Suite Magic Quadrant (continued) billing and provisioning. For mobile sales and field service automation, the product is adequate, providing basic capabilities. The fat-client, 32- bit mobile application struggles to meet mobility requirements. In marketing, Amdocs is likely to be a significant entrant to the market in 2004, and today offers solid churn analysis within the telecommunications installed base. E.piphany, through 2004, will be an alternative to the larger, more-rigid CRM application suites, because of product flexibility, lower complexity and good technology the application code base has migrated to Java 2 Platform, Enterprise Edition (J2EE) where deep vertical capabilities are not critical (0.7 probability). E.piphany has yet to reach the Visionaries Quadrant, because it lacks a sufficient feature set to be considered in either the CRM Sales Suite Magic Quadrant or the Field Service Magic Quadrant. It has the lowest B2B application revenue of any of the entrants in the Magic Quadrant, as Gartner estimates that less than 20 percent of its approximately $34 million in license revenue in 2002 was for end users in B2B. In addition, it has deployed little besides its campaign management and real-time recommendation engine outside North America and does not have the integrator support to implement large-scale, worldwide CRM suite projects. For B2B enterprises, or those requiring partner management, E.piphany will not have a best-ofbreed CRM application suite through 2004 (0.7 probability). Onyx Software, like E.piphany, is on a smaller scale than the rest of the large-enterprise CRM suite vendors, selling approximately $23 million in application licenses in Gartner estimates that 75 percent of that revenue is in the B2B area. It has few large partnerships among the system integrators, and none that has demonstrated worldwide capabilities. The situation is different on the regional level, where components of the Onyx system are beginning to be used by the integrators. Executing on a successful long-term partnership strategy will be key to its success. Onyx has a fine Internet architecture that leverages Web services, but the full mobile Web-based technology is not yet released (it is scheduled for release in April 2003). Prospects can expect to wait until 2H03 for largescale, referenceable implementations. Onyx has successfully sold into vertical industries, such as healthcare, local government, media and financial services. With the latest software release, Onyx Enterprise CRM v.4.0, it has a good call center offering and customer portal (but the portal has been successfully deployed in few accounts). The products should be considered for divisions of large enterprises, as well as midsize enterprises in such vertical industries as healthcare, local government, media and financial services. Risk-averse buyers should weigh the continued challenge that Onyx has faced in growing a profitable business, because it has experienced two straight years of losses. Bottom Line Although the depth of the CRM suite vendors CRM modules continues to improve, the realization that must come to customers and vendors is that each enterprise has a specific enterprise architecture within which the CRM vendor must participate. Enterprises should weigh not only the features/functions and viability of the vendor, but also the architectural foundation of the CRM suite for its fit with overall enterprise objectives. The likely scenario for most organizations will be a suite at the core, integrated with multiple additional technologies. Production references will remain the litmus test of vendor hype about CRM capabilities. Written by Edward Younker, Research Products Analytical sources: Michael Maoz and Gareth Herschel, Gartner Research For related Inside Gartner articles, see: Management Update: Gartner s 2003 CRM Field Service Management Magic Quadrant, 26 February 2003 CEO and CIO Update: 2003 CRM Predictions Point to Light at End of Tunnel, 11 December Inside Gartner This Week

9 Management Update: Gartner s SCP Magic Quadrant and Options for Process Manufacturers Many enterprises are looking for insights on supply chain planning (SCP) suites. As Gartner s SCP Magic Quadrant for Process Manufacturing Industries matures, new solutions for process manufacturers focus functionality on industryspecific needs, rather than providing generic tools that have limited support for unique requirements. Greater Range of Solutions budgets and more conservative buying habits. However, the solutions continued to mature during the past year, and Gartner expects them to mature more rapidly through yearend 2004, as vendors seek to meet the needs of this largely untapped domain. That gives process manufacturers an opportunity to invest in robust optimization solutions at a lower price, because SCP license fees have declined during the past few years. SCP Magic Quadrant Inclusion Inclusion in Gartner s SCP Magic Quadrant for Process Manufacturing Industries (see Figure 4) requires the following: A credible vision for a multiproduct, process manufacturing-oriented SCP suite (including network planning, capacity planning, demand planning, The SCP suite market overall has experienced contraction in revenue, as well as in the number of vendors. However, manufacturers in the process domain find themselves with a greater range of solutions, because of vendors expansion of functionality and the larger number of competitive suites that serve these industries. That can be attributed to two factors: Figure 4 Gartner s SCP Magic Quadrant for Process Manufacturing Industries 1Q03 Challengers Leaders Maturing process industry solutions being offered by large, best-of-breed and enterprise resource planning (ERP) vendors Growth in the number of suite solutions being offered by smaller, best-of-breed vendors that solely support the process industries Solutions Are Maturing In some respects such as integration and breadth of industry coverage the SCP suites serving these industries are less mature than those that serve the discrete manufacturing and distribution-intensive SCP domains. The immaturity can be attributed to slower adoption by these industries, because of lower IT 12 March 2003 Ability to Execute J.D. Edwards Oracle Logility OM Partners WAM Systems Niche Players Source: Gartner Research Finmatica i2 Agilisys Completeness of Vision SAP Manugistics AspenTech As of January 2003 Visionaries 9

10 Management Update: Gartner s SCP Magic Quadrant and Options for Process Manufacturers (continued) manufacturing planning and scheduling, distribution and deployment planning, and transportation planning) An effective sales distribution channel for a global presence However, a particular position on the Magic Quadrant does not guarantee that a vendor s capabilities will match a particular enterprise s requirements. Enterprises should match their needs with vendors specific functionalities and be cognizant of vendor competence within their particular industries and global scope. The Magic Quadrant is a graphic description of global vendor performance in a market segment, based on viability, service and support, features and functionality, and technology. Ability to Execute shows Gartner s view of how well a vendor performs today. Completeness of Vision is Gartner s view of how well a vendor will do in the future, based on where a market is headed. The Four Quadrants Magic Quadrants are meant to provide an understanding of vendor positioning and to set performance expectations for providers. Gartner describes the four quadrants as follows: Leaders: Execute well today and are positioned well for tomorrow Challengers: Execute well today and may dominate large segments, but are not in synch with the market s direction Visionaries: Understand where the market is going or have a vision of changing market rules, but do not yet execute well Niche Players: Focus on a small segment of the market and do it well, or are unfocused and do not out-innovate or outperform others Leaders Quadrant No vendors are in the Leaders Quadrant. That is because of the immaturity of the large-vendor solutions and the financial performance of the best-of-breed vendors. Challengers Quadrant No vendors are in the Challengers Quadrant. Visionaries Quadrant Agilisys has made the break from SCT, its former parent company. It largely serves batch process industries, and its ability to handle the complexities of disassembly, shelf life, characteristics and volumebased scheduling makes it especially suitable for enterprises in the food and beverage, pharmaceuticals and specialty chemicals industries. Agilisys recent release of more robust collaboration capabilities and the promise of Applied Relationship Technology to model and manage complex, multienterprise trading partner interactions signify a unique approach to the support of extended enterprise relationships. However, the company s recent acquisition of Brain AG, a German automotive ERP (enterprise resource planning) vendor, should be watched, because it could cause deviations in focus and direction at a time when Agilisys must strengthen its foothold as an independent software vendor. AspenTech continues to offer differentiating best-of-breed functionality for such process industry verticals as bulk chemicals, specialty chemicals, and oil and gas. Many of its customers that have deployed configurable applications are quite satisfied, and others have found that Aspen s flexibility has enabled them to solve problems that could not be solved by more-generic vendor solutions. Its initiatives in supply chain inventory visibility, performance management and portal technologies put it ahead of many of its competitors in vision, especially when linking plant floor events to decision support. However, AspenTech has experienced many of the financial woes that have plagued other vendors in this market. This financial bind comes at a time when it is investing in software development and integration to bring its vision to fruition. Enterprises in process industries that require a good 10 Inside Gartner This Week

11 understanding of manufacturing processes should short list AspenTech; however, they should put contractual controls in place in case Aspen is acquired. Manugistics has many solutions that make it a good fit for the process industries. Its distribution and demand-planning solutions are used by many process enterprises that have been very satisfied with Manugistics ability to understand their businesses and partner to deliver suitable solutions. However, its shrinking employee base and management departures in the chemicals industry vertical indicate that, although its solutions will continue to serve these industries, more visionary functionality (such as revenue and pricing optimization) should not be expected during the next 18 months. Enterprises looking for an integrated solution in the process industries especially consumer packaged goods (CPG) and pharmaceuticals should investigate this solution, although they should watch Manugistics quarterly revenue announcements as it continues to struggle with a failure to increase revenue and attain profitability. SAP continues to deepen its support of vertical industry requirements. Recent releases have included campaign and safety stock planning, and many enhancements have been added to enhance usability and data management. However, SAP still has work to do on model scalability, as well as functionality in production planning and detailed scheduling. Although it can handle flow rates and simple linear scenarios, complex task scheduling and formula optimization are still immature. Likewise, collaboration and supply chain inventory visibility capabilities are not widely used and not integrated with its planning modules. SAP customers will find that the solution is more mature than it was a year ago; however, all enterprises should evaluate it against solutions provided by best-of-breed providers, augmenting where competitive advantage goals are not being met by established functionality. Niche Players Quadrant Finmatica (from Italy) is building its SCP portfolio through acquisitions, and, in 2002, it made two: Ortems (France) in April and Mercia (United Kingdom) in July. Ortems had had a process-manufacturing planning and scheduling solution for more than 10 years and has more than 300 customers, largely in Europe. Finmatica plans to combine the Ortems solution with Mercia s to provide a complete suite of products and to become a European alternative to large U.S.-based supply chain management (SCM) vendors. However, there is no plan to rewrite the applications to have a single code base, and the integration appears to be opportunistic. Ortems serves the pharmaceutical, specialty chemicals, and food and beverage industries, as well as metals. Ortems customers should talk to Finmatica about extending the relationship. All customers should examine ongoing integration plans and look closely at Finmatica s commitment to support their implementations outside of Europe. i2 Technologies, with its reorganization, is again competing in the process industries market. During its downturn and subsequent layoffs, the company failed to enunciate a clear commitment to this domain. Bolstered by its relationship with Royal Dutch Shell, maturity in metals, and capabilities in pulp and paper (some acquired from IBM), i2 has again restructured its organization to focus on the process market. However, these efforts should be considered immature until i2 can prove that it s here to stay. Although metals companies will be well-served by i2 s solution, oil and gas companies should be cautious, because its product is still in progress and, given current financial conditions, may never be complete. Enterprises in other process industries should investigate mature point solutions from i2. J.D. Edwards (JDE) continues to have best-of-breed planning functionality that serves a wide range of process industries. Of note is its Strategic Network Optimization product for strategic planning, as well as its recently released Demand Forecasting module for statistical forecasting. Late to market in delivering comprehensive collaboration capabilities, it 12 March

12 Management Update: Gartner s SCP Magic Quadrant and Options for Process Manufacturers (continued) has recently announced Supply Chain Management 9.0, which includes multienterprise modeling and event management. JDE customers should short-list these products. Logility continues to focus on the midmarket ($200 million to $3 billion in revenue), and, although it can address batch, as well as some continuous process requirements, its focus is largely in CPG. Logility s Manufacturing Planning application supports several critical requirements in process industries, including constraint-based byproduct and co-product planning. The Manufacturing Planning application s strength is plant-centric and plant-to-plant planning and scheduling. Its Supply Planning offering is better suited to aggregate, constraint-based capacity planning and allocation; however Supply Planning is new and has been implemented by only a few customers. With the exception of its agreement with SSA Global Technologies, Logility sells mainly in the United States. U.S. midmarket enterprises with batch manufacturing requirements should investigate Logility. OM Partners is well known in the Benelux region, but it is now trying to expand into the rest of Europe and the United States in some subindustries. OM s solutions serve flow processes (such as metals and paper) and batch processes, including the food and beverage, chemical and CPG industries. Originally a manufacturing planning and scheduling vendor, OM is now adding distribution-planning capabilities. An original equipment manufacturer agreement with France-based Aperia has given the vendor a forecasting module to offer to its prospects. European enterprises should investigate OM, particularly for manufacturing planning and scheduling problems. Other enterprises could look at point solutions; however, they should get a clear picture of support capabilities and commitments. Oracle, although it has shown little penetration thus far, is beginning to compete in process industry SCP deals. A few recent go lives and a sizable process industry installed base make it a possible contender in this market. Oracle ERP customers willing to take an incremental approach to implementation and increasing levels of optimization should short list the company s product. WAM Systems is an emerging vendor within the process manufacturing domain. Originally founded as a consulting company, WAM has evolved into a licensed-based manufacturing-planning applications vendor since It has also expanded its suite to include demand and distribution planning, as well as collaboration. Although it started in the polymers industry, recent customer wins in several chemicals subverticals and a partnership with Honeywell to develop a refinery planning solution could enable it to expand beyond that vertical. Enterprises in North American chemical industries, especially those that require campaign functionality, should examine this vendor; however, they should get references from enterprises that are using the solution to solve similar problems. Bottom Line Enterprises in process industries should continue to deploy SCP solutions to improve established business processes, and they now have a more-robust selection of options from which to choose. However, they should rigorously push vendors on industryspecific functionality that can be delivered today vs. functionality that is available in a future release (or after joint development). They should also look at a suite as a way to obtain wider capabilities at a lower ownership cost; however, they should realize that many may require augmentation. Furthermore, because many SCP vendors are struggling with continued growth in a constrained market, enterprises should monitor ongoing vendor health during the next 12 months. Written by Edward Younker, Research Products Analytical sources: Karen Peterson, Maria Jimenez and Andrew White, Gartner Research For related Inside Gartner articles, see: Management Update: How to Implement a Successful Supply Chain Management Project, 25 September Inside Gartner This Week

13 Management Alert: Beware of 10 Myths Plaguing U.S. Enterprises in Wireless Procurement Many enterprises are really struggling to deal with the explosive growth of wireless applications. Moreover, the majority of enterprises have just begun to evaluate how to manage and control their wireless spending. Gartner discusses 10 myths that add to the confusing nature of managing wireless service plans. A Costly Situation Many misconceptions about specifying and managing wireless service have been promulgated mainly because of operator deceptions, long proposals and confusing pricing plans as enterprises began to offer wireless telephony services. Gartner calls these misconceptions wireless myths. When a practice continues unabated, even though initially it may seem logical, but after a while it can be deemed impractical and costly. The problem is exacerbated as more enterprises adopt wireless services and as spending for those services increases. Gartner has identified the top 10 wireless myths, practices and ideas common in many enterprises, and offers facts and recommendations to overcome the pitfalls. Vendors such as traq-wireless and LetsTalk Enterprise Solutions offer wireless service management capabilities, monitor thousands of users and have provided some data based on real users and usage patterns. Those types of services can help enterprises evaluate many wireless usage patterns. Myth 1: All renegotiated contracts offer the best deal Fact: It may seem logical to assume that renegotiated contracts save money and offer the best deal. Typically, procurement managers may receive a 10 percent discount during contract renewal if they bypass a request for proposal. However, saving 10 percent off a current contract may leave an additional 5 percent to 10 percent on the table from poorly negotiated contracts. Recommendation: Always check industry price averages through peer groups, online resources and analysts. Gartner regularly reviews thousands of contracts and pricing every year, and provides data on current pricing and negotiation strategies that regularly can save enterprises millions of dollars. Myth 2: It s better to undershoot plans than to pay for overage Fact: The average midsize-to-large enterprise contracts for wireless services at approximately 12 cents per minute, but is paying 30 cents because of overage charges. When a subscriber runs over the bundle of minutes in the plan, overage charges generally run 35 cents to 45 cents per minute. For example, 100 overage minutes can cost almost $50. That happens more than many enterprises realize. LetsTalk Enterprise Solutions monitored 2,000 users for three months and reported that 34 percent of users went over their bundledminute plan. Most enterprises could have saved an average of 20 percent by moving to the next-highest plan. In the same vein, the cost per minute of national plans aren t always more expensive than local or regional if you take into account that many users roam and are in the wrong plan. LetsTalk Enterprise Solutions says, in general, 24 percent of the users they monitor on local or regional services roam out of their home markets, and most of them would be better suited on a national plan. Recommendation: Underage (falling short of using all the minutes in the plan) is less expensive than overage. In many cases, it is better to overestimate the amount of minutes to be used each month. Depending on the user or the plan, expect an average of 10 percent to 20 percent higher usage, which should maintain a break-even point. For example, Verizon Wireless charges $55 for 400 minutes, with overage charges of $35 per minute. Its nexthighest plan is $75 for 600 minutes. If the user on the $55 plan goes over by 71 minutes (or less than 20 percent), it becomes more cost-effective to be on the higher plan. Myth 3: Pooling minutes is always a good way to save money Fact: Pooling may be a good way to save money, but beware of loopholes. Two types of pooling plans exist. One plan allows a specific number of users or user groups to pool minutes (maybe for an extra charge). The users who go over their plans 12 March

14 Management Alert: Beware of 10 Myths Plaguing U.S. Enterprises in Wireless Procurement (continued) may consume unused minutes from that pool, reducing overage charges. That is a good way to cut down on costs. However, another method is to negotiate a monthly access fee and cost per minute. A large pool of minutes is prepurchased and not assigned to any specific user. If the pool is used up, additional minutes are added, at the negotiated rate, incurring no overage charges. At first, that may sound good but, typically, costs per minute (with the monthly access fee included) are higher for these types of pooled minute plans than a negotiated perminute rate on most bundledminute plans. Recommendations: Enterprises with a large number of users and that have no way of monitoring or controlling service bundles should consider pooling. Enterprises that monitor usage and actively optimize their users into the correct bundledminute plans will not benefit from pooling methods. Myth 4: An enterprise should consolidate to one provider Fact: Although consolidation of vendors is a great way to save 15 percent to 25 percent on service charges, coverage will not be sufficient to appeal to the user base at most large enterprises. Most national providers started out as a local or regional carrier and have areas that they may cover better. For example, Verizon Wireless in the United States is very strong in the Northeast corridor, but less so in the Midwest. Cingular Wireless provides excellent coverage in the South, but poorer coverage in many other areas of the United States. Although difficult to manage, relationships with two to three providers will be the norm, at least until operator consolidation occurs. Recommendation: A better strategy is to choose a primary service provider and direct users to it. Pick a second and third provider for niche users who may have special needs, such as international travel or specific local coverage. Make it difficult to choose a secondary provider by enforcing manager sign-off and permission. Myth 5: Toll-free numbers are toll-free Fact: This is not true for wireless phone users. These users are charged the same per-minute charge for tollfree as they are for any call, except star-dialed calls, such as *611 for customer service calls made to the operator or its partner. Enterprises that host internal meetings, client calls or have a voic number that is a toll-free bridge may end up paying triple for a call. Toll-free numbers are usually 3 cents to 4 cents per minute. That cost, plus the per-minute costs of the wireless user, may push charges up to 15 cents or 20 cents per minute. Traq-wireless monitored 75,000 toll-free calls in one month that totaled an average cost per minute of 32 cents. Recommendation: Distribute directdial numbers for wireless phone users rather than toll-free numbers. There are no additional charges for direct-dial numbers, and longdistance tolls are included in national plans. Myth 6: Retail deals are better than corporate plans Fact: Corporate procurement managers always hear from users who see advertised specials that seem to cost less than their corporate service. Many of those specials have limited times they are available, may be only for new subscribers, are available only in local or regional plans, not national (Cingular s rollover, for example), don t include roaming charges ( America s Choice from Verizon Wireless) or may be misleading in other ways. For example, one operator offers large bundled plans that look inexpensive at first, but, on closer inspection, you realize that 75 percent of the minutes are off-peak (generally between 9 p.m. to 6 a.m.), not during business hours. Recommendations: Many times, users don t see the discount rate that the enterprise receives on top of the published price. When possible, include this rate on corporate bills, and actively publicize specials and cost savings by sending to users or posting the savings on an intranet site. Myth 7: Price is the most important feature when selecting a wireless service Fact: Although an important consideration, the lowest-priced operator is not always the best choice. For 14 Inside Gartner This Week