Cognos Unveils CRM Solution

Cognos (NASDAQ: COGN; TSE:CSN), one of the world's largest business intelligence (BI) companies, today unveiled a comprehensive BI solution (including interactive reporting, data analysis, and scorecarding) for the customer relationship management (CRM) marketplace. The announcement was part of an aggressive CRM market initiative showcased at Cognos's Enterprise 2000 conference to an audience of corporate executives and industry experts. Cognos showcased its Cognos business intelligence for CRM solution as providing the extensive interactive reporting, analysis and scorecarding functionality critical to organizations looking to better attract and retain customers.

CRM is generally understood to refer to an integrated information system that is used to plan, schedule and control the presales and post sales activities in an organization. Although the dividing lines are not well-defined, CRM has generally not been understood to include the marketing function. The theory behind CRM initiatives is to improve a company's understanding of their customer's needs and preferences. Theoretically, this will create greater customer retention and easier customer acquisition.

Joanne K. Masingill, Cognos's Senior Vice president of marketing stated that "an effective CRM system is no longer a 'nice-to-have' but a must-have requirement for competing and winning in the Internet economy. Cognos allows organizations to consolidate data, across inventory to sales and customer information, to deliver the operational efficiencies and high-touch customer relationships demanded by today's customers."

Market Impact

Cognos is a very strong competitor in the business intelligence space. It is logical for them to enter the extremely hot CRM market. Their extensive experience with tools that use multi-dimensional databases (i.e., Cognos PowerPlay) should enable them to hit the ground running, giving companies the ability to drill down and across product lines, and customers the power to discover developing trends. They also have the advantage of being able to sell into their huge installed base. Companies already using Cognos's CRM solution include Send.com and United Guaranty.

In order to further accelerate their entry into the CRM market, Cognos has joined the Siebel (NASDAQ: SEBL) alliance program as a premier partner, along with 92 other vendors (at current count), many of which are also in the business intelligence space, who provide competencies not core to Siebel's business. Siebel is currently the largest CRM vendor on the operational side, but is partnering to provide some of the analytics. "The basis for successful loyalty relationships is providing a full-service approach. Siebel Systems enjoys a leading position in the customer-facing eBusiness market and Cognos is excited to be a partner," said Patrick O'Leary, Cognos vice president of strategic alliances. "CRM is a natural complement for our enterprise business intelligence solutions. Cognos and Siebel bridge the gap between business processes to ensure that customers, partners and suppliers are making consistent, coordinated decisions to grow the business and strengthen e-business relationships."

The key to this alliance is for Siebel to provide the operational CRM (such as sales force automation), and then work with other vendors to effectively analyze the data. Some of Siebel's competitors, such as E.piphany, have already made strides in this direction.

User Recommendations

The combination of Cognos's analytical product suite and Siebel's experience in what they refer to as "customer-facing eBusiness applications" should prove to be a powerful tool for companies entering the customer relationship management arena. It should be noted, however, that the product is brand new, having only been announced on October 3, 2000 at the Cognos User Conference. There will be a period of time while the kinks are worked out of the General Availability (i.e., post-beta) release.

Other vendors which should be placed on a list for consideration include Hyperion, Microsoft, MicroStrategy, and Oracle. Any companies considered should have strong underlying analytical engines, since it is the quality of the analysis that yields business value, not the mere capturing of the data

Can Auditing and Project Management Co-Exist in an ERP Environment?

It is hard to recall the last time an ERP implementation team included an auditor as an active member. Could it be because of availability? No defined role? Never been asked? No perceived benefits? This article explores key points in a project's lifecycle where the audit function should be involved and the deliverables to be expected. Whether internal or external, an auditor, preferably experienced in IT matters, can provide benefits while the software is being implemented and, afterwards, when the software is being used.

For whatever reason, having an auditor as part of the ERP project implementation team is a rarity. In fact, involving an auditor in the selection of ERP software is fairly rare as well. These same folks are going to have to toil in the ERP software fields after the systems go live. Would it not make sense to involve auditors up front and, for sure, when the software is being implemented? Of course, it does and I will make a case as to why this proactive approach can save time and money in the long run.

First, for argument sake, let's define the basic ERP implementation project lifecycle as containing the following phases:

* Project Planning and Organization
* Business Process Pilot
* Solution Integration
* Integrated Pilot
* Go Live

The following paragraphs will identify how an auditor can be effectively utilized in the various phases and the expected results.

Project Planning and Organization

In the Project Planning and Organization (PPO) phase, the overall workplan and time schedule are defined and training for the project team is completed. As you would do with any business process owner/leader, assurance must be obtained as to the availability of resources to include the audit function. More importantly, in this phase it would be appropriate to specify the audit role or, better yet, have the auditor articulate his or her role.

Business process owners need to understand what the auditor will be examining in terms of input/output and processing controls. This will become more obvious when developing customized business conditions. Training for the auditor must be scheduled and should be held together with the team. While a detailed understanding of the each process may not be required, an overview of the entire ERP function must be gained and understood by the auditor, particularly the process-to-process flows and exchange of data.

If the above observation, namely that an auditor's involvement is, indeed, rare, inclusion of the audit function in the planning phase should become as commonplace as other business process owners. Furthermore, business process owners will be relieved to know that the burden of accountability and control is being shared with the subject expert.

Business Process Pilot

The Business Process Pilot (BPP) phase is where testing is performed solely within the confines of the process. In this phase you take a selfish approach to testing and verify that the process works within its own boundaries. At this point, you are not concerned what happens up or downstream.

Before this testing can be done, however, business conditions must be developed and/or tailored to your company's environment. In this regard, the auditor should review the conditions and suggest additional conditions to substantiate the financial integrity of the software. In the ordering process, a business process owner is concerned that, for each order, an invoice is produced. The audit implication is that the dollar value of order, typically already communicated to the customer, is reconcilable to the value of the invoice.

Whereas the business process owner is worried that the correct products are picked for an order, the auditor is concerned that appropriate costs are relieved from inventory. The former keeps the customer happy but the latter condition keeps the company profitable and the project team gainfully employed. Auditors are attuned to look for these types of checks and balance and are, in fact, the experts. Someone should do it. Why not let the experts do what they are trained to do? Why not let the auditor review the business conditions to ensure that the accountability aspects as well as the operational functions of the software are being verified?

The Genesis of CRM: The Perfect Storm

CRM, as a technology, started as a software marketing strategy. The concept was to create a common database between customer service and sales force automation (SFA). The SFA industry picked up on this idea and soon there was massive consolidation among SFA, customer service, and field service software providers. Each vendor (left standing) claimed to have an integrated set of capabilities and the phrase customer relationship management became a bi-word in the world of technology.

On a separate path, Peppers and Rogers (currently a strategic division of Carlson Marketing) popularized "one to one marketing" which established a marketing component in CRM. At the same time, the dot-com era was born and the idea of tracking consumer behaviors at the click level materialized, giving rise to real time marketing. The rush for customer data was soon followed by the realization that there was an ocean of data with few tools to ferret out actionable information.

Since the beginning of this "perfect storm", there has been a quantum leap in CRM tools, but there has been a distinct lag in the management rationale to keep pace. This new set of tools provides the means to integrate the actions of sales, marketing, customer service, helpdesk, field service, and web site design; and it is a way to interface with partners. However, part of the problem is that this spans an enormous amount of resources and responsibility. Since most organizations are structured by function and basically compete for limited resources, each function has a different view of performance, and of CRM for that matter. Therefore, CRM installs have historically involved functional deployments and there has been some success in this approach. The advantage of limited deployment is that it is more manageable in terms of scope and accountability. However, the real leverage for CRM is at the enterprise level.

Key Terms and Phrases

The following terms and phrases are not necessarily inclusive or exhaustive; rather, they illustrate the need to be more precise in our language. From an industry standpoint, there is a need to use terms in a general way, but when it comes to the end user community, the lack of definition generates missed expectations and leads to failure. This discussion is presented to help organizations to better understand these needs and, in some cases, as an admonition to the industry to refrain from using terminology that does not add value to the user community, and as a result, is destructive to the long-term health of the industry.

A Lexicon for Customer Relationship Management Success

User Dissatisfaction with Customer Relationship Management

The customer relationship management (CRM) industry is approaching a ten year anniversary. Despite its longevity, there continues to be a pervasive sense of dissatisfaction within the end user community relative to CRM's perceived delivered value. There are three fundamental factors contributing to this:

1. The industry fails to articulate a clear picture of the value it provides outside of the feature/function attributes of the technology.

2. Senior management (user organizations) view CRM in terms of infrastructure deployment instead of in operational and strategic terms.

3. Because the user community fails to approach CRM as an operational strategy, its perceived value is limited to technology efficiency. User organizations must move beyond technology and process productivity to properly assess the system's potential. Only then, can the vendor and user communities establish meaningful discussion about value.

The industry does itself a gross disfavor by using tired and essentially empty terms when discussing the application of CRM. The rate of technology development has largely outpaced the development of management techniques to effectively use the technology. Vendors base their pricing on the level of sophistication their product has, but end users balk because they are unable to leverage a solution's capabilities. As a result, users do not assess the added value highly.

It is time for the CRM industry to more accurately articulate the implied value proposition of their solutions and for senior management to take a leadership position and articulate a true CRM operational strategy. Without these two forces coming together, CRM will be forever relegated to a position of infrastructure and will become one more footnote in the history of failed management concepts.

The Issue

The motivation to write this article was spawned by two recent articles. The first article was based on a survey of CRM experts who explained why they believe CRM initiatives fail. Although some of their comments were refreshingly accurate, there were a number of references to tired old phrases that do little to improve understanding of the real issues and opportunities associated with CRM. The second article was based on a survey of chief executive officers (CIO) about their satisfaction with CRM applications. The survey reported a rather low level of approval and cited various technology and productivity deficiencies. These two articles are representative of the disconnect between galloping technology and the inertia of many organizations to change their operating paradigm. The continued use of empty phrases and the emphasis on implementation as opposed to strategy is not going to help narrow this gap.

More Caveats

Coming back to the list of actual or perceived limitations of SaaS, two other major concerns are how integration between off-premise (SaaS) and on-premise data and content will be securely routed and managed, and what happens to the wealth of sensitive data and accumulated information when the customer cancels the SaaS arrangement with the vendor. Also, many territorial information technology (IT) managers will not be pleased with the idea of relinquishing parts of their "IT fiefdoms" and having to rely on an outside host's ability to impeccably run their data centers, even if the host is a viable business. At the end of the day, the major question remains whether SaaS deployments are really ready to support complex, global organizations around the clock and on stringent service level agreements (SLAs) or not.

These issues, combined with a new and growing market awareness, may explain the findings of some recent studies indicating that over 60 percent of enterprises currently still prefer the perpetual licensing model on-premise over subscription-based options. In fact, most of Salesforce.com's AppXchange partners still have sound on-premise businesses, and typically claim that only 10 to 30 percent (at most) of revenue comes from the Salesforce.com alliance. Also, most SaaS vendors are positioning themselves as software plays even though they are really blending software and consulting services, whereby the understanding of these services and their economics (both those of the master vendor and of its partner ecosystem) is still being devised. For now, this positioning is largely in the form of fixed set-up and consulting fees before the customer can embark on the pure subscription service. Accenture's relationship with Salesforce.com is both a blessing and a curse in that this partner represents a serious endorsement of the SaaS delivery model, but one should still expect some notable consulting price tags for certain implications even in the SaaS environment.

As for software licensing, the most common way today remains for the customer to pay a fixed fee according to the processing power of the machine (or machines) being used, or another widely used alternative whereby the user enterprise (licensee) pays a fixed fee according to the number of users (or seats) accessing the software (see New Approaches to Software Pricing).

To be fair, both approaches are relatively stable; the customer can budget using a formula while the vendor receives a big chunk of license revenue up front and a steady flow of annual maintenance revenue (usually 15 to 20 percent) thereafter. It is a steady, profitable model that customers and investors both understand, and habits are difficult to break.

Another downside of a hosted model is the long-term cost of "leasing" the service for the customer. One of the primary benefits of hosting is the initial negation of up-front costs associated with (since one still has to cleanse data, test and integrate systems, train users, etc.) more rapid implementation of a production system. SaaS does indeed cancel out the need for separate server hardware or hosting, and it reduces upgrade costs, as it does the cost of bug fix and patch application, tuning, and other maintenance and support traditionally done by the user enterprise's internal IT staff. However, after a certain period of time, the subscribed-to system will begin to cost more than an in-house production system would, and the customer has no ownership of anything at the end of the day. The appeal of SaaS is immediate gratification coupled with reduced initial financial pains, as would be the case with renting an apartment, furniture, or appliance as opposed to buying one.

Software as a Service: Not without Caveats

Despite the success of the companies mentioned above, many people are still skeptical about the long-term success of SaaS. Data sensitivity, privacy and security (outside the user's firewall), the system's flexibility, and concerns about recent, highly publicized outages (which translate into general system performance concerns) represent only some of the issues that will give on-premise applications a longer lease on life. In addition to such concerns, the question of whether on demand hosted offerings can be properly integrated with existing on-premise applications as well as skepticism over the usefulness of adapting SaaS or on demand solutions to unique business processes and practices top the list of doubts.

Salesforce.com and other SaaS-evangelist companies typically offer workable solutions for such standard business operations as capturing sales opportunities and leads. However, by using true multi-tenant architecture, which allows volumes of numerous customers' data to be stored on a single instance of the database on the vendor's premises (a heck of a lot of metadata to be maintained by the vendor), such applications often cannot offer companies (especially large and demanding ones) the kinds of differentiators they need to increase sales and profits or gain market share. Indeed, SFA processes are quite cut-and-dried (routine) and are not exactly revenue generators as long as their functionality is merely about capturing sales personnel's opinions on opportunities and making sure that they abide by the sales process rules.

Sales forces are quite successful at leveraging this "one-size-fits-all" delivery model, as they are still to this day the least regulated of all business process functions. This delivery model enables each sales person to quickly deploy a solution because, in their opinion (and consequent attitude), the tools they use do not impact the other parts of the organization. That is to say that in such environments, there is no point in extensively customizing the SFA system since it is not the details of the sales process that matter much. For instance, since planning implies some ability to proactively influence the outcome, those user organizations that have attempted to integrate the disconnected SFA function with the forecasting, fulfillment, and accounting aspects have uncovered additional challenges when these are attempted in a SaaS manner.

In other words, resembling the well-known "80-20 rule" somewhat, that final 20 or so percent that sets any company apart from its competitors often cannot be provided by SaaS solutions. The need for differentiation will require the enterprise to still seek out more traditional vendors who have industry-specific expertise and broader functional footprints to accommodate evolving, interdepartmental business processes. At the very least, coexistence of SaaS and on-premise applications will be the reality for many enterprises (Microsoft cites the existence of dual models, where a PC-installed application can be enhanced by online functionality, as seen with media players like Windows Media Player), so SaaS will be able to move beyond providing operational efficiency toward helping businesses become more effective. Giving users the ability to customize screen field names, as one is able to do in a Salesforce.com service, is not going to cater to true differentiation. Neither will enabling users to write JavaScript (or similar) and put the universal resource locator (URL) for the script in a custom field, nor will the use of tab access and the style sheets, which is what Salesforce.com refers to as "customization".

This resembles the "a-ha" notion of the "iPod user experience" that lets users listen and arrange music to their (distinguished) hearts' content in a new, simple, clear, and appealing way. Companies need to conduct their business processes differently from what they have done in the past if they want to set themselves apart, and this includes creating new features and interdepartmental/inter-enterprise flows. Thus, it remains to be seen how much Salesforce.com's Apex, the vendor's most recently unveiled multi-tenant interpretative language, will help in that regard. Apex, a runtime engine with Java-like syntax and the functionality of procedural language structured query language PLSQL (since the underlying database at Salesforce.com is Oracle), was designed to work with the Salesforce.com application programming interface (API). Apex has limited functionality that can only do what it was designed to do (special database triggers and stored procedures, for example), and it is not really the general-purpose programming language needed to accommodate significant custom programming. Again, the benefit of a controlled environment comes with the downside of limited tailoring. Enterprises also want more control of their applications, as they need to constantly change configurations in order to add new products, develop closer integration between their systems, and introduce best-in-class business processes.

HighJump Grows in a Period of Low Growth Through Adaptable, Broad Function Products

HighJump began life as Data Collection Systems Inc. (DCSI), a provider of bar-code data-collection systems to track labor costs and inventories in manufacturing plants and warehouses. The company was founded in 1983 to develop inexpensive systems to collect, view, edit, and process shop-floor/warehouse data for existing mainframe-based applications. Although data-collection systems remained an important offering, since 1997, under the leadership of CEO Chris Heim, DCSI began to more aggressively diversify and evolve into a full-fledged SCE vendor. DCSI complemented its first SCE product, a radio frequency (RF)-based warehouse management system (WMS) named Warehouse Advantage, with applications that facilitate many aspects of Internet-based order fulfillment. Consequently, the revenue nowadays is split into a healthy 40% for license fees, 50% for services & maintenance, and remaining 10% for data-collection hardware.

In 2000, DCSI became HighJump, albeit, contrary to its competitors like Provia or Adexa (see What's in a Name for Supply Chain Vendors? ), this name has not necessarily been made up with any deliberate causal meaning.

HighJump customers include manufacturers, distributors, retailers and third-party logistics (3PL) companies, and the vendor targets the operational needs of a wide range of organizations from midsize to large companies and divisions of the Fortune 1000, with more than 700 customers at this stage. Sample customers include Verizon, Honeywell, Sony, Georgia-Pacific, Toro, Fisher-Rosemount, PepsiCo, Starbucks Coffee Company, Circuit City and NASA. Moreover, several new international customers have recently been added to HighJump's growing roster of worldwide customers. These companies span industries including retail, telecommunications, food/beverage and consumer packaged goods (CPG), and utilities. Key customer wins include Comercial Mexicana, DiMalsa Logistics and Alen Grupo in Mexico; SKF Italy; Ajover in Colombia; Hitachi and Top Shop Holding B.V. (Oke TV, Tel Sell and TV-Select) in the Netherlands; Telecommunications Services of Trinidad and Tobago; PCTEL in Hong Kong; Artysen Technologies in China; SMART Modular in Singapore; and Quebec Telephone, Hospital for Sick Children and Pauwels in Canada.

To support its international endeavors, HighJump has also extended Supply Chain Advantage, its collection of SCE solutions, with multi-lingual applications to broaden the global deployability of the product line. Thus, throughout 2003, HighJump continues to further its aggressive international expansion with ongoing partner initiatives, new customer wins and product enhancements geared toward a global audience, which it has successfully initiated a year earlier. Namely, for fiscal year 2002, which ended March 31, 2002, the company realized 40% year-over-year revenue growth as well as profitability. Fiscal year 2002 produced other significant achievements for HighJump Software, since, in addition to acquiring over 50 new customers, the vendor:


First, HighJump released Warehouse Advantage Suite 5.0 in November 2001. In addition to enhancements to all of the components of the supply chain solution, this release featured an enhanced event management module called Event Advantage that measures and monitors supply chain processes for exceptions and bottlenecks, enabling an organization to proactively manage events across its supply chain. Other enhancements to HighJump's suite of SCE solutions included product innovations for wireless communications and extended Web visibility via hand-held personal digital assistant (PDA) devices, which facilitates real-time, mobile decision-making.

Later in 2002, HighJump announced the release of Warehouse Advantage Suite 5.1, which extended HighJump's inventory management and collaboration capabilities with key functionality that includes yard management and multi-lingual applications. Central to the release of Warehouse Advantage Suite 5.1 was the yard management solution, Yard Advantage, which extends the activities involved in inventory management beyond the traditional scope of the warehouse. This browser-based solution leverages real-time information exchange to increase operational efficiency by coordinating and optimizing physical product movement as it arrives in the yard and is introduced into the warehouse or distribution center. Yard Advantage can operate as a stand-alone system or can be fully integrated into SCE and/or warehouse management solutions, such as HighJump's supply chain execution suite, to increase the visibility and effectiveness of the entire supply chain.

Why Are You Replacing Your Existing ERP System?

So, why are you thinking about getting rid of your existing ERP system? If the answer is simply your need for some of these newer and more advanced applications, you have not thought through your options - you can reach these objectives with or without replacing your existing system.

If the answers have to do with technology, you need to look deeper. A CIO recently told me that he was going to replace his old ERP system because, "My users think it is old and ugly." Unhappy users are always an issue. How much you weigh this issue versus the cost, time and disruption issues is part of the trade-offs involved in making this decision.

Maybe the existing technology itself is old and ugly. If the underlying hardware and systems software is creating frequent disruptions or have become very expensive to maintain, you have another issue to trade-off. But if the existing hardware or systems software puts you at risk of a lengthy or permanent disruption of service, you have no choice but to go to a replacement system.

Why would you add the new function around your existing ERP system? If you add the function you require on to the existing system, you should get the benefits you seek faster. You can proceed directly to implementing the functions that will deliver the ROI. That project will have to include some consideration of integration of the new function to the existing ERP system, but the overall schedule is typically shorter.

In many cases, the functionality provided by a specialist or best of breed vendor will be better than that offered by many integrated vendors. As the above-mentioned article discusses, the future of ERP means sharper vertical focus. For many industries or verticals, significant operational advantage can be gained by going with a vendor who focuses in their industry. The best of these focused vendors typically limit their target market to a few, closely related industries. Note, industry focus means application function, not industry specific brochures.


But what is the true cost of going the best of breed route? Integration is one of the answers. It is not free. It is another issue that must be traded off. The reality is that the integrated vendor should have better integration and they will bear the cost of maintaining that integration. This is almost always true if the vendor wrote all the pieces themselves. If they acquired some or all of the pieces, this should be true, but you should test the vendor's commitments in this area. If the components come from a "strategic partnership", it means that as long as the relationship makes money for both parties and they do not evolve into a competitive situation, the integration will continue to exist.

Part of the integration trade-off has to do with the quality of the integration. A single vendor, integrated solution should have better integration. The question for the best of breed option is, "Can these products be integrated in a practical way." Practical does not mean best, it means acceptable given all the other trade-offs that will always have to be made. You will have to live with extra code, the integration code that needs maintenance. You will have to live with duplicate files that may get out of synch. You will be the one who deals with the finger pointing between the two vendors when one or both of the two systems are not working correctly. You will have to deal with the new release cycles that will prove to be always perfectly out of synch.

The selection of an add-on product must include the ability of the product to integrate with the existing systems. Was it built to be integrated? What integration technology does it support? What will be the cost and risk of maintaining the integration?

The 'Old ERP' Dilemma: Replace or Add-on

First, what is an old ERP system? If your system has green screens, you have an old ERP system. If your system has a GUI (Graphical User Interface) but not something that looks like most Windows applications, you have an old ERP system. If the system was introduced in the 80's, you have an old ERP system. If your vendor is no longer enhancing the system in "new areas", you have an old ERP system. If your vendor is becoming a "have not" of the ERP industry, maybe old age is approaching.

If you have an old ERP system and you need some of the business functionality offered by Supply Chain Planning (SCP), Business Intelligence (BI), Customer Resource Management (CRM), New Product Development (NPD) or e-commerce you have a dilemma. Do you replace what you have first and then add these new functions or do you keep what you have and add these functions around your existing ERP system? Every vendor of ERP or any of the functions listed above will have advice for you. But you can rest assured the advice is what is best for the vendor in almost every case. (To be sure, there are some conscientious sales reps out there that will give you honest advice.)

The Realities of Replacement

Why are you thinking about getting rid of your existing ERP system? What ever your answers, they must be compared to some of the realities of replacing the old system. Those realities include cost and time, but these two issues go much deeper. You have to pay the cost of buying and installing a replacement ERP system. You have to suffer the cost of disruption, typically a dip in operational efficiency and effectiveness, before, during and after the implementation. You will have to suffer the pain of ripping out the existing system and putting in its replacement. Will the replacement of the existing system be more or less painful that what you experienced the first time? This is a good question, which has no standard answer.

Once the replacement system is installed, will it give you adequate ROI on the replacement investment? The time involved in implementing the replacement ERP system means that the ROI on the added function you are seeking is delayed. Yes, you could try to implement both the replacement ERP system and your shiny new SCP or e-commerce system at the same time, but are you willing to accept the risk and even greater disruption in doing so. The "big bang" horror stories of the late 90's should make you very adverse to this approach.

An ERP system is the backbone of your operations. You need to make absolutely certain that any replacement system functions as well as or better than what you have. The word old means mature. Will the replacement system offer all the function that your old, mature system has today? Your people may not like the existing ERP, but they know it. Can you guarantee that the new system will really be an improvement for these people? Maybe the most important thing that can be said about the old system, which may not be true of the replacement system is, "It works!"

If you are looking for a replacement ERP system as a way to get to some of the newer functions like BI, SCP or NPD, you need to pick a system that is both better than your existing ERP system and provides the best functionality in the new areas you are seeking. You will have to pick a single vendor who is up to both tasks. Although the offerings from the integrated ERP vendors have improved to the level of functionality of the best of breed vendors specializing in a single area for many situations, the exact function you want and the specifics of your industry may mean that the integrated vendor is not up to the challenge.

The Process and the Framework for Improvement in Practice

To drive the procurement improvement program, it is imperative to form a project team with a clearly defined governance mechanism, in order to determine areas to work on. Also needing to be considered is the percentage of team time being spent, particularly in the case of a highly decentralized procurement function being coordinated from different groups and locations and from different units. This is in fact often the case for companies who have expanded globally without an organic understanding of the need for their processes to evolve

We'll turn now to the process for implementing a structured framework. In the first step, the problem statement is established and discussed. This is the foundation for the entire process. A detailed assessment of the processes through a structured framework, with a focus on the determination of value leakages, can help determine multiple problem statements. For this reason, it is vital to accord the time and resources necessary for this step. Establishing clarity in thinking will bring clarity to action and thus measurable results in the improvement process. Thus, some fundamental questions will drive the shape of the process as a whole:

* What does past data reveal?
* Are there pain areas identified by the users?
* What are the effects and future trends of the particular industry?
* What is the present status of the supply market?
* Is benchmark data available, and has it been evaluated?
* What are the present strengths, weaknesses, opportunities, and threats in the particular industry?

Based on the answers to these questions, strategic decisions can be taken, and a fair idea will be obtained of the direction to be taken for improvement. There are of course many other questions which can and ought to be posed: it all boils down to a considered evaluation and articulation of the "as-is" as contrasted with the "to-be." This is where the real (and huge) value of a structured framework will appear: it can help organizations generate a systematic approach towards problem-solving, and therefore gain substantial benefits, such as centralized procurement activities, improved supplier relationship management (SRM), and innovative ideas coming from all levels of the organization

Once these questions have been defined, considered, and addressed, the next step is the generation of ideas by means of interactive discussions within the team, and between the team and external resources. The inclusiveness of this aspect of the process must address the stakes of the internal team, management, suppliers, customers, and competitors, so that decisions can be taken as to what ideas can be taken forward and how the process should be conducted. This phase is essentially a process of clarifying the "drivers." All too often, however, organizations fall into the trap of vague, grandiose generalizations about value, so it's important to emphasize that each and every driver must be related to one or more product groups. This will help in identifying the focus area for process improvement. For example, applying this thinking to the "indirect materials procurement" function may reveal that the potential sources of improving performance should include areas such as contract labor and office supplies.

After thorough investigation and further detailed analysis, some pilot implementations can be carried out to determine the business impact of the proposed changes. If the results of pilot implementations show satisfactory performance, then these trials can be extrapolated across the organization, and procedures can be established to make those part of the system. If the performance is not satisfactory, it is time to demonstrate commitment to the improvement process by returning to the investigation and analysis stage.

Discovering and Creating Value in Procurement through Continuous Assessment and Innovation

About a decade ago, the procurement function was viewed primarily as a cost centre and a routine operation. More recently, it has been considered as a revenue-generating centre because of value-adds in the function. The procurement function now plays a key role in terms of improving the organization's performance, and any improvement in procurement operations can bring tremendous results in a firm's financial results. The procurement function's scope is not limited to purchasing, but covers the entire process, from source determination until the material reaches the required destination. Structured frameworks help in improving the operational efficiency of the procurement function by giving an understanding of the needs for improvement.

The key features of structured frameworks lie in their defining characteristics: they are step-by-step processes (meaning that they are sequential in nature), and they are flexible enough to take process constraints into account such as size, resources, and business functions.

Inherent to all organizations seeking procurement and process improvement are the aspects of innovation, continuous assessment, and process enhancement. A structured framework of analysis and execution will help create value across the three dimensions of process, technology, and organization.

Benefits of Structured Frameworks in Procurement

By implication, and practically by definition, a structured framework involves assessing the current state of the process, measuring the efficiency drivers for the process, and continually innovating to plug sources of value depletion. However, such a framework, if it is to bring best-in-class solutions to a problem-solving exercise, must be characterized by several elements and goals. It must

* be robust and simple;
* be highly systematic in its approach;
* determine non-value-added activities;
* drive innovation in process execution;
* drive measurement on process goals and objectives; and
* have a good governance mechanism in place.

Such an approach will help drive benefits such as improvements in supplier collaboration; consolidation of specific functions; optimization of supplier performance; reduction in procurement costs through efficient analysis; and improvement of customer satisfaction.

Even though procurement problem-solving can be undertaken without reference to a standard process or approach, the results obtained can well be haphazard, and the time taken for completion of the entire improvement process will also be significantly higher. By means of a structured framework that is used consistently and iteratively, one can pinpoint the areas of value depletion or value leakages and work towards eliminating them. This approach thus highlights the benefits of improving procurement function in a strategic manner.a

How One Provider's Solution Covers the Bases of Price Optimization and Management

Zilliant Precision Pricing Suite (ZPPS) combines proprietary pricing science with analytics and workflow automation to support the pricing process continuously throughout the four sales phases: price segmentation, price analysis or sensing, price setting and optimization, and price execution. Each application within ZPPS has been developed to address one or more aspects of the data-driven model. Although the applications are tightly integrated with one another, they are deployed one at a time, and in the sequence best suited for the particular needs and objectives of each customer.

ZPPS applications offer a variety of role-specific interfaces designed to support all key pricing decision makers, including executives and marketing, pricing operations, and sales personnel. Interactive pricing workbenches are provided to supply the necessary drilldown and ad hoc query capabilities combined with user-defined reports and integrated visualizations. In a "different strokes for different folks" (personalized) manner, targeted reports, analytics dashboards, and alerts are provided to keep management well-informed, while scorecards and flexible hypertext markup language (HTML) interfaces provide sales teams with clearer guidance, information, and deal review process support.

Zilliant's Price Optimization and Management Applications

ZPPS science-based pricing applications for enterprises consist of ZPPS Server, ZPPS Analytics, ZPPS Optimization, ZPPS Price Manager, and ZPPS Deal Manager.

ZPPS Server acts as the suite's foundation, and this mandatory application collects data, organizes it, and allows it to be shared with the other applications. Given the need for extracting data from multiple transactional sources, ZPPS's service-oriented architecture (SOA) also enables an easier integration of pricing content directly into other enterprise systems. The relatively young age of the company and the product has had the benefit of being technologically modern, as it is based on Java 2 Enterprise Edition (J2EE) SOA concepts (see Architecture Evolution: From Mainframes to Service-oriented Architecture).

The suite is therefore modular in architecture to support the user enterprise as the user's pricing requirements and technical environment become more sophisticated. ZPPS's open standard technology is designed to work fairly seamlessly with the enterprise resource planning (ERP), customer relationship management (CRM), and database infrastructure the user company might already have in place to administer and calculate pricing.

To that end, ZPPS Server is the integration point for the application suite's incoming and outgoing data. Transactional and master data from CRM, ERP, and data warehouses are typical inputs. Outputs usually include price recommendations by way of price multipliers, policies, or pricing rules. These outputs are fed back into order management applications and pricing engines from, for example, SAP, Oracle (including Siebel), and others. The module propagates the resulting price segmentation model into all ZPPS applications, providing the applications with the more precise subset of market data relevant to operations, such as price indexing, peer grouping, key performance indicator (KPI) calculation, and price optimization.

ZPPS Analytics then drives pricing intelligence and decisions by providing insight through a series of template-based, customized views, and ad hoc querying to enable users (executives and managers) to measure margin, revenue, profitability, sales channel effectiveness, and discounting. Users are also able to measure price waterfalls, price bands, customer scatter plots, and outlier reports.

ZPPS Analytics is a decision support application that yields deeper insight into all price-related performance measures. The application creates a system of record for detailed profit and margin analysis to provide more precise comparative metrics and to identify latent opportunities for enhanced profitability. Underlying ZPPS Analytics is the multi-dimensional online analytical processing (OLAP) engine that leverages Microsoft Analytical Services (sitting on either Microsoft SQL Server or Oracle databases), thus combining scalability and performance with strong data security.

Featuring role-specific interfaces, each tailored to the needs of different business users and situations, ZPPS Analytics enables sales, marketing, and finance personnel to understand buying and selling behavior in greater detail. In addition to being a "pocket margin" system of record (see Know Thy Market Segment's Price Response), the module is a cross-functional management tool for identifying and resolving the most pressing ("top 10") profit improvement opportunities.