Suite As It Sounds?

March 1, 2003

By Malcolm Wheatley, MSI Magazine

Cybex and Pella went the suite route, but some see integration issues as overblown

Cybex International, an $80-million manufacturer of high-end fitness equipment based in Medway, Mass., distributes its products through some 250 resellers. Scattered around the world, these distributors sell to gyms, fitness suites, and health club facilities in hotels and workplaces.

While these channel partners strengthen Cybex in most respects, fancy service management systems aren't a strong point with these entrepreneurs. As a result, Cybex had to invest heavily in a telephone-based customer service facility, says Brian Lyman, the company's business systems manager. The tasks of this facility included dealing with everything from order-status queries to maintenance and repair instructions. What's more, the cost of reliance on phone-based interactions was too high.

But Cybex found a way to alleviate this pain point. Thanks to customer relationship management (CRM) capabilities within Cybex's enterprise suite from Pleasanton, Calif.-based PeopleSoft, most of the information that its resellers need now is available via a Web site. Takeup of the new system has been phenomenal, particularly among international customers, says Lyman. "Half our customers use the Web site either daily, or at least three times a week," he says. "The most popular pages are the order-tracking pages, which enable them to be very proactive with their customers in terms of the status of particular orders."

And Cybex is pretty pleased, too. "The dropoff in phone calls has been almost linear to the takeup of the Web site," says Lyman. No wonder, then, that an upgrade to the company's PeopleSoft applications scheduled for the second half of this year will see further CRM capabilities implemented-such as the complete history of a customer or piece of equipment.

Communicating across a global supply chain also is an issue for $1.6 billion-metal-cutting tooling manufacturer Kennametal, Latrobe, Pa., explains Gary Hillard, manager of global business replenishment processes at the 12,000-employee multinational. In Kennametal's case, he says, the problem is rolling up and consolidating demand data from its sales force and distributors around the world into a single product demand.

"For manufacturing, we have a philosophy of single-sourcing our products: we want to be able to manufacture in one location, and then distribute the product around the world," he says. "It's also important to be able to, for example, match a shortage of product in the U.S. with a surplus in Germany."

The answer? Supply chain and demand planning software from Rockville, Md.-based Manugistics, one of the largest best-of-breed vendors of supply chain management software. At Kennametal, Manugistics' software is integrated with an enterprise resources planning (ERP) system from Walldorf, Germany-based SAP. Although the size of the product range caused initial teething difficulties-"We were the first Manugistics customer to have more than a million SKUs," recalls Hillard-"the same combination of SAP and Manugistics has since been extended to another business unit, and currently is being rolled out at a recent company acquisition in Germany. Second time around, the hardware and consulting cost was about 10 percent of the original cost," says Hillard. "My staff and I were able to do almost everything ourselves." Taken together, Cybex and Kennametal epitomize the debate that's currently raging among those concerned with automating the extended enterprise. That is, is it better to build those links to the outside world with applications from a company's main ERP vendor-most of which have expanded their offerings into broad-based enterprise suites-or is it better to go with the "best-of-breed" approach? It's an argument that pitches best-of-breed stalwarts such as Manugistics against enterprise suite giants such as SAP and PeopleSoft.

The core arguments

Predictably, each camp is strident in its conviction that its approach is the right one. The enterprise suite players see the compelling argument as integration-in particular, the need to do less of it, as their core applications already talk to each other.

"It's one thing to use best-of-breed inside the enterprise-but quite another to use it outside," warns Tom Dykstra, a Tucson, Ariz.-based industry manager with IFS, a Chicago-based enterprise suite vendor. "You can almost always set up your best-of-breed applications to run within one set of four walls, but once you get out into the network, it gets more complicated."

Simplifying the systems landscape was certainly a concern at Pella Windows, Pella, Iowa, says Bruce Baier, the director who led a recent implementation of Redwood Shores, Calif.-based Oracle Corp.'s Oracle E-business Suite 11i. The implementation led the company to eliminate 14 legacy systems, a number expected to rise to 55 within two years. "We looked at just about every enterprise suite vendor in the marketplace," says Baier.

The result: a head-to-head between Oracle's suite and a solution combining a back-office ERP system with best-of-breed CRM, supply chain planning, and product configuration packages. In the end, Baier explains, the decision boiled down to whether the company's overall objective-a 360-degree view of customer-related data in which information would come from a single vantage point-could be met through an integrated best-of-breed solution. At Pella, at least, the feeling was that the answer was no.

"Even the Oracle solution had gaps, which Oracle told us it would close," says Baier. "And every gap we identified has been 100-percent closed." The result, says Baier, is that the functional benefits of a best-of-breed solution are there, but with none of the integration hassles.

Analysts also see integration savings as central to the suite versus best-of-breed debate. "Assuming equivalent functionality, using an enterprise suite solution can reduce integration and customization costs by 15 percent," says Brian Zrimsek, research director with Stamford, Conn.-based analyst firm Gartner.

But realizing those savings in full, Zrimsek adds, will depend on the extent to which an enterprise suite meets a company's needs. Companies whose requirements aren't quite met by the enterprise suite will incur some customization costs as they patch in the functionality they need. "But if the enterprise suite offering is good enough, then it's a straight savings," he says.

For their part, the best-of-breed vendors scoff at such thinking. "Every customer is different," says Andy De, director of product marketing at Dallas-based supply chain management software vendor i2 Technologies. "If you buy the enterprise suite solution, everything is pre-integrated, forcing customers to adapt their processes to the prewired enterprise processes. Especially in the extended enterprise, this is just too confining."

Neil Hooper, group vice president of solution consulting at Manugistics, adds that it's important to focus on business issues, and not just IT issues, when making application decisions. "We say: let's start with the problems facing the business," he says. "Is your problem that you want fewer software vendors to call, or do you need to increase your inventory turns from 8 to 20?"

Shades of gray

Even suite vendors acknowledge there are niches they don't address, and that there are shades of gray with some specialized functions. "The real issue is how you leverage technology to get a bottom-line benefit, which is about real dollars, real costs, and real profit," says Carol Ptak, PeopleSoft's vice president for industrial and high-tech manufacturing industries. "Sometimes that will mean using a best-of-breed application, because the reality is that new and late-breaking functionality grows up in niche applications, and gradually spreads to the enterprise suites."

Of course, besides integration risk, there is another risk to the best-of-breed approach. Small, but innovative, best-of-breed companies may not be the most viable vendors. "If a company adds enough value, and has enough customers, then it tends to get acquired, rather than go belly-up," says Laurie Orlov, a research director with analyst firm Forrester Research, Cambridge, Mass. Such a risk is probably worth it. But some companies just shutter their doors. "Only the most risk-aware early adopters should touch small best-of-breed vendors with funding difficulties," she warns. But where there is risk, there is typically some upside. "There's no getting away from the fact that the best-of-breed vendors can innovate faster than the enterprise suite guys: it comes down to focus, and the enterprise suite suppliers are too fragmented in their R&D," says Orlov.

Suite vendors point out there are some areas they don't plan to address. Gregory Mekjian, a vice president with SAP, the world's largest suite vendor, recites a long list of best-of-breed vendors SAP partners with to tackle niche requirements. "Of course I can't position us as a turnkey solution [supplier], because we're not," he says. "We don't do basket-weaving algorithms, and we don't want to do basket-weaving algorithms."

Basket-weaving aside, SAP has massively extended its capabilities in recent years. Lori Schock, senior global business process manager at Midland, Mich.-based Dow Corning, cheerfully admits to leading a team in the mid-1990s to assess the ability of advanced planning & scheduling (APS)-based software packages-including SAP's then-nascent APS solution-to model the intricacies of optimizing production across Dow Corning's 26 global sites. The result? A head-to-head evaluation between i2 and Manugistics.

But the decision was deferred until the company's rollout of SAP's ERP software had progressed further-and in the meantime, SAP moved back into the picture. "We started to see our requirements become SAP products," she says. "The relationship with the SAP people was very good, and staying with SAP meant we wouldn't have to teach our logistics and planning people a new tool." The decision, in essence, had made itself.

EAI to the rescue?

SAP is convinced that the battle is going its way. "What customers are telling us is that in practice it's just too hard to manage all those software partners and their release schedules," says Mekjian.

Today, the suite approach may have the momentum, but tomorrow could be another story. "Integration issues are starting to dissipate, as companies get rid of their older packages and homegrown applications," says Nigel Montgomery, European research director with Boston-based AMR Research. "Newer systems are better at integrating, and so it's less of a problem."

Advancements in enterprise application integration (EAI) software-which uses technologies such as object-oriented connectors and messaging to link disparate systems-could bolster the best-of-breed approach. But at the same time, suite vendors are leveraging EAI and middleware tools of their own, and aiming to imbue these tools with as much pre-built integration content as possible.

It's a shift that J.D. Edwards is more than ready for, says Lenley Hensarling, vice president of product management for the Denver-based enterprise suite vendor. In a deal with EAI vendor WebMethods, Fairfax, Va., the company has built pre-configured interfaces into its software, intended for use by CRM, e-procurement, and Web commerce solutions.

"We're very pragmatic: we'd prefer you to use our CRM solution, but we understand that some industries have some very specific CRM requirements-and that the same goes for other areas of functionality," says Hensarling. "By packaging a series of 70 or so common interface 'touch points' into our enterprise suites, we're at least meeting the best-of-breed vendors halfway."

Indeed, it was the existence of this 'touch point' capability, termed XPI, that convinced Katherine Litchfield, director of IT at Cal-Air, a $185-million compressed air and piping maintenance company in Whittier, Calif., to choose an enterprise suite from J.D. Edwards in fall 2000. "We'd already decided on a specific best-of-breed service package: the problem was what to integrate it to, and the XPI capability was a critical part of our decision-making process," she says.

Ultimately, suite vendors and best-breed vendors know they must push forward on both fronts: mitigating integration costs, and building out their functionality. Assessing vendors on either score takes in-depth evaluation, which means that for the foreseeable future, the great debate in applications is far from settled.

To view the online article, please click on: http://www.manufacturingsystems.com/archives/2003/mar/ms0303f1.asp