Back in 2000, when Uponor Corp., an international supplier of plumbing and heating systems, opted for the Oracle packaged application suite, it did so because it wanted a platform to which it could add modules from that same vendor when and where it made sense. When warehouse management became a core requirement, Uponor figured it was a no-brainer to plug in Oracle Corp.'s WMS product because Uponor was already covered for the license.
Turned out, that decision wasn't so black-and-white. For Uponor's purposes, the Oracle WMS didn't hold its own in a feature-to-feature comparison with best-of-breed applications specializing in that particular area of functionality, according to Chris Moore, vice president of IT for 1.5 billion euro Uponor. Yet, integrating a third-party WMS application with the core Oracle enterprise suite was likely to open a Pandora's box of integration headaches.
In the end, concerns about integration took a back seat to the need for high-end features, such as order consolidation functionality. In 2004, the Finland-based company added HighJump Software's WMS offering to its core Oracle ERP platform.
"As we got a closer look at [Oracle's] WMS, we realized it wasn't going to offer us any of the benefits or automation features we had hoped for," says Moore, who is based in the company's North American headquarters in Minneapolis. "[Oracle WMS] was cheap and easy to enable, but it wasn't going to provide us the necessary benefit from a business perspective."
While Uponor considers itself an Oracle shop, it's not willing to close the door on best-of-breed software. Not every manufacturer feels the same way. With consolidation rampant among best-of-breed software providers, many manufacturers that once were sold on the speed and flexibility of stitching together their preferred mix of point solutions are shifting their attention back to big-company packaged suites. They are doing so, in part, to avoid the risk and instability associated with products from small companies that could be acquired at any moment. Also, companies like the idea of dealing with a single vendor for all their support needs, and they buy into packaged vendors' claims that an all-in-one approach offers lower total cost of ownership (TCO) over the long haul.
Market changes have also worked in favor of packaged suites. The big guns — Oracle, SAP AG, Microsoft Corp., and Infor — have been on a buying spree over the past few years, fleshing out their core enterprise resource planning (ERP) systems, initially with broad customer relationship management (CRM) and supply chain management (SCM) capabilities, and eventually, with niche-type functionality traditionally associated with point-solution vendors. Manufacturers' willingness to take a best-of-breed approach also took a hit as many companies found the integration challenges to be far more complex than they had originally bargained for.
"As an IT strategy, best-of-breed has largely gone away," says Jim Shepherd, senior vice president at AMR Research Inc., who estimates that the big, packaged suite vendors currently dominate with more than a 70% share of the market for enterprise software. "People got disillusioned with the actual experience of trying to create fully functioning information systems out of a bunch of parts. It turns out, independent software doesn't always fit neatly together. There are overlaps or gaps in functionality, the [programs] don't play well together, the look-and-feel and navigation is different, and it's very hard on a one-time basis to create an integrated business system."
SOA's Impact
The move to service-oriented architecture (SOA) environments, led by Oracle and SAP, among others, may alter the landscape yet again, however. SOA, with its promise of constructing composite applications and piecing together plug-and-play modules, will likely mitigate some of the integration challenges, swinging the pendulum back again, this time to the point at which best-of-breed is an accepted, if not necessarily preferable, IT strategy. Moreover, manufacturers such as Uponor, with very defined needs in the specialty areas of warehouse management or sales operations and planning, say that after close examination, many of the packaged offerings still fall short on capabilities that add value to the business, keeping the door ajar for point solutions on a case-by-case basis.
"There will always be gaps, and when business models and technology change, independents definitely can respond more quickly than the big-suite vendors can," AMR's Shepherd says. "Also, as broad suites and smaller, niche applications become SOA-based and as SOA skills develop, we'll begin to see CIOs once again view best-of-breed as a strategy for creating more flexible, integrated business suites. I just don't see any signs at the moment that that's happening."
Going forward, SAP and other enterprise software giants point to SOA as the linchpin enabling best-of-breed vendors to participate in their enterprise software environments. SAP's NetWeaver SOA, SAP officials say, has been constructed as an open platform upon which third-party vendors can create new services and capabilities that extend the core SAP platform.
SAP has a variety of certification levels, including a coveted industry value network certification, that specify that the third-party program will integrate seamlessly into the SAP environment, according to Kevin McCollom, director of business development for the automotive industry business unit at SAP Labs.
Oracle, too, touts its SOA-based Fusion architecture as a stage on which best-of-breed vendors can perform. "We're not in the business of plugging every hole, and, to some degree, it's good to have holes because it drives innovation," says Jon Chorley, Oracle's vice president of SCM and E-Business Suite product strategy. "We're providing a framework that partners and ISVs within our ecosystem can plug into."
While SOA may change the game in terms of integration, many of the SOA pieces are not yet in place. Acknowledging that, Oracle and SAP officials state that their ability to deliver a lower TCO is a primary reason why the tide has swung in favor of packaged suites. "People have looked at the total cost of ownership of rolling up applications themselves and concluded it's too expensive," Chorley says. "That sea change where people arbitrarily said, 'I like to do my own thing' — CEOs and CFOs are making the CIO re-evaluate that."
At Welch Foods Inc., the need to establish a single platform that would provide better visibility and allow the organization to connect business processes was a primary driver for the consumer products company to standardize in 2004 on the Oracle integrated enterprise suite. But the single-platform cause was also aided by TCO advantages related to less integration work and the ability to bring in and train one set of developers, according to Larry Rencken, Welch's CIO and vice president of information services.
Beyond the core Oracle ERP suite, Welch's will implement other Oracle products in the areas of warehouse management and transportation management as its needs grow, and the company will routinely consider Oracle first when it needs to broaden its enterprise software suite. "Our motto has become 'all Oracle, all the time' — when it makes sense," Rencken says.
Though he doesn't universally rule out a best-of-breed solution, he says it would be the exception rather than the norm. "It boils down to integration and the cost of ownership," he says. "Best-of-breed comes with its own set of expertise and would require our people to acquire an additional skill set. We've made a significant investment in training and hiring Oracle developers."
As part of Welch's governance process, business process owners define requirements to meet the business need and then the team considers them against Oracle products. "We review the level of those requirements fulfilled by Oracle," Rencken says. "If we identify a significant gap between the Oracle product and the actual requirement, then we'll reach out to best-of-breed vendors to potentially fulfill the need."
Watch Those Hidden Costs
Karin Bursa, vice president of marketing for Logility Inc., a best-of-breed supplier of supply chain management software, including demand planning and forecasting tools, makes the case that integration within packaged solutions can be far more onerous than users realize, upping the TCO quotient for a platform solution. For example, to take advantage of new SCM capabilities, an ERP customer often must upgrade the entire system, as opposed to changing a specific area of functionality. "You have to really understand your ERP provider's integration story and how it will be more cost-effective over time compared with leveraging a best-of-breed provider," Bursa says. "It's not the initial implementation, but what comes next."
Bursa and executives at other best-of-breed providers also argue that while ERP vendors have made progress in filling out their suites, gaps in functionality remain between their offerings and point solutions. Logility, for example, enables multi-echelon planning scenarios, a high-end capability not yet available in many ERP vendors' solutions, Bursa says.
For its part, HighJump says its supply chain execution platform offers a variety of specialized capabilities not found in packaged software options, including direct support for integrating with material handling systems, such as conveyors and sophisticated process control functions, according to Chad Collins, vice president of global strategy at HighJump.
And Steelwedge Software, a maker of sales and operations planning (S&OP) software, echoes that sentiment with the claim that no packaged suite vendor can provide the depth of functionality offered by its products. In fact, Steelwedge, like many best-of-breed providers, has been certified by SAP and Oracle for integration with their product lines.
"Companies that buy us can't get what they want from [packaged vendors]," says Glen Margolis, Steelwedge's founder and CEO. "They offer some simplified version of what we do."
That's exactly what Monster Cable Products Inc. found out after trying to institute some basic S&OP practices with its core PeopleSoft ERP system, now owned by Oracle. "We were doing S&OP with our ERP package, but as we started doing it, we realized the package lacked a central point for aggregation," says Ruben Andreu, worldwide demand planning manager at Monster Cable. "It was hindering our ability to spread the rollout of S&OP. Instead of spending time on the actual discussion of S&OP practices and working with team members, we were spending half our time on data analysis and collection."
Because the company had decided to make S&OP a best practice as part of its drive to gain efficiencies in inventory management and customer service, Monster Cable quickly determined that it needed to bring in a point solution — in this case, Steelwedge's SO&P offering — to get the job done.
Meanwhile, at Uponor, the decision to broaden the Oracle suite with HighJump's WMS product has paid off, despite the initial integration challenges. Moore admits the company spent "a painful" month or so working with HighJump and Oracle to hammer out all the touch points. Yet, since the software has been online, it has more than paid for itself by allowing Uponor to significantly reduce the amount of worker hours needed in its warehouses.
"We've been able to take a lot of functions that were manual and automate them in HighJump," Moore says. That is something that wouldn't have been possible with the Oracle WMS functionality.
This fall, when Uponor begins to evaluate a CRM package, it will keep its eyes open for solutions outside the Oracle suite. "Maybe we'll stick with Oracle, maybe not," Moore says. "We're not ruling out everything else."