Build it, they’re coming
The pressures of globalization and budget constraints mean that manufacturers will have a bigger say about what’s hot in IT this year, says George Schultz
Build it and they will come. That line from a popular movie has some relevance to the IT industry, considering the manufacturing enterprises that flock to it for the means to advance their profitability goals. It happened again recently with the advent, and quick proliferation, of e-business. Now manufacturers are having a bigger say on what will keep them coming this year and during those that follow.
Thus Microsoft launched its Collaborative Product Development (CPD) initiative in the broad product lifecycle area, says Don Richardson, director of Microsoft’s manufacturing industry group. “To learn what are the ‘pain points’ of our end-user customers, to address what they are trying to achieve, and how IT groups and companies are spending their dollars—to help focus our effort.”
It also fits the pattern in Microsoft’s launch in the early 2000s of its .Net technology, a framework using XML for building Web services and applications “to help companies leverage the Internet,” according to Richardson. “Now,” he notes, “the Web services techniques are mature enough that people are using them in day-to-day services, and why the CPD approach is combining product and technologies so that customers can more easily [move] around this framework.”
Industry’s biggest and immediate influence on information technology currently, however, comes in a single word: budgets. David Caruso, senior vice president of research for AMR Research Inc., the Boston-based consulting firm, calls it “patently true” across the corporate community from talking with many chief information officers. “They know their company budgets are not going up.” But, at the same time, he says that “they see some increase in IT spending within company budgets.” Hence, the big challenge in finding money for new applications and technology investment is seeking funds within other technology areas.
They likely will find it under companies’ “business drivers” today, a major one being globalization strategies—with attendant IT priorities, like visibility. “Manufacturers have to ask themselves,” Caruso says, “questions like: ‘How do I make my visibility reach around the globe? How do I direct with customers and suppliers around the globe?’ And that drives right down into ‘What does my underlying IT topography or footprint look like?’ Especially among manufacturers having a lot of different applications from acquisitions and mergers.”
Companies may need to rationalize their current “ERP (enterprise resource planning) mindset” for IT, he says, whether a single-vendor system (the proverbial “single instance of SAP”) or tight linking across key areas. The dominant issues here are supplier integration—especially if global, manufacturing in both North America and China, for example, with a whole new set of suppliers and manufacturing partners—and, simultaneously, customer-facing operations.
“The only way you can afford to do that is to have good supply chain capabilities to manage that process,” stresses Caruso. “The difference we see today is that most supply chains are not linear with vertical orientation as they were before, but now very complex networks. Suppliers who formerly supplied components now are supplying assemblies, for example. Value-added distributors are now actually doing final assembly or product configuration.”
Accordingly, Caruso sees portals communication technology being “one of the more striking strategic investments for a lot of manufacturing firms” during 2005. As situational examples, he mentions that companies with “an incumbent large ERP player like PeopleSoft or Oracle” might use the portal development tools from those vendors’ platforms. Companies also might be looking into, for example, “some of the specialty providers—large, like Microsoft’s capabilities [e.g., the .Net platform, SharePoint Portal Server], BizTalk or IBM for its WebSphere, or specialized players like Plumtree (San Francisco) or Vignette (Austin, TX), especially in front-end environments with disparate ERP systems underneath,” he notes.
IBM entered the New Year with just-available enhancements to its WebSphere family of Internet infrastructure software, including the WebSphere Portal for Multiplatforms which fully automates business processes by integrating collaboration and search tools with enterprise, legacy and third-party applications. “This latest release of WebSphere Portal further demonstrates the business value of enterprise portals in bridging communications among employees, customers and partners,” says Ken Bisconti, vice president for collaboration products.
This Portal version 5.1 extends business process integration, support for virtual portals and Web content management. The company also released Version 6 of the IBM WebSphere Application Service, plus WebSphere Application Service—Express for smaller to medium-size companies.
Enterprise software vendor SAP continues to roll out its NetWeaver product, the technical foundation of mySAP Business Suite solutions, SAP xApps composite applications, partner solutions, and custom-built applications. This software is built on Enterprise Service Architecture, SAP says, “to help companies reduce costs of creating and maintaining interfaces and enabling enterprise-scale usage of Web services.” This year will see more service-enabled scenarios, focusing on business process flexibility while also providing new composite applications. Scheduled for 2006 in the three-year rollout is capability for customers and partners to build composites on top of SAP’s infrastructure, plus industry-specific composite applications built on this new architecture.
Compliance—either regulatory or market-generated—represents another significant driver of technology investment by manufacturers, and again portals technology figures to play big, according to AMR’s Caruso. What’s making their role bigger here is support for communicating among and within corporations concerning operating performance, analytics, and required documentation. The Sarbanes-Oxley Act to enforce corporate finance and governance standards in publicly-listed corporations, with its extensive reporting burden, certainly looms large.
Similarly pushing IT investment for regulatory compliance support, says Caruso, are industry-specific issues like the TREAD Act in the automotive industry; US Food and Drug Administration (FDA) regulations, most notably these days, CFR 21, Part II, in pharmaceutical and medical equipment manufacturing, plus OSHA among other health and safety requirements more broadly across industry.
“One of the trying moments these days for CIOs is they’ve got to spend money on the tools and capabilities to maintain regulatory compliance,” says Caruso, but it doesn’t do anything for competitiveness. “So we always raise the point: If you’re going to make that investment, how can you do it so that it helps the business, more than just helping keep score for the company?”
Not all compliance issues are government generated regarding corporate behavior, product safety, environment and health. A big IT-based push today is “RFID compliance” with the mandates from Wal-Mart and other mass merchandisers that all their principal vendors must use RFID (radio-frequency identification) technology—and similarly for suppliers in the government’s US Department of Defense procurement operations.
“So a lot of companies are trying to formulate RFID strategies,” says Caruso. “We see a lot of little pilot programs going on today among companies to determine their answers to: ‘What does this mean to me? What do I have to do? How do I need to interpret the compliance requirements from someone like Wal-Mart?’”
Significantly he adds, “it’s interesting; that’s a new area for a lot of manufacturing IT organizations. A lot of folks today are complying only by slapping the RFID tags on the shipment but not really using it [RFID investment] to track anything internally yet. That’s the next wave, people saying, ‘I’ve got to make this work beyond just being compliant to Wal-Mart.’”
Hewlett-Packard, a major computer hardware and equipment manufacturer responding rapidly to RFID technology’s growth, continues into the New Year with ambitious RFID integration development through its own R&D efforts and working with technology groups on developing industry standards. One impetus derives from RFID user growth, having learned that the pharmaceutical industry, a key market, is embracing RFID to the extent that it will outpace the huge consumer packaged goods (CPG) sector in RFID use over the next 18 months.
SAP, the biggest enterprise and manufacturing software vendor globally, recognizes spread of RFID implementations plus standards issues in its further expansion. It is among technology vendors working with retail and CPG, pharmaceutical and aerospace industry leaders in, for example, protecting consumer privacy without limiting the continued development and use of RFID in retail markets.
Collaborative IT, across companies’ internal and external supply chain operations and due to become tighter in application integration during 2005, permeates most of the hot strategic technologies described.
“There’s incredible demand for new product innovation,” AMR’s Caruso says. “In fact, lots of companies have realized that, when they’re continually putting new products into the marketplace, the company is vibrant, the margins are higher. That’s the way they can create wealth rather than just continue to reduce costs on the existing products.”
The trend to globalization and the distributed nature of manufacturing made clear to Microsoft the growing need for advanced real-time systems in product development collaboration, says Richardson of its manufacturing industry unit. While Microsoft positions itself as a platform company, its strength, he says, is that its extended partner program across the product development field “brings many solutions to bear and adds vertical expertise to our platform in a cost-efficient and productive way for our customers.”
Since no new overarching developments like the Internet and e-business with Web-based functionalities will likely come along again anytime soon, the IT industry’s outlook for 2005 and the immediate future appears to revolve around enhancing, extending, or tweaking currently emerging technologies for manufacturer support. Float it, and see if they come.