Small Business Vs. The Supply Chain Bullies

January 8, 2007 by Kevin Reynolds.

WANTED: Small to Medium Business (SMB) with the supply chain capabilities to be able to effectively work with LARGE companies. Must be able to provide REAL-TIME Business Management, Inventory Management, EDI, and Forecasting. Companies still managing their operations with a 25 tab Spreadsheet and using Paper and Pencils for data collection need not apply.

Ouch! How many SMB’s got tossed out of the opportunity because of the last line? Did you?
This is a topic that was discussed in Supply and Demand Chain Executive last month in a article titled “Managing the Mini Supply Chain” by Ali Jani. Check it out at: http://www.sdcexec.com/online/article.jsp?id=8985&siteSection=4

As a SMB, you are being bullied into evolution. LARGE companies are spending immense amounts of money to get the inefficiencies out of their supply chains. This money is being spent in several different areas. Software, hardware, people. They are getting their supply chains humming along… Until SMB’s get involved. Then, all the sudden this carefully built supply chain comes tumbling down because it has a very weak link. A SMB can’t provide them with the real-time information they need. They have spent millions getting everything to flow perfectly, and now their manufacturing line is down because you didn’t deliver a little pip-squeak of an item that they were expecting at exactly this time on this day.

What went wrong? How did this mistake happen? Did you miscount what was in your warehouse? Lose some inventory or forget to replenish? Perhaps it was an error during all of the duplicate data entry? Maybe your salespeople sold the same items to multiple customers? Too bad. The LARGE company simply doesn’t care. All they know is that their million-dollar ERP system is telling them that your company has dropped the ball, again, and that over the last year this has happened exactly 7.953% of the time. It also tells them the your errors have slowed down production or distribution to the tune of $50,000 in lost revenue. Say goodbye to your biggest account, because you are now off their supplier list.

Is this fair? Depends on who you ask. Just because a LARGE company can afford SAP or Oracle, doesn’t mean a SMB can. (Even if SAP and Oracle will say otherwise. Got to love those ads!) So when the LARGE company tells you to meet their requirements if you want their business, you have two choices - You can tell them to take their requirements and stick them where the sun don’t shine, or you can look at this as the best path for your SMB to make lots of money in the long run.

LARGE companies have spent some serious time and money figuring out just what works. They know that today’s software solutions provide large, measurable, profitable results. There is a reason why they want to bully you into meeting their requirements. It is in their best interests to make you more efficient. If you are more efficient, they are more efficient, and their profits go up. They also know that spreadsheets and pencils don’t do anything but slow you (and them) down. And of course, time is money.

The problem of course is money. More specifically, your money. If you had the money, you would have invested in the technology to make it easier to run your business long ago. (Right?) You would already have the necessary tools, and you wouldn’t be stuck in this crappy position between a rock and a hard place right now. So now what - Do you leverage your business and home to try and afford a massive investment in traditional software solutions? (Warning, learning that you have risked the family home to buy software has been known to seriously annoy your significant other!) Or do you kiss the amazing opportunity you have been working towards for 5 years goodbye?

Tough call. This is why you wanted to run your own business, right? To make these decisions. Chart your own course. Well.. you are going to get lucky here. There is another option. A way to get the technology you need, fast, without risking the house.

The software business is changing, and the days of massive up-front investment in new software systems are disappearing fast. “On-Demand” and “Software As A Service” (SAAS) are going to get you out of this hole, and you are going to be able to tell everyone how smart you were for not investing $100,000 in software systems 3 years ago. Sounds good, right? Well, it is good for you, but not for the old-school “Pay me up front” software vendors. They are in big, big trouble.

Next Blog - How “On Demand” is going to change the way you buy software, forever! (And seriously scare the old-style software vendors.)

My first blog entry!

January 8, 2007 by Kevin Price.

First BLOG
Hi, there. Kevin Price here, founder and CEO of AccuCode. AccuCode is one of the leading software developers and system integrators in the United States specializing in the application of mobile computing and automated data collection technologies. This is my very first BLOG entry. Forgive me is I am ignorant of the etiquette and protocols of the medium. For this first series of entries I would like to provide a review of major technological and business developments activities of networking, business software, mobile computing and automated data collection. These are the primary sectors addressed and provided by AccuCode to our customer in retail, manufacturing, transportation and distribution.
Before diving into the major industry developments of 2006 I should make some disclaimers. Most of the content in this BLOG should be taken as opinion. For eleven years I have been known as one of the most out-spoken observers of our industry. Loved by some, disliked by many but always a polarizing voice. As an observer I do not hesitate to voice my observations, concerns and predictions. While many senior managers in our industry have found themselves on the cutting edge of my razor sharp tongue I always strive to be honest and forthright in my observations and complaints. If I am wrong I am adamantly wrong. If I am right I am just as adamant. When proven wrong I do not hesitate to acknowledge my error. I have enthusiastically eaten many a humble pie of over the past decade. However, I must be doing something right because over the past eleven years AccuCode has been recognized as one of the fastest growing technology companies in the US by Inc Magazine and four times by the Deloitte & Touche Fast 50 listing. I myself make a considerable side income acting as an industry analyst covering all of the public companies in the sector for some of the largest investment funds in the world. That being said, take this information for what its worth.
Networking

Major technological developments in the networking sector include open source networking, content based routing, Mesh Wi-Fi, WiMAX, EVDO, and location based services. I’m sure there are more but I have to keep this thing to some kind of reasonable length.
Cisco this year announced a new product offering featuring content based routing capabilities, specifically target at mobile computing, bar code and RFID oriented applications. The full implications of this technology won’t be seen for many years to come but by my estimations it is huge. Instead of a message being sent from on IP address to a single (or multiple) static recipients these network routers have the ability to analyze the application layer data and content of the message, determine its context and relevance and route it to all recipients that need it. If full leveraged at the software application layer this could dramatically reduce network congestion and dramatically enhance application performance. Today, virtually all data must make a round trip across the IP cloud to a host server that decides what to do with that particular bit of information and inevitably it ends up being stored in a database. This scenario creates the need for more and more processing power and storage on the server side. The reality is in real-time, business process automation applications (those the most leverage, mobile computing, bar code and RFID technologies) most of the data is transient in nature and only has relevance at the point and time that it is created. If it could be acted on by all the other applications and users that need it seconds after it was created, without ever having to make that round trip to the application server large IT organizations could save millions in infrastructure cost and operational efficiencies.

Open source networking hit the scene in 2006 with out much notice but that won’t last for long. In July Vyatta of San Mateo, CA announced the availability of their Open Flexible Router V 1.0 and they are not the only one. The idea here is that using open source software you can effectively turn any x86 based computer with the proper networking hardware and processors into a high performance network router that can compete very favorably against offerings from Cisco, 3com, HP, Nortel and others at a fraction of the cost. Further, using virtualization technology you can turn under utilized PC’s and servers into virtual routers while they are still doing their day jobs. As it is already doing in the enterprise software sector, the open source movement is likely to be a very disruptive force in the future of networking.

Mesh Wi-Fi first appeared on the market a couple of years ago but it didn’t really have much impact until 2006. As a result of their 2005 acquisition of Airspace, Cisco released their first Wi-Fi mesh product. The Aironet 1500 Series lightweight access point has been designed for outdoor use. It includes power adaptor for easy light or traffic pole installation. It can be combined with a compact solar panel and battery for completely autonomous operation. The 1500 is integrated into Cisco’s unified wireless infrastructure that includes centralized wireless network control and switching. This is by no means the first Wi-Fi mesh offering. Competitive offerings that predate the Cisco introduction include Stratix, Firetide, and Tropos Networks. Of course there have been proprietary mesh radio offerings on the market for many years but these products all use a combination of 801.11 A, B & G. Here is how most of them work. They use B/G as the local area wireless protocol and then 802.11 A, at 100MB per second through put, to automatically establish a backhaul connection to the next available access point. All AP’s on the network then route their back haul traffic back to the most available hardwired network connection. Several of these offerings can dynamically shift backhaul routing to the most efficient of multiple hardwired connections. Using these products can dramatically lower the cost of providing large scale wireless connectivity in a campus, metro or large installation environment. Within the next 12 months Mesh Wi-Fi will merge with WiMAX. In many metro-scale installations WiMAX will be used to replace both 802.11 A as the mesh protocol or replace the hardwired network connection. As metro-scale wireless installation increase in both size and volume during 2007 and beyond these technologies will play a pivotal role the wireless architecture. We can use this technology today to provide wireless coverage for large manufacturing or distribution environments at a fraction of the cost of a traditional Wi-Fi installation.

802.16 WiMAX officially started shipping in 2006. This much anticipated next generation of wireless technology has the potential to remake the telcom and ISP market places. Sprint Nextel recently announced intentions to invest $3 billion in the construction of a nation wide WiMAX network to provide high-speed wireless internet connectivity and converged mobile services for voice, data and video. WiMAX is a certification standard that applies to wireless offerings from a wide range of suppliers and frequencies. The 802.16 specification applies across a wide swath of the RF spectrum. However, specification is not the same as permission to use. There is no uniform global licensed spectrum for WiMAX. In the US, the biggest segment available is around 2.5 GHz, and is already assigned, primarily to Sprint Nextel and Clearwire. Elsewhere in the world, the most likely bands used will be around 3.5 GHz, 2.3/2.5 GHz, or 5 GHz, with 2.3/2.5 GHz probably being most important in Asia. In addition, several companies have announced plans to utilize the WiMAX standard in the 1.7/2.1 GHz spectrum band recently auctioned by the FCC, for deployment of “Advanced Wireless Services”. The technology has the ability to provide up to 70 MB per second and can span up to 70 miles (112 Km) in line of sight installation. However, these two capabilities are mutually exclusive and are only achievable under fairly ideal circumstances. A more typical performance will be 2MB per second over 2 kilometers and this is divided across all users in the same coverage cell. In the short term Wi-MAX will have a much larger impact outside of the US, providing voice and data services in third world countries and areas that have been previously uneconomical to reach. However, as Sprint Nextel and others like Clearwire start to leverage the frequencies they have purchased and mobile devices start to incorporate Wi-MAX capability this technology has the potential to remake the mobile computing, telcom and ISP markets.
EVDO and higher speed GSM/GPRS made significant progress this year. These cellular ISP services are gaining big ground with business users with large field user communities. Smart phones have made the most of these new network capabilities but ruggedized mobile computers from Symbol, Intermec, Hand Held Products and others have begun to incorporate these high-speed wireless services as well. Many of these devices (smart phones and rugged mobile devices) have also begun to take advantage of GPS enabled location based services. Several, integrated circuits for EVDO, CDMA and GSM now includes GPS transceivers that further leverage the cellular network to provide enhanced real-time location information. In coming years we will see location based services leveraged by the likes of Google, Yahoo and others to provide context sensitive based services.
Next week I’ll cover the major 2006 developments in the mobile computing sector, and a few predictions for 2007 and forward. Feel free to post any comments or request for future topics.

Until then,

Kevin

Watching the Software Dinosaurs Die

February 6, 2007 by Kevin Reynolds.

In my last post I mentioned there was a new style of software on the market. It is known as On-Demand or SaaS (Software as a Service). What is SaaS? A good definition is a software application that is hosted by the software company, which the end user accesses via the web. Thereby freeing the end user from the need for on-site servers, installation, maintenance, or support.

A few SaaS stats provided by Bill McNee, CEO of the research firm Saugatuck Technology:

55% of all SMB companies currently have at least one SaaS application running.

61% of North American companies with revenue over $1 Billion plan to use SaaS applications in the next year.

Almost all new software venture money is flowing to SaaS startups these days. NOT traditional enterprise software companies.

Industry experts estimate that by 2010 (just 3 years away) 30% of all software will be delivered in a SaaS model. (Based on the number of new SaaS companies entering the marketplace, I think that this estimate is conservative. I believe the number will be well over 50% of software delivered.)

What do these numbers mean? It depends on where you stand. The consumer is about to score big time, and the traditional software vendors are about to go out of business. It is that simple.

Evolution is happening in the software industry. Something better has come along, and it is better suited to the current consumer environment. Consequently it is quickly making the older products irrelevant and pushing them toward extinction.

Why is the SaaS model thriving? Because it offers consumers the flexibility that they demand.

1) Up-front costs - With SaaS, the up-front costs are minimal. The very concept is to remove all up-front costs and move you to a small recurring monthly subscription. In traditional Supply Chain software, up-front costs can be considerable when you are deploying a large enterprise application. A small mid-level WMS can easily cost over $100,000 when you figure in software, hardware, implementation, support, etc.

2) Implementation - SaaS has no on-site servers, very little (if any) on-site installation, web based training, and can be up and running in days. Traditional software is the exact opposite.

3) Ongoing Management - With SaaS, ongoing management of the system is the software companies responsibility. Not yours. Maintenance, upgrades, enhancements, testing and bug fixes all are handled by the software company. Not by you. You simply log on and use the product. Consequently IS folks tend to have a love/hate relationship with SaaS. If they are currently utilized to the max, SaaS provides them with a solution that will not take any more of their time. But in the end, well.. you can see where this is going. Most SMB’s don’t have an IS staff anyways, and don’t want to hire one to support their Supply Chain Software.

4) Flexibility - SaaS allows you to scale up or down depending on your needs. Need to add another site, no problem. (Web-based makes this easy.) Need to add users for the summer rush. Sign up for a few more licenses and in my case, rent a few more handheld scanners. Need to drop a few users after the rush. Just cancel a few subscriptions. Hate the product and want to try something else? Simply cancel your entire subscription. When you are not tied to a product for years looking for elusive ROI and TCO, all of the sudden all sorts of exciting options open up.

In the end, this is what will destroy the traditional software companies. They simply are not structured to meet this new demand. From a technical perspective, the cost to rewrite their applications to make them a true SaaS product is prohibitive. From a operational perspective, they are addicted to the big invoice and they can’t make a change to small monthly recurring revenue.

Their mindset is just in the wrong place. They say things like people will not want to trust their private data to a outside company. I say why not? A dedicated hosting company will have levels of backup and security far beyond what you have in-house. (560,000 subscribers place their most important customer and prospect information on Salesforce.com) They say speed is an issue. Not usually. From my own experience, I can say that SaaS can provide sub-second response times to transactions. They talk about long-term ongoing costs. I say you can pay $1000 per month for a long time before you reach the $100,000 mark. And at that point, your SaaS software will be as current as the day you subscribed.

What does this all mean to you? Well, going back to my previous blog, here is your way out of that nasty little hole. A Supply Chain Software solution, wrapped up in a affordable little bow. You can get the functionality of a $100,000 plus solution, but with a small monthly subscription fee. Your supply chain partners are happy, because you are giving them exemplary service and providing them with accurate real-time information. And you are happy, because now you have many of the same competitive advantages as the folks who invested in the big-ticket software solutions, but you are not saddled with recouping the capital expenditure.

Give it a try. Just about every area of Supply Chain Software is represented by a SaaS solution. You have options. Something that you didn’t have three years ago. Find an area where a little technology can help you out. Something that is an unending thorn in your side. Then turn to the web. Do a search for whatever you are looking for and include one of the following terms - On-Demand, SaaS, or Subscription. You will be surprised how many options you do have, and how little it will cost to remove that thorn.