Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

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August 31, 2008

High Tech Industry: A State of Flux

Moore's law describes an important trend in the history of computer hardware: that the number of transistors that can be inexpensively placed on an integrated circuit is increasing exponentially, doubling approximately every two years. The trend has continued for more than half a century and is not expected to stop for another decade at least and perhaps much longer. This alone is a testimony to the fact how the high tech industry is changing at a rapid pace. And companies seem to be in a state of shock trying to cope with this change. Rising costs, shrinking markets seem to add further to their woes.

 

High tech is technology that is at the cutting edge—the most advanced technology currently available. There is no specific class of technology that is high tech—the definition shifts over time. Analysts predict that this sector will always have the maximum growth but there are enough evidences where this sector has taken a beating when supply has surpassed demand.

So where is the High Tech sector heading towards? Today the sector is in a flux with new and evolving environmental regulations e.g. emergence of RoHS and carbon emissions. The pattern of global supply and demand has shifted. With rising costs more and more manufacturing is being done in the lower cost Asia-Pacific region. As a result, companies are looking towards the Asian markets. There is increasing pricing pressure from local players who are under-cutting the established players in a big way. There are other challenges in terms of Sarbanes-Oxley regulations, infrastructure constraints in the emerging markets.

With saturation in Western markets, High Tech companies have no choice but to look at emerging Asia-Pacific markets for growth. With increased internet penetration in these territories, the prospect looks bright in these regions. Also operating from these territories gives a cost advantage. But there are issues with local players undercutting heavily to keep the big players. But in the long run as the bigger players start moving operations to the low cost regions, the local players will fade away as they will not be able to match the scale of these bugger players.

Please post your comments

 

August 16, 2008

Thinking of Acquisition? Keep ERP as one of the decision parameters

John G. Smale, the former CEO of Procter and Gamble had once remarked, “Our commitment must be to continue the vitality of this company –its growth in physical terms and also its growth as an institution –so that this company, this institution, will last through another 150 years. Indeed, so it will last through the ages.”

 

As companies tread through this growth trajectory, the million dollar question here is from where the growth will come. Typically companies have followed both inorganic and organic paths to grow. While, organic growth is time consuming there are challenges in terms of integration for inorganic growth. And as consolidation happens in the market place, mergers and acquisitions are the immediate fallout.

There are various reasons why acquisitions happen, namely access to markets, better synergies, economies of scale. While in most of the cases a proper due diligence is done before a go/no-go decision, there are cases where companies are bought over a gut feeling. But one thing companies miss is the kind of ERP systems which they have.

Once the acquisition decision has been taken, every company has to go through the pangs of the integration process.  Different cultures, different policies, different systems are some of them. Leaving aside the debate about which is better, SAP or Oracle, a big challenge here is which system to follow. Company A is on Oracle and has acquired a Company B which is on SAP. The customer is confused because if it is a mixed order, he does not know whether to Order it through Company A and Company B because the two systems are not integrated. And even if we decide to have integration points between the two systems, there is the additional challenge of building interfaces to synch up the two systems.

While the logical way is to have one system, but it is not easy as it looks to be. Even if the Company B is to be brought over to Oracle, the process is time consuming and there is the additional task of educating the end users of Company B. And believe me, it is very difficult to let go of something you are so used to doing.

ERP is always a business enabler and if the acquisition has the potential to trigger growth, it makes perfect business sense to go ahead even at the cost of disparate systems. After all, this is more of a strategic move and the company is in business because of the products which it is selling and not because it has an ERP system. With SOA coming up in a big way, future integrations are going to be lot simpler. But it is always prudent to have ERP as one of the decision parameters to minimize the birth pangs.

August 14, 2008

Age of packaged BI and analytics – Should you embark on this journey? Part1

Historians used two approaches to apply the past to the future: reasoning by analogy and projection of trends. The 1970’s saw the emergence of ERP systems in the form of Inventory Control Packages and Manufacturing Resources Planning (MRP II). Then came the integration of Finance, which was followed by the integration of various functional areas like Customer relationship, HR etc.

The evolution of Business Intelligence traces a trajectory similar to this. From a time of specialized tools and long multi-year customized solutions, we are seeing a convergence of enterprise applications, Data warehouse tools and analytic solutions. This is reinforced even further by the takeover and consolidation of BI vendors leaving few large players with capabilities across the value chain.

  ‘No one can whistle a symphony. It takes a whole orchestra to play it.’  ~H.E. Luccock

The age of integration in Business Intelligence, lead by Packaged BI Applications, has created a disruption in the way organizations can expect to manage their Enterprise Information initiatives.  Packaged BI Apps include pre-built extract, transform and load (ETL) adapters and business logic to tap into a multitude of common operational applications and data sources including SAP, Oracle EBS, Siebel CRM, JD Edwards, Web logs and a host of other systems. Designed for both homogeneous and heterogeneous environments, they provide a viable alternative to data residing in multiple data warehouses (and potentially multiple applications) and significantly lower the total cost of ownership.

Moreover the very foundation for this concept was an integrated cross functional view without the constraint of disconnected systems. These complete, pre built solutions provide all necessary technology and business logic to transform enterprise data into actionable insight for all users to drive better performance.

This poses a dilemma for companies which had already invested heavily in a BI infrastructure and often face the following concerns:

·         Would packaged BI work with the existing heterogeneous systems?

·         Would the BI investments till date be a sunk cost?

·         Why should packaged BI be implemented

·         When and how should packaged BI Apps be implemented?

 

Would it work with the existing heterogeneous systems?

Packaged BI Apps include pre-built extract, transform and load (ETL) adapters and business logic to tap into a multitude of common operational applications and data sources including SAP, Oracle EBS, Siebel CRM, JD Edwards, Web logs and a host of other systems. Moreover the underlying ETL tools and technologies are the same which organizations have used for existing custom Data Warehouses.

Would the BI investments till date be a sunk cost?

The existing BI investments cannot be treated as a sunk cost, because it catered to the requirements of the organization till this period and hence the worth from the investment has been leveraged already. Moreover, this data can as well be archived.

Why should packaged BI Apps be implemented?

Packaged BI Applications have the following advantages:

·         Tight integration with Oracle EBS, PeopleSoft, Siebel, SAP and others

·         Pre-defined Role-based dashboards and thousands of pre-defined metrics

·         Easy to adapt and extend to add insight to CRM and ERP applications

·         Fast time to implementation, Low TCO

·         Works with existing IT environment

·         Assured business value

·         Pre-built DW design

 

The next blog in this series we will talk about other key aspects of Packaged BI implementation

August 13, 2008

Improving Package Implementations Estimates using Package Points

Today, ERP is used more to drive business improvements & operational efficiencies and hence, any delays or budget over-runs could impact the business. However, most independent surveys and studies indicate that about 55 percent of ERP Implementation projects incur budget overruns. According to Standish Group, a research firm, the average IT project runs over budget by about 43 percent. Among the litany of reasons quoted (such as excessive focus on technology at the expense of business processes, communication shortfalls, project management and operational issues) estimation & bad planning rank high in the list.

While effective monitoring & control of scope, risks, communication etc., can streamline the ERP implementation, there is no alternative for a robust and accurate estimate. Given this critical need, it is surprising to note that there is no common, industry benchmark for estimating a package implementation size. Commonly used IT techniques such as Lines of Code (LOC) and Function Points (FP) do not hold good in this case since custom development is only a portion of the project. The most common technique used is experiential estimation where the practitioner derives the effort and timeline based on the ‘perceived’ size and complexity of the implementation.  Although this provides a lot of flexibility, it is inherently dependent on the ‘experience’ and ‘risk appetite’ of the practitioner and the repeatability is poor. Another shortfall of this technique is that there is no baseline size for computing productivity or comparing across projects.

To derive consistent and repeatable estimates, we have introduced a size measure called as Package Points for package implementations. The three factors that affect an implementation size are Scope, Tasks (activities & deliverables that are part of the implementation) and the project Complexity. 100 Package Points have been defined as the size to implement a “Standard Module” for a “Standard Task List” with “Simple Complexity”. The Standard Module has been defined to contain 10 business processes; each process has 4 setup activities (nodes); each node can be setup using 1 front-end interface (form); each form has 10 fields; each field has 5 possible values.

The model maintains a library of various functionalities offered by a package and functionality size in terms of the standard module. Selecting the required functionality will derive the solution size. The model also has the Standard Task Album defined, which contains the activities & deliverables of a typical implementation along with the fixed & variable impact of these Tasks to the Solution Size.  As a second step in the model, these tasks are selected to calculate the Task Impact on the solution size. Impact of the tasks on solution size varies with Complexity Factors of the project, which help in pegging the Task Impact in the range of Low (Best Case) to High (Worst Case). The third step in the model captures the impact of complexity factors on the solution size to finally derive the Package Points.

I have elaborated further details about the Package Points model in the whitepaper “Estimating the Size of Software Package Implementations using Package Points (https://pub.infosys.com/default.aspx?cid=MTI5O29yYWNsZS93aGl0ZS1wYXBlcnMvZGVmYXVsdA%3d%3d-gtOtZSHtZCo%3d) – the link will prompt you for registration on the Infosys site. Please provide your comments on what you think about this methodology and yes we have tested it in our live projects and have found that the estimate is more accurate than the traditional experiential estimates, although more involved and time consuming.

August 10, 2008

Thinking of R12? Go for an Enhanced Upgrade

Call it the bane or boon of an ERP system, companies do not have a choice but to upgrade to a higher version. There are various factors which drive the decision to upgrade namely de-support of the current system by the ERP vendor, availability of new features in higher version which have the potential to give a strategic edge. Typically companies choose the upgrade path to avoid the de-support problem and hence what it finally does is a pure as-is technical upgrade. This has multiple benefits in the sense that it is least risky and also can be done in a shorter timeframe. But once in a while it makes sense to have a look at the new features which can bring efficiencies in the process.

 

R12, the current ERP version from the Oracle basket, has come out with some new features which can result in high efficiencies at a holistic level. Typically companies struggle in quantifying the business benefits in terms of ROI to make a business case for the upgrade. One way of looking at it is in terms of savings in user time which may be utilized in other areas and/or the savings involved in changing a business process to suit the ERP vanilla process. Another way is to eliminate the current customizations which potentially become a high overhead on the system. But it does not make business sense to change a business process which has a strategic intent to fit it into the ERP process. It is a matter of a cost-benefit analysis which will give the future direction. Talking about upgrade, there are typically two approaches. One is upgrade from the current system and the other is a complete reimplementation. Companies typically avoid the second approach because it proves to be quite expensive. This option works well if a company has built too many customizations and struggling to maintain it and hence is ready to start with a blank sheet of paper.

So what does R12 offer? Well, it has quite an appealing look and feel though people may differ on this view. The major change has been an architectural change which is close to Fusion. So if Fusion is the future roadmap of your enterprise, moving to R12 is the logical step. As far as functionalities are concerned, there has been a major revamp in the Finance functionalities. Oracle now allows Sub-Ledger Accounting though companies can choose to stick to the original Set of Books organizational structure. Some other features like Multi-Org Access Controls allows data control across Operating Units and hence will help in minimizing the number of responsibilities which need to be created. Sourcing Optimization, Externalization and Reverse Auction (these are available in 11.5.10 as Mini-Pack) have the potential to bring in high efficiencies to an organization’s Sourcing needs. A much improved XML Publisher can replace some of the custom solutions built around the label printing process. And the list goes on ….

So what drives these features? Well, study of the best practices across various businesses drive the decision on what features to include in future versions. And a lot of effort goes in doing this research and understanding the benefits out of it. And in numerous cases it has happened that a particular business process in a particular company has been incorporated as a module and offered in future versions.

Please post your comments and I will be more than happy to discuss.

 

 

August 08, 2008

Hi-Tech Trash: Have our e-dumps become safer?

Scientific American featured a thought provoking article in November 2007 titled--Trashed Tech: Where Do Old Cell Phones, TVs and PCs Go to Die? The enormity of the problem of electronic waste and the urgent need for producing toxin free electronic components could not have been discussed better. I had a serious conscience attack about replacing my old cell phone after reading the article!!

According to the UNEP, if all the sources of electronic waste are tallied, it could total more than 50 million tons a year worldwide!! A large part of this junk pile ends up in landfills and releases lead, mercury, arsenic, cadmium and other toxic substances into the ground. Significant amount of the e-waste also finds its way to developing countries in Asia and Africa for re-cycling where salvage firms use dangerous practices to extract metals from circuit boards in order to sell them for profit. Apprehensive e-gadget consumers like me would naturally ponder about the regulations being put in place to thwart the malady of hi-tech trash.


A significant directive called the Waste Electrical and Electronic Equipment (WEEE) Directive was introduced by the European Union in the year 2002. The directive imposes the responsibility for the disposal of waste electrical and electronic equipment on the manufacturers of such equipment. A follow up called the Restriction of Hazardous Substances or RoHS (pronounced as Row-Hoss, Ross, Rowsse, Rose depending on the country!!)  was introduced by the EU in 2003. RoHS, also referred to as lead free directive, restricts the usage of six hazardous materials (lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls and polybrominated diphenyl ether) in the manufacture of electronic and electrical equipment. RoHS is closely linked to the WEEE directive since its intent is make the recycling and disposal of e-waste safer through usage of safer and eco-friendly components.

The tightening of environmental compliance measures poses a big challenge to Hi-Tech Component Manufacturers and Distributors today since there is not only a cost of compliance but also a high cost of non-conformance. The key issues faced by hi-tech distributors are in the areas of:
 
1. Segregating RoHS compliant and non-RoHS compliant inventory for the same part
2. Managing the product change from non-RoHS compliant product designs to lead free product designs
3. Receiving RoHS compliant product information from hundreds of suppliers & manufacturers and effectively managing it to provide RoHS compliant product designs to customers.


Despite these challenges, giant steps have been taken by the National Electronics Distributors Association (NEDA) to come up with a position on Lead Free Product Transition and RoHS Compliance. Some of the recommendations include the creation of separate part numbers for lead free product designs and the usage of a Lead Free Information Worksheet for component manufacturers to provide comprehensive RoHS compliance information to distributors. 

Large ERP Vendors like Oracle and SAP are also supporting RoHS compliance efforts by providing solutions for environmental product compliance in their products. These solutions ensure that Hi-Tech Distributors and Manufacturers have adequate systemic support to store compliance information and can report it effectively.  

With these measures in place, electronic and electrical gadget owners will feel a little more comfortable when they go replacement shopping this holiday season. I will definitely keep my eyes open for Lead Free and RoHS compliant models. The key question now is: have we done enough for environmental compliance in hi-tech and are the regulations consistent world over, especially in third world countries? The jury is still out on that….Any thoughts??                   

   

August 06, 2008

Oracle SOA– (S)calable, (O)pen and (A)daptable

Service Oriented Architecture is a win-win solution for organizations today that have an utmost need for modernizing their legacy IT assets to sustain in a competitive world. At the same time the indispensible legacy gamut of applications needs to be retained.

A SOA solution lays down a strongly founded bridge between the old and the new world. It introduces the flexibility of replacing the old systems in future by new systems with much lesser costs to be spent in integration.

Oracle SOA is the most comprehensive suite of products for organizations that are in the process of implementing any enterprise application for integrating the new solution with their heterogeneous environment having legacy applications.

Scalability
IT today relies heavily on scalable solutions that can provide a high performance throughput. Oracle Service Bus, the backbone of Oracle SOA Suite, offers a platform for high volume and mission critical integrations.

Open
Oracle SOA is fundamentally based on “interoperability and open standards” like SOAP, WSDL, BPEL and XML. It utilizes web services that are 'published' by an application so that other applications can 'subscribe' to and use that service, and vice versa. This enables technology and vendor independence.
 

Adaptable
The applications integrating together in service oriented architecture can work together without relying on custom-coded point to point connections. This enables decoupling and enhances flexibility. The applications can be replaced much faster as compared to an environment which is tightly coupled. Business becomes adaptable to rapid changes and can respond more effectively with lower costs to spend.

Oracle SOA by bringing in a scalable, open and adaptable framework offers best of both worlds. Read on at -  http://www.infosys.com/oracle/white-papers/SOA-worlds.pdf

August 04, 2008

High Tech Sector’s Label Printing Needs: Are we there?

 

If there is one thing which we can call as the livewire of the High Tech Sector is Labels. The entire high tech industry moves on labels. In Standard ERP Packages there are certain limitations in terms of volume of labels, performance and quality of bar code labels. As a result, typically companies have looked at other middleware options as a plug and play with the ERP Packages. Latest offerings from the ERP vendors seem to address this problem removing the need for middleware.

 

Typically, the role of carton labels is to identify the packed contents for the logistic operations to ship and provide the information for the end customers to identify and receive the products.  The carton labels are generated from manufacturing packing process with the sale order line information.  These Labels are produced for every sale order lines shipped out of every the Direct Fulfillment Sites globally.  The output is the physical carton labels.

The typical system level requirements are handling a load of about 40000 labels per day, ability to produce the label within a specific timeframe, ability to produce RFID and 2-D bar codes, ability to print and reprint multiple label types, ability to support multiple printer models, ability to print labels in sequence, to name a few.

Typically, companies use middleware like ClearOrbit, Loftware, etc. since earlier versions of Oracle E-Business Suite (11.5.9 and below) did not have the capability to print bar code labels. So information from Oracle was sent to the middleware which stored the label formats and also handled the print queue. Also, the middleware had drivers for the industrial printers like Intermec, Zebra, etc.

From 11.5.10 onwards, Oracle introduced XML Publisher which has the capability to handle bar code labels within one system itself. Typically a template is designed (either .rtf or .pdf) with XML Tags at appropriate places and it is more of a skill with MS-Word. During submission of the concurrent request, the data and template are merged to produce the output. There are still some gaps like we need to procure the bar code fonts separately and install it in the server. There are still some concerns over the ability of XML to drive all kinds of industrial printers. And since the marriage of data and template occurs during submission of a concurrent request, the load on the system needs to be evaluated to arrive at a decision.

Please post your comments and/or send an e-mail to Sandeep_chatterjee@infosys.com.