An open letter to the C suite about your integrated IT shop (Pt. 1)

Dear C Level:

On the surface, riding the trend towards integrated vendor strategies — moving all functionality under one vendor brand name — seems to make sense. So do the routine justifications: that one vendor allows for a more integrated data environment, a simpler maintenance and support structure, and potentially lower costs. Simpler support means fewer people. A single vendor’s technology means fewer skill sets are required in your IT shop, and your company has more leverage over the vendor for better pricing in return for a better footprint. But you’re ultimately paving the way for poorer business performance — and maybe your own obsolescence, if you’re the CIO.

Your IT department is typically seen as an overhead cost, so you view anything you can do to drive down that line item number as a good thing. However, the one-vendor strategy ultimately yields a Pyrrhic victory. While you do get some potential short-term cost reductions, you’re ultimately setting your company up for diminished competitive advantage. Now the sales and operation professionals are forced to use less-than-class-leading software tools, your company faces huge opportunity costs in revenue growth and customer service capabilities, and there are very real and measurable negative impacts in the areas of production, inventory and working capital. Plus, you’re one step closer to making your whole IT department superfluous. Wow. Hope the free dinners and rounds of golf were worth it.

Let’s be really clear here: no manufacturing or distribution company in any industry has ever gained competitive advantage because it could generate a nice balance sheet or produce a purchase order or an invoice two days more quickly. Now, I am not arguing that — if everything else is absolutely perfect — these are not reasonable areas on which to focus, but with most companies operating with 40% or more forecast error at the execution level, your focus needs to be on driving company cash flow and profitability.

That means that you have to give tools to your company’s professionals that allow them to  perform measurably better. Best-in-class, or better yet, best-in-performance software strategies focus on what the people in your company need to outperform the competition. Your big, single-vendor ERP strategy does not allow for this. The integrated ERPs have never been, are not currently, nor will they ever be best in performance for each area of functionality that gets listed in their official footprint. Which means that in a single-vendor strategy, at least one critical group in your company’s business is going to get stuck with sub-par functionality.

You may reason that the advantage in data integration and the other “benefits” listed above more than outweigh the inconvenience that the afflicted group or groups have to face. After all, who really knows if some of those opportunity costs really exist, and even if they do, it’s too hard to measure them, so let’s go with what we can measure. Big mistake, and in my humble opinion, a complete shirking of an officer’s fiduciary responsibility to owners. I’m looking at all of you, C suite.

Data integration is no longer an issue with the advances in database, middleware and interface technology.  Data is now basically platform-agnostic; really, the only focus needs to be identifying systems of record, reducing multiple data entry situations, and keeping the data clean through standards. This can be done as easily in a best-in-performance environment as it can in an ERP environment. Don’t believe me; for you business people out there, what exactly do you think Oracle and SAP and Infor are doing behind the scenes when they roll out new functionality on the heels of acquiring yet another software company? They are creating a quasi-best-in-performance environment that would be exactly what your IT shop would create if it managed such an environment consciously.

Is there more to it? You bet. I’ll take it all up in part two of my letter.

Yours in creating your future profits,

Gene Tanski
CEO, Demand Foresight
Golden, Colorado

Making demand planning software live up to its promises

I started this blog to share my experience in the areas of forecasting, demand planning and demand management. Some of the conversations will be technical – look for explorations of the best practices in demand forecasting and supply chain management. Some will be practical – useful examples of how our clients implemented value chain management solutions that demonstrably helped the bottom line. And some will be casual explorations of current events and how forecasting or demand planning may have impacted these events.

I will also regularly highlight why software and software companies must do a better job setting expectations and delivering measurable improvements to our clients. Too often, vendors over-promise and under-deliver. Unfortunately, by the time the under-delivering is understood, too much money, time, effort and ego have been expended to correct course and produce a positive benefit. And at that point, the software vendor doesn’t care all that much because they have been paid and the client has little or no recourse.

It is time for this dynamic to change – it must change. Software companies have got to be held responsible for quality products that deliver on their promises. It does no one any good when you spend $5 million to install SAP APO or Oracle’s Demantra and significant improvements are not delivered. And when they are not delivered, the companies should be held accountable.

Foresight intends to show how it should be done. We want the software industry to be known for delivering what is promised and, where possible, over-delivering. That is why Foresight is the only software vendor to offer clients a double guarantee.

1. We will deliver a 25% reduction in execution level forecasting measured on an absolute basis versus any competitor and/or against what your company is currently producing,

2. You will be satisfied that the software is working to your specification and expectations.

If either of these conditions are not met, you will get back all of the dollars invested in Foresight.

This ensures that we are focused on understanding your needs, your competitive pressures, and your expectations. You have a highly motivated partner for achieving the desired improvements in forecasting and demand planning.

From our point of view, you should demand this type of partnership with every software vendor. If you bought a piece of machinery that did not work, you could return it or demand that it was made to work correctly. You depend on that machinery to deliver value in the production line. Heck, even government has some expectation regarding performance (see: the introduction of lemon laws.) Why should software be any different? The answer is that it should not be – but it is up to you as the client to demand that software deliver and add value or be discarded.

You have our guarantee that Foresight will deliver value and will help you create your future profits. I look forward to sharing more about our forecasting and planning software with you, and welcome your feedback and suggestions.