Is the debate on Best of Breed vs ERP or is it on Functionality vs. Integration?

Almost everyone has an opinion on the question of best of breed vs ERP. Alas, not many have the answers.
SAP and other big ERP players have this habit of browbeating the best of breed competition .SAP had once famously talked about the perils of buying best of breed .Well, the logic put by the ERP players is that integration is always an issue with best of breed software. But then, I am at a loss as to why the best of breed vendors have never hit back on their strong point of functionality. In terms of functionality, best of breed would win hands down.
So which is better, best of breed or ERP, which people have termed as best of suite. There are no clear winners and there are no clear answers. There is ample space for both for many more years. The criteria which normally hold the key are functionality, integration, implementation and technology. Price comes at the last which does suggest that this is an extremely profitable domain. Functionality and integration have the same priority on the wish-list of buyers.
But beware! Lots of buyers are opting for ERP and their decision is based on the presumption that they have the incumbent ERP installed and hence it’s the natural choice. Not necessarily a correct decision. The incumbent ERP may not have the requisite functionality ,required by the customers business, packed in it. If the customer just wants the industry standard process ,maybe a vague example could be inventory management module and normal functionality, they can very well opt for their current ERP. But if their functionality is rapidly changing, they need to look further and here the balance tilts in favour of best of breed.
Best of breed SCM software vendors are investing a lot in technology as well as adding more and more functionality to their base product. With most shifting to SOA(Service Oriented Architecture) , ERP vendors won’t have any grounds to complain about integration.
In SCM, business runs technology and not vice-versa. Its time for the ERPs to come up with their own best of breed versions.

 

When I2 was slam dunked by Nike

In 2001, I2’s share plunged by 22.4% as the markets reacted sharply when the reason given by Nike for its expected third- quarter earnings dip was flawed software from I2.The then CEO of Nike Philip Knight thundered in a conference call :” This is what we get for our $400 million?”
I understand that all SCM best-of-breed softwares are complex. But technology and support was never a problem for I2 though their software is pretty complex (as normally every other vendors SCM software is). The problem lies in how it is implemented. Nike had a complex problem of mapping and tracking every shoe-model manufactured by it. I2 enhanced its software for this feature and it took longer than expected. With issues cropping up during go-live and Nike’s earnings dipping, Nike squarely deflected the blame on I2.
What would have happened if Nike had chosen a big ERP player (though they had limited role in SCM during that period)? Would they have been able to put the blame on these big ERP players. The answer is always yes. The inspiration to write this article was because of the below piece of news I read at the start of this year.
Source: http://www.networkworld.com/news/2008/013008-ibm-american-lafrance-bankruptcy.html
IBM probably won’t be asking American LaFrance for product endorsements anytime soon.
American LaFrance, an emergency vehicle and equipment company in South Carolina, has faulted, at least in part, IBM’s software implementation for its recent bankruptcy in court documents filed at the US District Bankruptcy Court of Delaware this week.
According to the documents, American LaFrance began using unnamed ERP purchasing, inventory, production, payroll and finance services with the help of IBM and IBM software after the company was spun off from Freightliner in 2005.
However, the company said it began experiencing a “plethora of problems” with the components of its ERP software from its inception. Among the “serious deficiencies” that American LaFrance claimed had a “crippling impact” on its operations were “incorrect or incomplete” inventory data on the system; missing financial information that included inaccurate accounts payable, accounts receivable and general ledger balances; and the inability to transfer data from the Freightliner system onto the new system. As a result of these problems, the company says it was unable to reliably maintain its inventory, thus hindering the company’s ability to deliver vehicles and equipment to customers. This “had an immediate impact on [American LaFrance's] cash flow and created a liquidity crisis,” the company claimed.
Later in the documents, the company said it was “analyzing potential causes of action against IBM in connection with the problem-riddled transition to the ERP system.”
An IBM spokesman confirmed to The Register that American LaFrance had used its systems, but declined to elaborate, stating that the company was “reviewing the documents filed with the court and have no further comment to make at this time.” IBM bills its ERP system as “a comprehensive solution for managing business processes, including financials, human resources and operations and corporate services.

This leads us to the raging issue of best-of-breed vs ERP systems. Watch out for my next post.

 

I2 Tech to get $83.3 million SAP settlement

SAP is going to pay I2 Tech $83.3 million to settle a two-year old patent-infringement lawsuit. I2 had accused SAP of infringing on seven of I2’s software patents.
By paying up all of it in cash,SAP has been able to get the patents cross-licensed. Now each party will receive license to certain patents. Read the below Associated Press article in businessweek for details.
I2 Technologies Inc. said it will receive a cash payment of $83.3 million under terms of a patent litigation settlement with German business software maker SAP AG.
I2 makes software that helps companies coordinate deliveries from suppliers with their production schedule, and manage inventory.
The companies have agree to cross license certain patents, and dismiss all existing legal action with prejudice.
Further terms weren’t disclosed.
I2 expects to receive the cash payment in the third quarter. The company also said that since the settlement will boost financial performance, second-quarter results are no longer expected to be flat with the first quarter.
Shares rose 37 cents, or nearly 3 percent, to $13.09 in afternoon trading on an overall down day for the markets.
Source: http://investing.businessweek.com/research/stocks/news/article.asp?docKey=600-200806260839APDIGITLFINANCE__i2_Technologies_SAP_S-6AJ23A7BOO94R6D9VMCTEHU7DQ&timestamp=06/26/2008%208:39%20AM%20ET&headline=I2%20Tech%20to%20get%20%2483.3%20million%20SAP%20settlement&docSource=AP%20Digital&provider=ACQUIREMEDIA&realtedsyms=|US%3BITWO|US%3BSAP&symbol=SAPG.DE

“I2 makes software that helps companies coordinate deliveries from suppliers with their production schedule, and manage inventory.” Reading this line from the AP article makes me wonder how I2 has been relegated to the role of an inventory management solutions provider. Wasn’t it delivering a suite of products in almost all functional areas of Supply Chain? Maybe , its time to discuss why I2,which was one of the leaders in the best-of-breed SCM software providers, declined. This would lead to the wider debate of best-of-breed vs ERP.