CIOs Catch On to SCM Standards

I've got good news and bad news about supply chain management. The good news is that CIOs are demanding platform-neutral, standards-based technologies for the systems they buy. Let's talk about that a bit before we get to the bad news.

At the risk of sounding like a one-tune columnist, I will say this once again: Success in the Internet Age is all about standards, preferably open standards.

SCM systems and the Internet are about as perfect a match as you can get, because the Internet is an ideal conduit for business-to-business transactions. Therefore, the success of any given SCM system will be determined by its ability to support standards.

The emerging standards for SCM seem to be Java and XML. Many highly visible companies, such as IBM and Oracle, have pledged support for Java, but it should come as no surprise that Oracle would adopt Java as part of Oracle9i for SCM. IBM has been behind Java from the start, and Oracle will support anything that undermines its chief rival, Microsoft.

It was big news, however, when SAP endorsed Java. Until recently, SAP had a Microsoftian approach to enterprise resource management. It hoped to control the market through its proprietary language, ABAP. SAP hasn't given up hope entirely, so it's continuing to support and develop ABAP. But early last month, SAP CEO Hasso Plattner announced that Java would be SAP's second language.

If you're still not sold on Java as a unifying force for SCM transactions, then note that Plattner was careful to describe Java as the second language it supports, not a language of secondary importance. Java is now equal to ABAP in terms of SAP business priorities.

To be fair, Plattner also said SAP would support Microsoft .Net. But that's not an indicator that .Net will be a success. Java is already a success. .Net is simply a public relations checkbox item for every company, just in case it does turn out to be a success. That's not to say that .Net has no chance of being one of the next big things, but you can't predict that based on Plattner's remarks. It's just a typical response to any newly hyped technology.

Supply Chain Snapshots

Top Five E-Procurement Service Firms

Revenue in 2000 (in millions)
IBM Global Services $600
Accenture Ltd. $500
Cap Gemini Ernst & Young $490
KPMG Consulting Inc. $200
Source: IDC, Framingham, Mass., May 2001

Supply Chain Market Segments

The supply chain process management market—also known as event management—is expected to grow 33% per year, though from a small base.
Execution $2.7B $4.9B 12.6% Slow growth because projects have long payback period.
Planning and scheduling $1.7B $4.8B 22.2% Growth rate slowing due to Tier 1 saturation.
Process management $126M $518M 32.7% Emerging market for event management.
Total $4.5B $10B 17.4% Forecast lowered because of recession in manufacturing.
Source: ARC Advisory Group Inc., Dedham, Mass., October 2001

For example, when the Linux hype began to pick up momentum, just about every company on the planet pledged support for Linux. But if you talked to insiders at those companies, you'd find out that they didn't really take Linux seriously until after the 2.4 kernel shipped.

Companies like Oracle, IBM and others were willing to produce Linux products quickly only because it was easy to port their Unix products to the Linux platform. It's not nearly as easy to build on the .Net platform, so I wouldn't advise you to budget for the transition to .Net for at least a few years, which is how long it will take to see whether .Net will fly or flop.

As for XML, my faithful readers already know how I feel. XML is only as standard as you make it. The question of whether XML will be a unifying force revolves around how well vendors create and publish their Document Type Definitions, which is the crucial technology upon which XML depends.

Whether XML makes it easier for SCM systems to interact depends entirely on how vendors address the most common problem posed by the Internet: How do you make money by supporting standards instead of by keeping your intellectual property proprietary?

The answer, for the most part, is to become a service-based company. Most companies that sell SCM software are already heavily service-oriented, which is probably why SAP didn't hesitate to announce public support for Java.

But nobody would have supported Java or XML at all if CIOs and IT didn't demand it. So I see the trend as a sign that CIOs are getting a clue about what makes the Internet useful.

Now for the bad news: At least for now, nobody cares. Gartner Inc. predicts that 2002 IT budgets will rise a paltry 1.5% over 2001 budgets. The Morgan Stanley CIO Survey says SCM ranks 29th out of 34 items on the list of typical CIO IT spending priorities.

So if SCM is a leading indicator that CIOs are interested in standards, it isn't a terribly significant one.

Nicholas Petreley is a computer consultant and author in Hayward, Calif. He can be reached at

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Copyright © 2001 IDG Communications, Inc.

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