Sunday, April 11, 2010

The Strengths of a Vertically Centric Enterprise Software Provider

However, one should still not be hasty and dismiss small specialist providers as some are making a comeback. Tampa, Florida-based (US) Verticent (www.verticent.com) is one such company. Verticent is a wholly-owned subsidiary of Framingham, Michigan-based (US) ASA International, Ltd. (www.asaint.com), a private holding company of vertical enterprise business-to-business (B2B) software solutions and value-added services. Verticent is a provider of integrated enterprise resource planning (ERP), customer relationship management (CRM), e-business, and business intelligence (BI) software solutions, and strives to meet the unique business demands of small-to-medium size discrete manufacturers and distributors.

Verticent is committed to only a few specific vertical industries in areas where it has proven experience, and lately it has successfully leveraged industry-specific knowledge and functionality to deliver a flexible, yet affordable, enterprise business systems.

Recently the vendor announced that it has enjoyed several key license sales in the US Midwest, namely in Detroit, Michigan; Chicago, Illinois; Milwaukee, Wisconsin; and central Illinois. Verticent believes its focus continues to payoff, since these new license sales were won in its targeted verticals: metal service center industry, metal fabrication, and configure-to-order (CTO) manufacturing. Moreover, early in 2005, Verticent announced that Kandil Industries (Cairo, Egypt) licensed the vendor's ERP Plus suite for metal service centers. Kandil Industries reportedly chose ERP Plus to better match its demand and supply chain so it could achieve lower inventories; improve capacity management at critical bottlenecks in its process; reduce scrap costs and improve yields; streamline financial consolidation of all its divisions and companies; and move the company from islands of automation and spreadsheets to an integrated enterprise solution.

This win should allow Verticent to leverage its accomplishments in the North American metals industry and give it "a foot in the door" to the Middle Eastern market. Kandil Industries is a well-known and respected company in Egypt and the Middle East, and Verticent hopes to parlay its partnership to showcase its solution's capabilities, and replicate this success throughout the Middle East.

This is Part One of a two-part note. Part two will discuss the functionality of ERP Plus and analyze Verticent's target market.

Verticent's Background

Formerly called PowerCerv Corporation, the once publicly traded company been on a "rollercoaster ride" since its founding in 1992. In its first four years, the company grew meteorically seeing revenue of approximately $38 million (USD) in 1996 (although its ERP-related revenue was only one quarter of this). PowerCerv, which started as a reseller of PowerBuilder tools, evolved into a value added reseller (VAR) for Powersoft (now part of Sybase), reselling Powersoft's development tools and providing complementary services. PowerCerv spent its first few years crafting its business applications product and expanding its sales and marketing organization to support application sales. During that time, PowerCerv developed a suite of products aimed at PowerBuilder developers, including an object class library, workflow and asynchronous processing tools, and a security system.

The extraordinary growth of PowerBuilder during the mid 1990s fostered a market for PowerBuilder-based applications. In response, PowerCerv begun to develop and garner a set of modern enterprise applications, initially called the EnPower Series. However, the rapid transition from a software tool reseller to a "Johnny came late to the party", full-fledged enterprise resource planning (ERP) software developer took its toll, and since 1997, PowerCerv has made numerous major attempts to revitalize itself.

Throughout 1996 and 1997, the company did away with its unfocused strategy where it tried to serve multiple markets, and it began to focus on the discrete manufacturing mid-market offering a single product suite renamed ERP Plus. PowerCerv then divested several businesses that were not in tune with its new strategy, including its general consulting, application development tools, and database software reseller businesses. However, since 1997, the company continued to shrink. Its total revenue in 2001 was approximately $6 million (USD), down more than six times from its peak in 1996, and it had almost no new license revenue in 2002. This eventually lead to its "yard sale" where ASA bought several of PowerCerv's assets, assuming certain liabilities (see PowerCerv Finally Overpowered by the '02 Hurricane Season).

The nature of PowerCerv during its pre-acquisition days in the early 2000s were indisputably different than those in 1997. Like other tier two and tier three vendors, PowerCerv attributed its woes to the Y2K pinch which morphed into a seemingly never-ending economic slump. Even now, the company admits that it simply could not compete in the tough general, discrete manufacturing ERP markets where many larger vendors are considered to be a more viable option, as customers became more cautious of a vendor's viability.

This situation was also exacerbated by PowerCerv's late market entry. Despite its hefty investments in research and development (R&D), it ultimately had a low presence in an cramped marketplace where territories were already marked. Its international distribution channels were undeveloped and it only had around 110 customers in total, with only 60 remaining on ongoing maintenance agreements. PowerCerv's reliance on the PowerBuilder development tool did not helped either, despite some of the tool's advantages over Microsoft Visual Basic for Applications (VBA), such as its true object orientation, platform independence, scalability, release migration, etc. However, widespread use of PowerBuilder has been somewhat stunted because Microsoft .NET and Java 2 Enterprise Edition (J2EE) recent capture of the market and mind share, where they are perceived as de facto enterprise application development standards, rendering all other development environments archaic.

Vertical Focus Emerges

Given all of this, no one is trying to imply that PowerCerv's recent reincarnation as Verticent (referring to "vertically-centric" enterprise applications) will become a major market shaker or will turn many heads. However, what is notable is that the embattled vendor may find some "blessings in disguise". Momentum under its new patronage has been growing and Verticent is taking new business away from its ERP peers, and at times, is even displacing point solutions. Consequently, this may be the right time for Verticent to tackle these targeted industries, through its combination of technology, a broad ERP (and beyond) footprint, and deep, focused vertical functionality,

Though it was a general ERP provider, erstwhile PowerCerv understood the requirements of its target market. It understood that small and medium enterprises (SME) want as many of their business requirements as possible to be addressed from a single source. To that end, the vendor had long provided ERP, CRM, advanced planning and scheduling (APS), and business intelligence (BI) functionality and technology that facilitate flexibility, and supported distributed, remote applications deployment. Even way back with its release of ERP Plus at the end of 1990s, PowerCerv focused on the tight integration of its sales force automation (SFA) product into core ERP applications. It also added APS capability by embedding and marketing Taylor Scheduling Systems' production scheduling product, TESS (Taylor Enterprise Scheduling System), as an optional integrated component of its ERP Plus software.

To its credit, PowerCerv also incorporated BI tools in its PowerCerv Intelligence module—which is still being offered by Verticent and is branded as Verticent Intelligence. The BI tools currently provide the product's online analytical processing (OLAP) and executive information system (EIS) and dashboard capabilities. They are Web-enabled and have browser-influenced navigation, providing the user with pre-defined drill path and drill anywhere capabilities, pre-defined metadata settings, object modeling using JavaScript, and report scheduling capabilities.

Throughout the 1990s, over $30 million (USD) was poured into the development of the client/server, PowerBuilder-based flagship, ERP Plus. It is a tightly integrated software suite that streamlines front- and back-office operations that range from lead generation to after-sales service. The solution, which can run on Microsoft Windows-SQL Server and UNIX/Linux-Sybase platform combinations, includes the following five modules, each with an array of sub-modules:

* Financials Plus whose features include general ledger (GL), accounts payable (AP), accounts receivable (AR), project accounting, financial report writer, on-line drill downs, flexible account structure, unlimited calendars, multi-company, multicurrency, allocations, consolidations, lockbox receipts, not sufficient funds check recovery processing, recurring entries, manual checks, automatic clearing house (ACH) payments, bank reconciliation, workflow, multiple journal entry templates, padlock security, sales tax and value added tax (VAT) calculations, unlimited accounting periods, Sarbanes-Oxley Act (SOX) compliance, and so on.

* Distribution Plus, whose capabilities include sales quotations, sales order entry, product configuration, pricing, invoicing, order acknowledgments, multi-warehouse inventory management, shipping & receiving, physical inventory and cycle counting, distribution requirements planning (DRP), attributes, serialization and lot traceability, credit and debit memos, return material authorization (RMA),commissions and royalties, carrier and freight, credit management, etc.

* Manufacturing Plus, featuring capabilities such as master production schedule (MPS), material requirements planning (MRP), interactive MRP by item, finite scheduling, capacity requirements planning (CRP), purchasing and requisitions, receiving and inspection, quality assurance, shop floor control, serialization and lot tracking, inventory management, bills of material (BOM), routings and work centers, order management, product data management (PDM), engineering change management (ECM), tooling management, cost management, etc.

* Support Plus with help desk support, case management, workflow/escalation, knowledgebase, contracts/warranty, product registration, return & repair, quality reporting, etc.

Microsoft's Dynamic New Approach to Professional Services Automation

Introduction

With the recent re-branding of the Microsoft Business Solutions product line as Microsoft Dynamics, Solomon, Microsoft's flagship professional services automation (PSA) solution for the small and medium business (SMB) market, has been repackaged as Microsoft Dynamics SL. Microsoft Dynamics SL version 6.5 extends the solution's prior functionality through its business portal, as well as by offering new modules for purchase requisitions and bank reconciliations. Moreover, Dynamics SL offers its clients extensive project portfolio management (PPM) capabilities with its real time bi-directional integration with Microsoft Project Server 2003.

Replacing the old Project Green strategy, the new Microsoft Dynamics initiative will align its product line of business solutions, including Microsoft Dynamics SL, with its research and development (R&D) efforts in two waves. The first wave, which is underway and will continue into 2007, involves re-branding all business solutions under the Microsoft Dynamics banner, and developing these products to adopt a similar look and feel in terms of their interfaces and their usage of the business portal. The second wave will deliver a single Microsoft Dynamics solution that combines best-of-breed functionality from each product line by the end of 2008. To help its clients with the transition, Microsoft has put in place its Transformational Assurance plan that will allow users to migrate to the Microsoft Dynamics solutions at their own pace.

Eventually, Microsoft likely will absorb its PSA product strategy into its Microsoft Dynamics product strategy, providing a unified solution that will serve the various vertical markets requiring financials, enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM), and PSA solutions. However, the question remains: will Microsoft move in the direction of offering a single integrated PPM solution for service organizations by embedding Microsoft Project Server with the Microsoft Dynamics product line, or will it continue to offer distinct solutions, integrating Microsoft Project where needed? In either case, the Microsoft Dynamics product line will remain compelling to SMB organizations by continuing to offer a single technology that provides comprehensive PPM capabilities through Microsoft Project Server.

Microsoft Dynamics SL Components

Microsoft Dynamics SL is designed for organizations with 50 to 2,000 employees and revenues of between $5 million (USD) and $250 million (USD). The average Microsoft Dynamics SL project costs approximately $150,000 (USD) for both licenses and implementation, with a single user license starting at $5,000 (USD). Dynamics SL serves project-centric and service-oriented organizations, and is also suitable for distribution organizations.

Microsoft Dynamics SL comes in two flavors: the standard edition designed for a single site organization with up to 99 employees and a maximum of 10 user licenses; and the professional edition designed for multisite organizations and a maximum of 2,000 employees. The main components of Microsoft Dynamics SL include the following.

Financial Management and Payroll Microsoft Dynamics SL has a complete financial package providing general ledger (GL), accounts receivable (AR), accounts payable (AP), and payroll modules. The modules are designed to handle multisite organizations and multiple currencies. For service organizations that operate internationally, Microsoft Dynamics SL's comprehensive multicurrency capabilities (especially for billing and expenses) are a critical feature. For SMB service organizations, the financial package offers complete integrated back-office functionality, which is not typically found in best-of-breed PSA solutions.

Project Management and Accounting Microsoft Dynamics SL's strength lies in its project management and accounting capabilities, which are tailored for project-centric organizations. By providing extensive time, billing, and expense modules for service organizations, Microsoft Dynamics SL supports the detailed tracking of tasks and expenses relevant to billable projects. In comparison to other PSA solutions, Microsoft Dynamics SL provides above average resource utilization, contract management, and project control capabilities.

Field Service This module streamlines service delivery and all related activities. For professional services organizations (PSO), Microsoft Dynamics SL provides additional functionality, such as managing equipment maintenance, service level agreements (SLA), flat pricing functionality, and service tracking of account history and employee profitability. Moreover, Microsoft Dynamics SL is one of the few integrated PSA solutions that offers field service functionality to small organizations.

Distribution Microsoft Dynamics SL also differentiates itself by serving distribution organizations. In addition to providing extensive functionality to manage shipments, bills of materials (BOM), and inventory control and replenishment, Microsoft Dynamics SL supports electronic data interchange (EDI) and e-commerce capabilities. Furthermore, this module has robust order management and purchasing features that are specific to distribution organizations.

Foundation Microsoft Dynamics SL's Foundation module allows users to work with other Microsoft applications and technologies, as well as with Crystal Reports and the Business Portal. In addition, the Foundation module is delivered with a tool kit for customizations and integrations utilizing standard Microsoft technology. Consequently, Microsoft Dynamics SL provides the best tools to leverage an organization's existing Microsoft-based information technology (IT) infrastructure.

What's New in Microsoft Dynamics SL 6.5?

Microsoft Dynamics SL version 6.5 offers new modules for requisitions and bank reconciliation, and includes new feature enhancements at both the technological level and in the business portal. The requisitions module is primarily targeted at distribution organizations. It provides a request entry system for employees and multiple levels of approval per project. Following the submission of a request, managers can search for similar items in inventory and previous bids, and provide approvals and rejections of requests. In the new bank reconciliation module (found within the financial management module), users can reconcile bank statements, allowing users to correspond bank accounts to accounts and sub-accounts in the GL. They can also reconcile bank statements against transactions in the G L, AP, AR, and payroll modules.

Another new feature in version 6.5 is support for SQL Server 2005 and Visual Studio 8.0. This allows increased flexibility for customizations. There are also additional features in distribution with EDI integration and purchase order management. However, the majority of new features are found in the business portal. New features in the business portal include extranet functionality, item request entry and approval in the new requisition module, inventory lookup, multi-company enabled queries, mass import of users, copying of business portal role, a role-based home page, customer and vendor data access policies, support for Windows SharePoint Services version 2 (SP2), and management of data permissions in the administration console.

Product Strengths

Microsoft's Dynamics SL offers complete PSA functionality for project-centric organizations. Its target market is billable organizations, such as PSOs, computer and IT related services, engineering and architectural firms, and management consulting firms. The Microsoft Dynamics SL solution has also gained some traction in the not-for profit and health sectors, but it is particular strong in the construction and distribution markets. This is because extensive functionality in inventory management, order management, and purchasing provides a complete solution for distribution organizations. Construction organizations, meanwhile, can benefit from Microsoft Dynamics SL's extensive project accounting and workflow functionality, which is designed for general contractors.

In terms of providing deep functionality in portfolio management, Microsoft Dynamics SL has seamless real time bi-directional integration with Microsoft Project Server 2003, enabling project managers and stakeholders to gauge the progress of projects and the utilization of project resources. Microsoft Dynamics SL also has the distinct advantage of offering its clients a fully integrated PPM solution for PSOs by combining (and continuously enhancing) Microsoft technology with Project Server 2003 and Sharepoint Services. Furthermore, SMB project-driven organizations that have already incorporated Microsoft Project Server and Sharepoint into their infrastructure can have a comprehensive integrated PPM solution with the inclusion of Microsoft Dynamics SL.

Product Challenges

The real challenge of Microsoft Dynamics SL is in regard to its PPM functionality. Currently, project-driven organizations are required to purchase Microsoft Project Server to handle extensive portfolio management and project management capabilities. Microsoft's recent acquisition of PPM vendor UMT will only compound this problem. Consequently, organizations requiring strong PPM functionality must purchase Microsoft Project Server in addition to Microsoft Dynamics.

For the moment, with many PPM and PSA vendors pitching similar functionality, Microsoft has successfully delineated its product positioning of Microsoft Dynamics SL (as a PSA solution) and Microsoft Project Server (as a PPM solution). However, should there be a trend of consolidations between PPM and PSA vendors in the future, Microsoft's may have to integrate its PPM solution into the Microsoft Dynamics product line in the near- to mid-term.

Business Intelligence and Identity Recognition—IBM's Entity Analytics

The cause of poor customer service ratings, ineffective marketing initiatives, faulty financial planning, and the increase in fraudulent activity can, in many cases, relate back to an organization's management of its data. As the data collected and stored in organizations has grown exponentially over the past few years, its proper management has become critical to the successful implementation of such business initiatives as product marketing and corporate planning. Additionally, as fraud and acts of terror receive greater attention, it has become essential to use data to identify people and their relationships with one another.

This article will define master data management (MDM) and explain how customer data integration (CDI) fits within MDM's framework. Additionally, this article will provide an understanding of how MDM and CDI differ from entity analytics, outline their practical uses, and discuss how organizations can leverage their benefits. Various applications of entity analytics, including examples of its application to different types of organizations, will be highlighted along with the benefits it offers organizations in such service industries as government, security, banking, and insurance.

Data Management—Its Broad Spectrum

MDM has emerged to provide organizations with the tools to manage data and data definitions effectively throughout an organization in order to present a consistent view of the organization's data. In essence, MDM overcomes the silos of data created by different departments and provides an operational view of the information so that it may be leveraged by the entire organization. It focuses on the identification and management of reference data across the organization to create one consistent view of data. MDM's application identifies how different subsets of MDM address separate aspects of an organization's needs.

MDM manifests its importance when a customer service representative (CSR) cannot access customer information due to inconsistencies introduced by a corporate acquisition or a new system implementation, which may lead to the frustration (or even alienation) of the customer. Add to this the extra time the CSR spends accessing the appropriate data, and the issue extends to wasted time and money. MDM focuses on the identification and management of reference data across the organization to create one consistent view of data.

CDI is a subset of MDM, and serves to consolidate the many views of a customer within the organization into one centralized structure. This data consolidation provides the CSR with the information required or the ability to link to the required information, which may include billing, accounts receivable, etc. Once the data is consolidated, references to each customer file are created that link to one another and assign the "best" record from the available information. Consequently, data inconsistencies that occur across disparate systems, such as multiple address formats, are cleansed based on defined business rules to create one version of customer data that will be viewed across multiple departments within the organization.

The creation of "one version of the truth" presents unique challenges to organizations In many organizations, there are multiple views of the customer, such as accounts payable, call center, shipping, etc. Each profile may have the same customer name, but different addresses or other associated information such as unique customer numbers for each department, making it difficult to link one person to multiple processes. The difficulty comes when determining which view is the most correct. For example, if four versions of the same customer name and associated address exist, one version should be chosen from the four files to represent the most correct view in order to create a consolidated profile of that customer. The issue that arises here is that each department may have a different definition of "customer," making reconciliation of customer data an enormous task. For instance, organizations often profile their customers differently in systems across the organization, giving employees an incomplete view of the customer. The resolution of this issue allows the redundant or inaccurate customer records to be purged.

Aside from incomplete records, as the customer information is entered into the system multiple times, more silos are created, amplifying the problem. In addition to CSRs and employees having direct contact with the customer, marketing is another department that may have a different or incomplete view of the customer. This can translate into ineffective marketing campaigns and missed revenue opportunities. Although this last example may seem farfetched, the reality is that poor management of data within an organization affects the bottom line. CDI, when implemented properly, can not only reduce costs, but also increase sales, customer service ratings, and customer loyalty.

Data Complexity

As data becomes more complex, management strategies have been applied differently and used more widely to address not only organizational needs, but those concerning fraud detection and security. IBM's Entity Analytics Solution (EAS) addresses the needs of such organizations as government agencies and financial and insurance institutions to combat fraud and terrorism by applying data management techniques in a different way than CDI. Essentially, the concept surrounding the EAS platform translates into "the more data collected, the better". Instead of discarding extra information, as CDI does, the opposite direction is taken by aggregating, grouping, and resolving identity information attributes to use new, old, accurate, inaccurate, and seemingly attributes. This helps with the development of pattern recognition. For example, if a person collects more than one social security check using two or more separate addresses, EAS will identify the fact that a particular individual collects multiple checks sent to various addresses, and will create an alert in the system.

The ability to link individuals to multiple data sets and determine their interconnectivity helps proactive identification of potential fraudulent or criminal activity. IBM, with its acquisition of Language Analysis Systems (LAS), has started to address these needs through IBM Global Name Recognition. Instead of taking a business intelligence data integration or customer relationship management (CRM) customer data integration approach (whereby data cleansing activities take place to create one version of the truth), Entity Analytics uses the opposite approach to identify recurring data patterns to address terrorism and fraud through its Terrorism and Fraud Intelligence Framework (T&FI). The software addresses the issues of searching and managing data on individuals across geographic regions, customers within financial institutions, etc. to meet the demands of managing data sets from diverse cultures and geographic regions. This goes beyond name recognition to analyze how names are interconnected through the identification of recurring data patterns and entity connections. These connections are flagged based on rules created to identify suspicious transactions or behavior.

IBM Entity Analytics Software Offering

IBM Entity Analytics Solutions Global Name Recognition provides four modules (see figure 1 below) to enable organizations to identify people, relationships, and data patterns, and to share that information anonymously to identify potential fraudulent or suspicious behavior. IBM's EAS consists of

  • IBM Identity Resolution, which identifies an individual entity and connects the data associated to that individual across data silos;
  • IBM Relationship Resolution, which identifies non-obvious relationships to reveal social, professional, or criminal networks. This module also provides instant alerts once data connections are detected;
  • IBM Anonymous Resolution, which de-identifies sensitive data sets using proprietary preprocessing and one-way hashing to add additional layers of privacy, and link that data based on codes that enable entity relationship identification without jeopardizing individual privacy laws. Data is shared anonymously and remains with the data owner to ensure data security;
  • IBM Name Resolution solution includes name searching, variation generator, parser, culture classifier, and defining genders. Global Name Recognition's primary use is to recognize customers, citizens, and criminals across multiple cultural variations of name data. A practical application of the name variation generator is to learn the different spellings of names across various geographical regions.



Figure 1. EAS's Identity & Relationship Recognition Platform, IBM 2005

Government Use

Governments are obligated to spend taxpayers' dollars prudently in addition to protecting the public trust. This includes ensuring that they provide proper payments, services, and benefits to all social services recipients. Improper payments represent 10 percent or more of the total payout in social benefits. The US government issues over $6.6 billion (USD) in improper payments annually. The identification of relationships and data patterns and their associated entities can identify these data anomalies before fraudulent payments are issued, allowing money to be accurately channeled to the correct recipients.

In the aftermath of hurricane Katrina, the US federal government distributed $1.2 billion (USD) in aid to individuals who submitted fraudulent claims, either by using the same name at multiple addresses, or by using multiple names at the same address. This is an example that highlights the benefits of entity analytics over CDI in the detection of fraud. Where CDI attempts to reconcile the data into one correct version, EAS tries to spot the multiple records and creates a flag to identify the discrepancies. Solutions such as EAS identify this type of activity beforehand, thus reducing the possibility of fraudulent claims.

National Security and Terrorism Prevention

National security and terrorism prevention are major priorities for many countries. Identification of terrorists and individuals associated with known terrorists is crucial to safeguarding national security and to developing a list of potential security threats. For instance, the United States is currently using name recognition technology in the war on terrorism. The US Homeland Security agency used EAS to analyze Iraqi data sources in an effort to leverage data to help identify and gather relationship information during interrogations. Consequently, approximately 2,000 relationships of interest between intelligence agency personnel, service personnel, criminals, detainees, kin, tribal leaders, tribal members, and those interrogated were discovered. The detection of these relationships assisted in identifying and capturing potential terrorists before they committed acts of terror as well as in developing strategies based on potential areas of threat.

Additionally, governments are using EAS at an international level to help prevent terrorists and potential criminals from entering or exiting a country. An individual's identity, related to the way he or she spells a surname, can be different across multiple geographic regions. Ordinarily, data inconsistencies of this nature may present one individual as multiple individuals based on the recorded inconsistencies within the different systems. With an EAS solution in place, the systems can link and match these data sets to find consistent elements, and link them to create a complete individual record, thereby turning multiple fictitious people into one entity. Additionally, IBM Anonymous Resolution, coupled with anonymous identification, helps protect individual privacy and adheres to international privacy laws.

Financial and Insurance Industry Applications

In both the banking and insurance industries, the need to identify and to track data patterns and entity relationships has become essential to detect potential fraud and money laundering activities. One example of such activities is the submission of forged mortgage applications marked as approved. Bank employees have used this technique to pocket millions of dollars by creating fake customers, changing small amounts of application data on approved forms, and pocketing the money. With the ability to match "like" forms by collecting and storing every piece of information, financial institutions can raise flags based on recurring data patterns, thereby decreasing the potential for fraud.

Balancing Trade-offs Between Security and Privacy

As analytics software becomes more entrenched in general use, questions arise as to whether its benefits to identify criminals and terrorists outweigh its potential to infringe on personal privacy. Governments must strike a balance between effective management and analysis of information assets to recognize and preempt potential threats while ensuring the preservation and protection of citizen personal privacy and civil rights. Citizens must also be confident that information under the care of the organizations entrusted to protect them is not re-tasked or re-purposed for missions beyond the scope of the mission for which it was gathered.

Data management represents an effective approach to strike this balance. Responsibly managed information analysis enables national security compliance through effective and accurate watch list reference, intuitive filtering, and know your customer (KYC) controls as designated by such regulatory guidelines as the US Patriot Act and Bank Secrecy Act, and the international Basel Accords. This is done while providing a centralized source for managing personally identifiable information (PII) security, collective notification, opt out, and access controls resident in almost all privacy and regulatory requirements. By granting the government access to that data relating to known terrorists only, the balance of the citizen data is not shared with the government. Thus, EAS software accomplishes this in a manner consistent with international and domestic privacy laws.

The ability to identify people, track their movements, and uncover interconnections in their relationships and social associations is imperative to help preempt potential security threats. In the financial and insurance industries, using these tools can reduce fraud and create an environment of proactive fraud detection. Although there remains the issue of personal security and the question as to whether the government has the right to capture so much information about so many people, the benefits of identifying and matching individuals based on their associations have proven advantageous in the detection and prevention of potential fraud and terrorist activity. Furthermore, financial, insurance, and security organizations may derive immediate benefits from such entity analytics software as IBM's Entity Analytics by proactively thwarting fraudulent and criminal activities, and saving time, money, and lives in the process.

Segregation of Duties and Its Role in Sarbanes-Oxley Compliance Issues

In the aftermath of some highly publicized cases of corporate fraud, the US government announced legislation designed to implement compliance and financial-reporting standards. The most notable of these laws is the Sarbanes-Oxley Act (SOX) of 2002. The primary goal of SOX is to enforce a higher level of transparency into organizations' business processes, financial transactions, and accounting methods, to ensure that known and accepted accounting principles are practiced.

In this new SOX era, the issue of compliance spans several industries, attempting to harmonize evolving standards across both public and private sector organizations. The requirement of standardized reporting of financial information now forces organizations that had once been less transparent to tighten and streamline their audit and control practices on an ongoing basis.

Traditional Audit and Compliance Standards Prior to SOX

Pre-SOX standards were designed to ensure a modicum of corporate governance by focusing on the areas outlined by the Committee of Sponsoring Organizations (COSO) and on an IT system process framework. This framework was provided by the Control Objectives for Information and Related Technology (COBIT) IT process standard, which was developed in 1992 by the Information Systems Audit and Control Association (ISACA). COBIT was to provide adequate control levels for organizational structure, ethical standards, and board and audit committee review. It was the earliest set of audit standards established to cope with IT processes and audit procedures. COBIT focused on application controls, general control of information systems, and security issues.

Reporting standards used prior to SOX remain in place today. Of these, the most notable are the EU's adopted version of the International Financial Reporting Standards (IFRS) and the US's Generally Accepted Accounting Principles (GAAP). In 2002, an accord known in financial industry circles as the Norwalk Agreement was struck. This agreement states that US-based companies' financial-reporting procedures are to be harmonized with the European standard by the end of 2008. The implementation of SOX for firms that import into and export out of the United States is yet another layer of compliance standards recently introduced. Table 1 lists several other audit control standards, both pre- and post-SOX.

Regulation


Purpose/Target Industry

SOX


publicly traded US companies

ISO 17199


IT security standards

Canadian bills 198, 52-109, and 52-111


Canada 's SOX equivalents

Basel II Accords


G8 regulations for international banking

Health Insurance Portability and Accountability Act (HIPAA)


US health and medical industries

Office of Management and Budget (OMB) Circular A-123


US government agency financial standards

Solvency II


European insurance industry standards

IFRS


European accounting standards

Office for Economic Co-operation and Development (OECD) principles


EU agencies of internal controls

GAAP


US-based generally accepted accounting principles

Table 1. Key audit control standards.

Segregation of Duties

Within SOX is a provision entitled Section 404. This section is a comprehensive list of accepted internal controls organizations must have in place to be deemed SOX-compliant. The list targets application internal controls and highlights areas where fraudulent reporting is likely to occur, whether intentional or not. Among key provisions in this section is segregation of duties (SOD). SOD aims to close loopholes that would otherwise permit questionable accounting practices; one of its key attributes is that it allows the monitoring of processes and cross-verification of transactions processed in real time.

In simplified terms, SOD is based on the concept of having more than one person in an organization that is able and mandated to complete a task. SOD is a security principle whose main goals are the prevention of fraud and errors. These two objectives are realized through the reviewing of business processes and the dissemination of tasks and associated authorizations among several levels of hierarchy. Such actions serve as validation—in other words, they are a series of checks and balances.

One way to illustrate the key tenets of SOD is to consider an accounting department in any small to medium business (SMB). Here, some of the day-to-day activities include the receiving of checks as invoice payments, approval of employee time cards, processing of payroll checks, and reconciliation of bank statements. Within these activities a form of SOD is already in place—usually the issuing of checks requires different levels of authorization and more than one signature. In essence, more than one person validates a process or activity.

In terms of IT, SOD issues are not as clearly defined, and in many instances, individuals in an SMB have multiple levels of responsibility, which can call into conflict the stated goals of SOX and SOD.

Following are five circumstances in which IT processes can conflict with the goals of SOD:

1.

Improper account provisioning for change, meaning access rights to applications are not changed (revoked) when employees leave the organization or a department.
2.

Insufficient control of change management issues, meaning a change is made to a financial application or process without documented record of the date the change occurred, the nature of the change, and which persons in the organization are impacted by the change, for quality assurance purposes.
3.

IT departments lack an understanding of key system configuration workflow processes.
4.

No audit logs are used to document unusual system or application occurrences.
5.

No root cause analysis is performed to determine what caused an unusual event.

Twin Pillars of Protection

In any organization, IT serves as both the gatekeeper and the distribution point for information. Financial-reporting serves as the means to support an IT infrastructure. Insofar as systems infrastructure and financial reporting are linked, the requirement to ensure the integrity of the system and the processes that support it are in compliance with accepted standards and practices. Within these twin pillars of protection are principles that must be adhered to in order to ensure the integrity of the system, the public's confidence in the system, and that all key requirements of SOX Section 404 are met. Figure 1 depicts the basic steps to take to meet these requirements.

Figure 1. Key elements to support SOX and SOD.

1. Study business control processes.

Below are three of the primary business control processes essential to support SOX compliance:

1.

Controls found within most ERP systems—these controls reconcile orders processed only with prescribed customer credit limits. All goods shipped have an associated invoice.
2.

General IT controls—these allow authorized individuals access control to order management and receivables applications. This process ensures that system upgrades and fixes are documented.
3.

Manual controls—these controls ensure that only authorized individuals can alter or cancel a customer order.

2. Develop and automate internal testing to support the system.

Most organizations typically run financial reports on a monthly and a quarterly basis, reporting the organization's performance in terms of budget and projected sales. To ensure compliance to SOX-SOD requirements, these two procedures are essential:

1.

Using internal data to ensure that no sales or financial records can be altered without being identified, logged, and reviewed by three levels of authorization.
2.

Reviewing examples of where individuals contravene SOD requirements (e.g., persons who perform procurement activities cannot also be involved in the receiving of inventory and the posting of accounts payable).

The purpose of this exercise is to demonstrate that an internal, documented process exists to segregate responsibilities and prevent any ability to alter or destroy financial-related data.

3. Analyze test results with known compliance standards (e.g., COBIT, COSO).

When organizations are in the process of selecting enterprise software applications (e.g., an ERP system), due diligence is advised as part of the request for proposal (RFP) process to ensure that the proposed vendor's solution adheres to known financial-reporting and compliance standards in its industry. When interfacing a new solution with a legacy application or with an internally developed in-house system, the COBIT and SOX models should be the fundamental criteria for assessing whether the new system meets your organization's compliance and financial-reporting requirements. Following are some additional points to consider:

*

Data revision management—changes to financial-reporting data should be carefully managed, ensuring that all modifications are authorized and documented.
*

Contracts—all IT vendor contracts and service level agreements (SLAs), including their financial implications, must be clearly defined.
*

Third-party equipment—third-party software must abide by known and accepted standards. License and user requirements must be defined in vendors' contracts, as these requirements are also subject to known performance criteria indicated in the vendor SLA at the time of software purchase.
*

Access control—ensure users have an identifiable security password and user code, which tracks access and transactions performed.
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Security—the system must be in compliance with ISO 17799 and designed in a way that limits disclosure or access to unauthorized parties.
*

Incident management—the system must record all incidents of failure or loss of data, and must support Information Technology Infrastructure Library (ITIL) guidelines. Corrective action to be taken must be documented so that it can be retrieved, and the work performed by another person.

SOD Checklist

If your organization is planning to review its SOX- and SOD-readiness, then a good starting point is to obtain a copy of the ISACA's segregation of duties control matrix to use as a general guideline. If after reviewing the matrix you conclude that your company performs certain tasks that cannot be segregated, then you can implement a series of further controls. Below are a few separate control procedures to help achieve SOX-SOD compliance:

*

Ensure that transparent audit trails are in place, that management is aware of each individual's level of responsibility, and that corresponding authorization is established.
*

Ensure that information related to who did the work, who approved the work, and the date and time the activity was executed are documented in the audit trail.
*

Enable the ability to review transactions at random times, thus instilling confidence in the process.

A Final Word

The introduction of SOX is hoped to bring a new level of accountability to the corporate world. It is believed by many that from the cases of corporate fraud in the United States several years ago, a new opportunity has emerged for corporate America to show integrity and prove that the interests of customers, employees, and shareholders are its primary concern. The positive outcome in all of this has been that those running organizations realize that their companies are part of the community they serve, and unethical behavior will not be tolerated. The compliance aspects of SOX and SOD, though challenging to understand at first, limit the opportunity (or chance) for wrongdoing, and ensure that organizations employ streamlined and verifiable processes to run their business.

Friday, April 9, 2010

Why Service Matters: Enterprise Solutions, Market Differentiation, and IQMS

Market Impact

IQMS (www.iqms.com), a privately-held company located in Paso Robles, California (US), has experienced a period of growth over the past few years when other companies have experienced decline. Its flagship product, EnterpriseIQ is one of the industry's leading enterprise resource planning (ERP) solutions for repetitive manufacturing environments, particularly suited for injection plastics molding/extruding and rubber industries. With its products, the company experienced a 12 percent growth globally in 2003 when 700 new licensed users reportedly joined its client base. Closing the year with a 15 percent increase in revenue, IQMS responded to this increase by expanded its US Midwest office, offering additional training and sales support to clients.

Part Two of IQMS Prospers by Helping Enterprises Work Smarter series

At first glance, IQMS resembles many of its peers from the lower-end of the enterprise applications market, not only in terms of its budding global presence, annual revenues, and install size figures, but also in terms of its industry-specific software that reduces implementation and training costs. For example, an average EnterpriseIQ implementation typically only takes between three and six months. However, despite the like corporate profile and product similarity, IQMS has a comprehensive, one-source delivery and service where all of its product development, training, implementation, and support are provided by its own employees, rather than third party providers. These employees are American Production & Inventory Control Society (APICS) certified and have extensive implementation and proven project management experience. They also have strong manufacturing and accounting backgrounds. This, in addition to its implementation methodology that balances on-site consulting, classroom training, and Internet-based training, are notable differentiating traits.

IQMS also has an upfront nature that makes it stand-out from its peers. Its maintenance contracts include all product upgrades and technical support, without any hidden costs. This, combined with IQMS' great reputation for customer support, highlights the company's open lines of communication. Customers are almost never put on hold or have to go through an annoyingly long automated process. Rather, calls are answered by a knowledgeable person, not a recording. The vendor happily lets anyone talk to any of its satisfied customers within selected industries of focus and that have had similar issues as the prospective customer. IQMS also proclaims its confidence by offering a one-year, money-back guarantee.

Still, although indisputably impressive, one could dig up similar value propositions from other players in the market. Also, on the surface, the product has many pedestrian functional and technological capabilities. For example, it has a Microsoft Windows-based platform for the client side and networks features familiar user-friendly interface with familiar navigation that involves easy jumps between tightly integrated modules and drill-down capabilities. The database resides on the server that performs operations on that data at the request of clients. Data is then transmitted over the network and users access the information from clients/workstations; ultimately, its a process that uses very little code. Furthermore, the front-end Delphi graphical interface allows users to manipulate or search for data, while Microsoft Terminal Server (MTS) and Citrix Metaframe clients are used for wide-area network (WAN) links.

Part Two of the six part IQMS Prospers by Helping Enterprises Work Smarter series

Part One presented the company background.

Part Three will continue a discussion of product differentiation.

Part Four will review IQMS' Single Database Solution and quality management.

Part Five will cover integrated EDI and miscellaneous utilities.

Part Six will present challenges and make user recommendations.

EnerpriseIQ Modularity

The EnterpriseIQ system is also modular, with a broad core package, and many optional modules that extend the product's functional scope. Consequently, the IQ Accounting & Financial Management modules include the "usual suspects" like general ledger (GL); accounts payable (AP); accounts receivable (AR); cash management (including disbursements, receipts, and cash analysis); budgeting; multiple currency capability; bank maintenance; customer and supplier status; standard costing; auto-invoicing; cost variance analysis; bank reconciliation; employee maintenance; tax code tracking; and so on. Another common feature is FRx Reporter, a powerful financial reporting system from FRx, a Microsoft company. The product, which has recently been re-branded as Microsoft Business Solutions Analytics (MBSA)—FRx, reads directly from EnterpriseIQ GL. With this feature, it is fairly easy to create and use customized financial reports, since the product was designed by accounting professionals for their peers. It has customizable formatting similar to Microsoft Excel, linking data from multiple sources with a drill-down viewer capability—from the summary level to underlying account and transactional detail. For more extensive information on the product, see FRx Poised To Permeate Many More General Ledgers.

Moving onto the IQ Sales & Distribution suite, one will also find many typical modules and capabilities, such as inventory availability, capable-to-promise (CTP), order entry, order tracking, shipping schedules, pick tickets, advanced shipping notices (ASN), bills of lading (BOL), packing slips, return material authorizations (RMAS), consignment inventory, freight maintenance, rework tracking, commissions, sales analysis, distribution centers, release management, customer specific sales pricing, tiered pricing, forecasting, and so on.

Linked with this suite is a native IQ CRM system, which also tackles some basic supplier relationship management (SRM) functions, and that features the Internet and a personal digital assistant-enabled contact management system. The product was devised to improve customer and supplier relations by tracking sales and marketing/procurement efforts and customer and supplier issues through, for example, notes, activities, follow up, alerts, etc. As a result, the product is workflow-enabled and provides customized alerts and scheduling, while its true integration with other EnterpriseIQ modules ensures centralized data management.

Likewise, the IQ Purchasing suite also seem to offer common capabilities like purchase orders, requisitions, material exceptions list, purchasing approvals, receiving, supplier management, supplier RMAS, 1099 contractors management, purchasing history, receiving inspection tracking, alternate purchase pricing, supplier performance analysis, supplier consignment inventory, and so on.

Differentiating IQMS' product from its peers' offerings, however, is the native IQWorkforce HR module. It enables employee benefit management and tracking, training and skill set management, application process management, and review and termination tracking. As with native CRM capabilities, the benefit of this module comes from consolidating information in a single database. The result is more reliable tracking of training in accordance with quality management standards; improved employee communications; centralized employee activity; and reduced management tracking activities. Moreover, the system also features a native payroll system that also centralizes employee activity. Automatic tax code updates, direct deposit, and electronic bank transactions are also supported.

All the reports and forms throughout EnterpriseIQ use Business Objects' Crystal Reports, which are relatively affordable, easy to use, and fully customizable. Further, in addition to financial reports by FRx, IQMS' partnership with CorVu provides the following analysis and executive information systems (EIS):

* CorManage—automates the user's balanced scorecard, Six Sigma, total quality management (TQM) systems, and economic value added (EVA), which is the financial performance measure that comes closer than most other to capturing the true economic profit of an enterprise. It is most directly linked to the creation of shareholder wealth over time.

* CorBusiness—provides business intelligence (BI) management with end user online analytical processing (OLAP) analysis, interactive reporting, database queries, executive dashboards, and key performance indicator (KPI) alerts.

* RapidScorecard—provides administration and data entry facilities for the CorManage product by automating proverbial Kaplan and Norton's balanced scorecard systems.

* CorPortfolio—enables executives to fairly quickly review reports, analyses, and business commentary from virtually any data source, collating them into an electronic portfolio.

What Then Is Unique About IQMS?

Nevertheless, going beyond these common capabilities that are frequently met by many other competitive offerings, one will notice that IQMS is truly an interesting enterprise applications provider, almost bordering on an anomaly. For one, IQMS' use of an Oracle database, which, despite the vendor's sensible rationale to leverage it, remains atypical for the market segment it targets. Namely, we can only think of ICICI-Infotech (see ICICI-Infotech's North American Strategy for Success) as another vendor comparable to IQMS that is also Oracle-centric, albeit ICICI-Infotech is focused on different industries. IFS, which, like IQMS, supports the Windows client/Oracle database combination, targets much larger companies than IQMS.

Another feature which demarcates IQMS from its peers is its focus on the unique needs of plastic processors and extruders. This is not a highly contested market by ERP providers; there are only a few vendors that have well-attuned offerings that cater to the market. One only needs to look at ones desk to see how ubiquitous the product is: telephones, staplers, monitors, computer housing, etc. all contain plastic. Plastics usually comes from converting raw resins to the molded form, which is then assembled as a final product, or shipped as is. Examples of "processed plastics" include extruded railings, frames, cables, etc. Because they cannot be disassembled and reused or stocked, they fall under the process manufacturing category, which is a manufacturing process focused on formulas, not BOM; ingredients, not discrete parts; bulk manufacturing, not pieces; and pack recipes, not packages. For more peculiarities of process manufacturing, see previously published TEC articles, such as Processing Manufacturing Software: A Primer, Process Manufacturing: Industry Specific Requirements and What Makes Process Process?.

EnterpriseIQ tackles both situations, although it uses a BOM to describe a "process". Namely, by changing units of measures (UOM) and the way the rate of production is displayed and calculated, the product supports a sort of a process formula. It also uses a different (though highly related) BOM for more standard, discrete manufacturing assemblies. Users can link a "process" BOM to an "assembly" BOM to create the final part. To illustrate, one could make the process portion first, temporarily store it in the warehouse, then later build and fill a custom container to the customer specifications. Thus, two BOMs, each with different core functionality, are tied together to deliver the final, end user component.

Moreover, as opposed to only being a planning or scheduling tool in terms of a machine or work center EnterpriseIQ is molding or extrusion die-based tool. Quotes and BOMs support family tools, and there can be multiple alternative BOMs that make the same end item. Part costing and pricing can be done for individual items of family molds. It also supports standard and actual cavitation, which happens when some cavities within the mold are blocked. EnterpriseIQ overcomes this by creating complex tools, and the plant maintenance module tracks cycles on tools, dies, and even mold inserts.

From the scheduling perspective, the product highlights tools and dies grouping, creates visibility for out-of-service tools/dies, and evaluates any auxiliary equipment conflicts. From the raw materials vantage point, it can track regrind, (a waste material from molding and extrusion operations, which has been reclaimed by shredding or granulating), scrap, sprue (the main feed channel that connects the mold-filling orifice with the runners leading to each cavity gate; it is also the piece of plastic material formed in this channel) and runner (the secondary feed channel in an injection or transfer mold that runs from the inner end of the sprue or pot to the cavity gate) materials. It also has multiple ways to make or track material blends, an can perform the so-called "Runs-the-Best" tracking.

These plastic-specific capabilities all come in addition to the usual IQ Manufacturing & Shop Floor Planning modules, such as quoting/estimating; BOM; routings; inventory management; production/work orders; finite/infinite scheduling; master production scheduling (MPS); material/capacity requirements planning (MRP/CRP); labor capacity planning; machine capacity planning; production reporting; process/job costing; lot traceability; non-conform and non-allocated inventory management; quoting inventory; work centers; shop calendar; outsourcing/subcontracting; physical inventory/cycle counting; and inventory transaction log.

This concludes Part Two of a six-part note.

Part One presented the company background.

Part Three will continue a discussion of product differentiation.

Part Four will review IQMS' Single Database solution and quality management.

Part Five will cover Integrated EDI and miscellaneous utilities.

Part Six will present challenges and make user recommendations.

Enterprise Incentive Management Leader Responds to Market Demands

Callidus Software Responds to Market Demands

San Jose, California (US)-based Callidus Software, founded in 1996 and publicly traded since 2003 on the NASDAQ under the symbol "CALD," is an enterprise incentive management (EIM) provider that benefits from the market dynamics detailed in Thou Shalt Motivate and Reward Workforce Better. The company has several US offices, namely in New York, New York; Austin, Texas; Chicago, Illinois; and Atlanta, Georgia, as well as in London (UK) and Sydney (Australia), with an estimated 330 employees worldwide. Callidus (taken from the Latin word meaning "expert") receives nearly $70 million (USD) in revenue and services over 110 global user corporations across multiple industries. Such industries include retail banking (22 percent of the install base), insurance (21 percent of the install base), manufacturing/high-tech and life sciences (23 percent of the install base), retail/distribution (12 percent of the customer base) and telecommunications (the remaining 22 percent of customers). While its products can serve the pay-for-performance program needs of virtually all companies, Callidus has focused principally on the above six key market segments, which were also described in Sizing the EIM Opportunity.

Part One of the series Enterprise Incentive Management Leader Responds to the Market Demands

In addition to selling directly, Callidus actively promotes and maintains strategic relationships with systems integration (SI) partners, management consulting firms, independent software vendors (ISVs) and technology platform providers. These relationships are formed to provide customer referrals and co-marketing opportunities with the aim of expanding the potential customer base. As well, these relationships leverage the vendor's primary business model by outsourcing integration and configuration services and allowing it to expand and focus on software license sales. To that end, Callidus has established alliances with Accenture and IBM on both a national and a global basis, whereby each provides systems integration, implementation, and configuration services. The vendor has further strengthened its relationship with IBM from a technology perspective by optimizing its products on platforms such as IBM WebSphere, DB/2, and AIX.

Besides working with global business partners, Callidus also maintains relationships with smaller and more specialized companies such as Compensation Technologies and Iconixx Corporation. These relationships provide the company with new business referral bases, compensation consulting, and augmentation of its professional services, including the implementation of Callidus products. Although all of these strategic relationships have been built on solid foundations over the past few years, they are non-exclusive, and either party may enter into similar relationships with other parties.

Callidus Software's global partnerships and alliances continue to grow in number, and today include some of the world's best-known SIs, consulting and technology groups, and software solution providers. Other firms that form the company's partner base: Actuate Corporation (for enterprise reporting applications), The Alexander Group, Atos Origin, Axis Group (a consulting firm in the field of business intelligence [BI]), BEA Systems, CelFocus, Hexaware Technologies (a provider of information technology [IT] and business process outsourcing [BPO] services), Hewlett-Packard (HP), Informatica Corporation, Oracle, Saama Technologies (a consulting and SI firm that provides actionable BI for enterprises and outsourcing services for software product companies), SAP, and Sopra Group, among others.

Ten of the thirty Dow Industrial companies have thus far chosen EIM from Callidus, whereby the vendor's partner programs hope to ensure successful implementation and faster payback for these companies as well as for all of Callidus Software's 112 customers. The consulting services firms and SIs mentioned above work with Callidus to add strategic value to sales performance management and provide integration, evaluation, strategic outsourcing, and hosting services. On the other hand, ISVs and technology platform providers integrate Callidus Software solutions with applications and platforms to maximize customer benefit and help build revenue.

The EIM Market

The market for EIM products is in its early stages and is rapidly evolving, and many of Callidus' direct and potential competitors have significantly greater financial, technical, marketing, service, and other resources. Many of these companies, such as Oracle (including former Siebel Systems and PeopleSoft), SAP, Synygy, Practique Associates (in Europe), and others also have a larger installed base of users, longer operating histories, and greater name recognition. However, Callidus is the EIM vendor of choice for some of the largest companies in the world (as indicated above, 10 of the 30 Dow Jones companies rely on Callidus). For example, five of the top ten US banks (US Bank, Wachovia, Morgan Stanley, Bank of America, Washington Mutual), three of the largest seven US property and casualty (PC) insurance companies (AIG, Aetna, Allstate, United Health Group, Allianz Group), and four of the five largest telecommunications companies (Telstra, Vodafone, AT&T, Sprint, Bell, Verizon) all use Callidus' products. In addition, seven of the twenty-five Fortune 1000 high-tech companies use Callidus, such as Amgen, Genentech, Apple, BEA Systems, HP, Konica Minolta, and Novell. Finally, over 450,000 salespeople, brokers, and channel representatives are paid regularly using Callidus Software's TrueComp Enterprise suite today. Other notable customers and partners include 7-Eleven, CUNA Mutual, Philips Medical Systems, Sprint Nextel, Sun Microsystems, and Time Warner Corporation.

The principal competitive factors affecting the EIM market are industry-specific domain expertise; scalability and flexibility of solutions; superior customer service; and functionality of solutions. Callidus believes that it can compete effectively with the traditional enterprise resource planning (ERP), sales force automation (SFA), and customer relationship management (CRM) companies due to its established market leadership, domain expertise, rules-based application software, and scalable software architecture. On the one hand, a potential benefit of leveraging an ERP/CRM/SFA solution is that a user company may be acquiring an incentive tool that is already integrated with its back- and front-office solutions, as opposed to going through a third party best-of-breed EIM player. This might save both time and money in implementation and rollout costs, and has the added advantage of offering management and executives a 360-degree view of their sales operations (they can supposedly track a lead all the way through to its close and then figure out who gets paid).

However, full-fledged EIM systems are generally not part of these vendors' core product offerings. Many of these companies with broader product offerings' scope might offer some sort of sales compensation tool within their overall product suite instead. Callidus will likely have developed the domain expertise necessary to meet the dynamic requirements of today's complex pay-for-performance programs more fully. In general, the incentive management solutions from ERP and CRM vendors fall somewhere between homegrown tools and the best-of-breed EIM solutions in terms of functionality, and are capable of handling moderately complex sales plans and sales forces. Such solutions have found a strong customer base among companies that do not have major compensation deposits via bank accounts or requirements for a full-fledged industry-oriented EIM tool.

Callidus also believes that it can compete effectively with the fellow best-of-breed EIM system vendors. Specifically, while each of the pure-play EIM system vendors has domain knowledge of the EIM market, Callidus claims to have developed the superior scalability demanded by the telecommunications, retail banking, and insurance markets. Additionally, it has created substantial product differentiation by adding features into its products that are specific to each of the target markets. The company's industry knowledge comes from over 100 successful implementations among global enterprises in banking, insurance, telecommunications, life sciences, and manufacturing.

As illustrations of its solution's scalability, 31 of its customers have over 10,000 payees and 15 customers have in excess of 25,000 payees, totaling over 1,450,000 payees currently served by Callidus. As for transaction volumes, 24 of its customers process over 1 million transactions per month, and 3 customers process over 10 million. As for the biggest compensation payouts, 9 customers are reportedly paying over $200 million (USD) per year, and the largest customer—$3 billion (USD) per year. Thus far, all of Callidus' customers have paid $25 billion (USD) to their sales force and channels. One can reasonably expect much more in the future.

ICICI-Infotech's North American Strategy for Success Part One: Company Background and Market Focus

Introduction

ICICI-Infotech has developed a well-earned and respected reputation in the Europe, Middle East, and Africa (EMEA) region of the world. Now it has set its sights squarely on the North American market. To reach this target, ICICI-Infotech has developed an intriguing strategy to attract new customers. This research note explores this strategy to assist you in determining whether ICICI-Infotech and its enterprise resource planning (ERP) offering, ORION, makes sense for your company, deserving a closer inspection and careful consideration.

After providing some background information on the company, the strategy is examined from the viewpoint of its market focus, customer focus, and innovative pricing. You'll see how pricing, both for software and professional services, is critical to making this strategy work and is the underlying foundation for the other two components. The research note concludes by discussing the challenges facing ICICI-Infotech and presenting user recommendations.

This is Part One of a three-part note.

Part Two discusses the company's strategy in terms of customer focus and innovative pricing.

Part Three analyzes the challenges facing the company and presents user recommendations.

Company Background

ICICI-Infotech (www.icici-infotech.com) is a wholly owned subsidiary of ICICI-Bank, the second largest bank in India with assets of $27.8 billion (USD) and over 470 branch offices. In operation since 1989, ICICI-Infotech has consolidated its position as a global developer and provider of enterprise business solutions aimed at regional and international companies.

The company presents customized solutions utilizing in-house expertise and experience gained from working in diverse markets and across a broad range of industry segments. These include distribution, retail, construction, automobile industry, insurance, process manufacturing, and energy. ICICI-Infotech has over 1,300 employees in thirty countries. In 2004 ICICI-Infotech has experienced a 40 percent growth in comparison to last year and projects a higher rate of growth in the coming years. Currently, ICICI-Infotech services over 1,000 customers including Imperial Chemical Industries (ICI), Panasonic, GlaxoSmithKline, Philips, Standard Chartered Bank, and Deutsche Bank. In 2003 the company joined an elite list of organizations having the distinction of achieving the highest and most prestigious optimized level of Software Engineering Institute Capability Maturity Model (SEI CMM) Level 5 certification for its offshore development centers.

In March 2003 ICICI-Infotech established a base of operations in the United States for its ORION software product. The new office is located in Edison, New Jersey, less than an hour's drive from New York City. In a short period of time, ICICI-Infotech has signed over ten North American customers. Seven of these customers are in the process manufacturing industry.

ORION, which is ICICI-Infotech's flagship enterprise software offering, is based on the ERP II model that includes full-featured ERP functionality, complemented by customer relationship management (CRM) and supply chain management (SCM) features. Client/server-based ORION integrates business processes across vendors, partners, and customers in order to foster a more effective and efficient organization to achieve and sustain growth. ORION also has web-enabled components to support remote data entry services and queries. Depending on a company's size, ORION comes in several flavors—Enterprise, Advantage, and Lite—to facilitate implementation and realization of expected benefits.

As an Oracle Certified Advantage Partner, ORION utilizes the capabilities of the Oracle database, forms, and developer platform and tools.

While this article focuses on ICICI-Infotech's enterprise solution, the company also offers information technology services for outsourcing, infrastructure management, security consultancy, and business process re-engineering and management. Some of the industries to which ICICI-Infotech caters include banking, retail, insurance, manufacturing, energy, government, and fashion.

Market Focus

As you have just read, ICICI-Infotech has prospered in many and varied markets. However, in North America the company has initially decided to narrow its focus on two significant market aspects in order to develop a critical mass.

First, ICICI-Infotech's ORION business practice is concentrating solely on the process manufacturing industry. Process manufacturing focuses on formulas, not bill of material (BOM); ingredients, not parts; bulk manufacturing, not pieces; and pack recipes, not packages. If you want a refresher course in processing manufacturing, read this author's previously published TEC articles, Processing Manufacturing Software: A Primer and Process Manufacturing: Industry Specific Requirements. ICICI-Infotech has already made considerable inroads into process manufacturing by securing several North America clients in the food and beverage, pharmaceutical, and chemical industries.

While these may be new customer markets in North America, the company's software is functionally robust in these industries. Additionally, ICICI-Infotech's professional services cadre has developed hands-on and in-depth experience in these areas. The software provides extensive formulation management and scalability. As you would expect from a company competing in the food and beverage arena, the quality control functionality permits compliance with external regulations and tracking at sublot and lot levels.

The software supports two features critical in the chemical industry, but particularly in specialty chemicals, where a new order is likely to be a variation of an old one. First, the ability exists to facilitate the creation a new chemical product based on ingredient substitution in an existing formula. Secondly, you can quickly convert estimates into firm orders and establish immediate visibility within production scheduling.

As you would expect, the software supports a catch weight feature for meats and poultry; a flexible pricing engine for consumer goods; extensive warehouse management attributes to support order fulfillment and distribution; and other functionality required in process manufacturing.

The second aspect of market concentration is software migration. ICICI-Infotech is looking for companies that have outgrown their existing legacy systems and require new capabilities to effectively compete in their respective markets. With its rather extensive and easy-to-use data conversion toolkit, a client's legacy data can be mapped and ported into ORION with little or no manual massaging or manipulation.

Additionally, ICICI-Infotech expects to leverage its approach toward enhancements, thereby making them less of a burden in the short-term and long-term life cycle of the software product. Be assured that ICICI-Infotech expects the best practices inherent in the ORION software to win out over the need of an enhancement. However, when absolutely necessary, ORION-constituted enhancements can be viewed more as subroutines, which are kept distinct and separate from the mainstream and standard code. Under the subroutine concept parameters are passed to an enhancement and results are returned, saved in a repository reserved for this purpose. The software leverages the processing speeds of the servers to counteract some of the negativity associated with enhancements. While some modification of an enhancement may be required with a new release of the ORION software, under the company's approach the upgrade workload and impact can be kept to an absolute minimum.

As will be discussed later in this research note, pricing of enhancements can make retrofitting a company's long established practices within ORION cost-effective, when compared to the competition, and doable in a reasonable period of time.

This concludes Part One of a three-part note.

Part Two discusses the company's strategy in terms of customer focus and innovative pricing.

Part Three analyzes the challenges facing the company and presents user recommendations.

Saba Learning Suite Overview

Founded in 1997, Saba (NASDAQ: SABA) is the premier global provider of strategic human capital management (HCM) software and services. Saba’s people management solutions are used by more than 1,300 organizations and over 17 million end users worldwide. Saba’s solutions increase organizational performance by aligning workforce goals with organizational strategy; developing, managing and rewarding their people; and improving collaboration. Saba provides unified solutions for people management across learning, collaboration, performance, compensation and talent management, enabling customers to align, develop, manage and reward their people Saba product offerings address all aspects of strategic HCM and are available both on-premise and OnDemand (www.saba.com/products). To ensure long-term customer success, our global services capabilities and partnerships provide strategic consulting, comprehensive implementation services, and ongoing worldwide support.

Saba Enterprise 5.4 is the foundation of the industry’s only unified HCM solution and continues to be the only solution that delivers the future of people management today.

> More Unified - provides best-in-class learning, performance, talent, and collaboration benefits whether modules are used together or separately
> Market-Leading Enhancements - brings the power of Web 2.0 to the enterprise by unifying formal and informal learning as Learning 2.0
> Global Governance - improves service delivery while reducing expenditures by identifying inefficiencies in program planning, development, and deployment
> Advanced Architecture - Saba's robust platform can adapt, scale, and integrate easily and effectively with existing systems

Bringing Learning 2.0 to the Enterprise

By taking a strategic, disciplined, enterprise-wide approach to aligning, managing and measuring learning and development initiatives, organizations ensure that their people have the right skills and knowledge to perform at their best.

Saba Learning Suite, built on the Saba Enterprise foundation, is the most comprehensive solution available to address the strategic mandates of the learning organization–to deliver effective formal and informal learning that is tied to clear business outcomes and strategic human capital management initiatives. With Saba Centra, Saba Learning Suite is the first learning suite from a single company that addresses the full continuum of learning—formal, informal, self-paced, live, and a blend—to provide seamless and truly effective learning.

The Saba Learning Suite consists of

> Saba Certification Management
> Saba Learning Commerce
> Saba Content Management
> Saba Publisher Professional Edition
> Saba Centra
> Saba Collaboration
> Career & Competency Management Capabilities

Saba customers include ABN AMRO, Alcatel-Lucent, Bank of Tokyo-Mitsubishi UFJ, BMW, Caterpillar, CEMEX, Cisco Systems, Daimler, Dell, Deloitte Touche Tohmatsu, EDS, EMC Corporation, FedEx Kinko's, Insurance Australia Group, Kaiser Permanente, Lockheed Martin, Medtronic, National Australia Bank, Novartis, Petrobras, Procter & Gamble, Renault, Royal Bank of Scotland, Scotiabank, Singapore Ministry of Finance, Sprint, Standard Chartered Bank, Stanford University, Swedbank, Tata Consultancy Services, Wyndham International, Weyerhaeuser, Underwriters Laboratories, and the U.S. Army and U.S. Navy.

Cash Management 101

Cash Management 101

Cash management is a need common to both large and small businesses alike. In its simplest terms, cash management is the assurance that today's receivables plus today's account balances exceed today's payables. Failure to practice this business management process guarantees bankruptcy.

Every large organization has a cash management group, sometimes called the treasury. This group's function includes management of such items as investments and borrowing in addition to the organization's daily cash flow. In small to medium businesses (SMBs), usually the chief financial officer (CFO), president, or owner performs the task of cash management.

Regardless of a company's size, the important thing is that cash management is practiced on a regular basis—at least weekly—and with sufficient attention to details. In difficult times, when liquidity is "tight" (at a minimum), it should be performed daily.

Crucial to organizations' successful cash management are the deals they make with their financial institutions for short-term placements and for borrowing funds. Unlike in other countries, in the United States, a bank account that is credited with deposits does not begin to earn deposit interest until three business days have passed. Furthermore, an American business account specifically may not be overdrawn, which necessitates cash management to be the most important activity of a business's financial management.

For all companies—and in particular, public traded companies—major financial statements include the income statement, the balance sheet, and the statement of cash flows. An organization's CFO, accountant, or proprietor will likely share this snapshot of financial performance with lenders, equity investors, and the company directors and key stakeholders.

Surprisingly, most SMBs and large organizations find spreadsheets a useful tool for cash management. The cash management facilities serve as the basis for entries on the spreadsheet. The spreadsheet is easy to manipulate and allows for what-if scenarios and forecasting. Yet cash management for many companies is a mix of financial software and spreadsheets, with the majority of decisions based on spreadsheet manipulations.

Cash Management Operations

Effective cash management requires having a firm handle on the following two areas:

1. Cash inflows

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Daily morning and afternoon deposits from the Automated Clearing House (ACH)—where morning deposits are received from local banks and afternoon deposits are received from banks located more than two time zones away—electronic data interchange (EDI) transfers, e-mail notifications, etc.
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Forecasted deposits for the day, generated from cash management software. These are based on reliable deposits taken from sales invoice dates plus credit days allowed (e.g., net 30, 2 percent net 10, etc.).
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Checks received in the mail.
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Over-the-counter cash receipts.
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Credit card receipts.
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Forecasted deposits based on disputed invoices (i.e., invoices where credit notes may have to be issued) or the "poor payer" category of customers, generated from cash management software.
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Investment income.

2. Cash outflows

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"Must pay" accounts (e.g., payroll).
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Commissions; local, state, and federal liabilities (e.g., taxes, social security, etc).
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Payment to liability accounts (e.g., insurance, mortgages, leases, employee travel expenses).
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Valuable suppliers that provide payment discounts for early payment.
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Suppliers whose limits within agreements can be stretched (e.g., net 30 days).
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All bank account balances.
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Loan payments due.
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Interest payments or term deposits due.

The Price of Cash Mismanagement

When cash flow is tight, cash management helps a company decide who must be paid and whose payment can be skipped for a given week. Mismanagement of cash inflows and outflows will cause a company to face a liquidity crunch. A liquidity crunch forces a company to borrow money at a disadvantage, meaning a company that is in dire need of short-term cash will pay more interest on a loan or line of credit than it would have had it used better cash management techniques.

Poor decisions and practices by a company's financial managers can have disastrous effects on the business too. Following are examples of poor decisions and practices:

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Transferring too much of the business's liquid assets into the acquisition of fixed assets, such as machinery or real estate. Monthly commit¬ments must be properly managed by obtaining long-term financing for such large capital investments.
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Failing to budget properly. To avoid this problem, construct a spreadsheet with columns that represent weeks or months, and with rows that represent inflows or outflows. Lay out, by month, the known inflows and outflows. Toward the bottom of the sheet, place the less-certain inflows and outflows. Each period's column total (closing balance) should be brought forward to the next column as an opening balance.
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Failing to make use of a business line of credit (LOC), or exceeding the LOC limit, resulting in refinancing with factorers. Factorers are organizations that provide funds to a business, using the business's inventory as collateral. A factorer can be a vendor's representative as well, selling on commission. Factorers can also provide cash based on a business's future confirmed receivables. Their rates for lending money are usually higher than bank rates.
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Failing to manage business risks (e.g., making poor client choices, overextending credit to poor payers, under or overestimating product sales, etc.).
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Failing to keep personal money out of the company. It is essential to separate personal and business dealings. Obtain business credit cards and keep detailed track of business expenditures for shared assets (e.g., vehicles, travel, entertainment, etc.).
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Failing to go after nonpayment or late payment accounts.
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Failing to pay attention to inventory or inventory turns. Inventory turns is a measure of the number of times inventory, save for safety stock, is sold. In general, the more the number of turns, the lower the cost of warehousing and insuring stock, as well as in tying up capital.
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In cash shortage periods, failing to defer some invoices for payment in a later financial period. (Become a 90-day payer with some suppliers, but it is not recommended to do this with the same supplier over and over again.)

The Web is a direct vehicle to a wealth of information on cash management. One highly recommended source is the Internet-based tutorial from the Hancock Bank: Cash Flow Management. Another is an article from the Business Development Bank of Canada: Techniques for Better Cash Flow Management. The Treasury Management Association of Canada (TMAC) offers onsite and Internet-based full-day training courses on cash management. Its web page contains the topics covered in the course and bullets the areas you should follow as standard cash management business practices.

A Helpful Tool: Enterprise Resource Planning (ERP)–based Cash Management

Every ERP system offers some elementary accounting functions. To get started in cash management, a few basic sets of reports that every ERP and accounting system provides include the following: open sales orders, aged analysis, open and closed purchase orders, shipping reports, inventory evaluations, fixed assets, and general ledger statements.

Bring this information together with other financial information to the ubiquitous spreadsheet program. Produce a cash-flow analysis schedule. Look at all areas of your business practices and get a good feel for where to make improvements. Go after areas that will yield the most results from being improved. Find out how much businesses similar to yours spend in these areas. Ask your accountancy firm for advice. Look at business process optimization to determine if there is too much paper-handling and if there are inefficient workflow processes.

Cash management is an analytical process performed by humans, using industry knowledge, gut feelings, and knowledge of the levels of risk. Computer applications that feed business decisions do not think and do not have knowledge. Rather, they apply the kind of logic needed, for example, to compare .001 to .0001. They cannot do what the human brain can do, and that is think. Humans make the final business decisions, not machines.

Some ERP applications have better financial capabilities than others; they have financials which include analytical applications that go beyond the simple accounts receivable (A/R) and accounts payable (A/P) tools. They perform the intelligent, automated merging of the items listed above. They also allow the following items to be entered, to create a big picture of an organization's situation:

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a cash balance report, which shows bank balances, incoming and outgoing cash, and dollar fluctuations
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bank web sites, to spot-check morning or afternoon incoming cash status before authorizing purchase invoice payments
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a cash diary, to identify cash inflows and outflows by absolute certainty transactions (e.g., investments, expenses)
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payroll reports
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business intelligence (BI) triggers and alerts
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ACH receipts and bank files
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budgets

Some vendors to consider for an ERP application to help you handle your cash management processes include Agresso, Flexi, SAP, and Lawson. These vendors are known for their focus on financial ERP systems and cash management. You can learn about more vendors and their offerings here.

Conclusion

Cash management is crucial for the survival of any organization. Realize that purchasing an ERP system that includes a specialized cash management module does not mean you can become lax with your cash management practices; you will still need to pay close attention to the critical areas discussed in this article.

Learn your business, learn your market, and learn as much as you can about your suppliers, competitors, and clients. Couple this information with effective cash management, and you'll be well positioned to grow your business—not close it.