By Brian Kilcourse, Managing Partner
10/20/2009
“It was the best of times, it was the worst of times.” That’s the opening line of Charles Dickens’ 1859 novel, Tale of Two Cities. Somehow, that’s apropos to a discussion of two meetings held last week by the behemoths of retail software, Oracle and SAP. Oracle’s retail sessions were part of the company’s mega Openworld event in San Francisco. SAP’s Retail Forum was a focused one-day event in Las Vegas. There probably aren’t two cities in America more different than SF and Las Vegas, just as Oracle and SAP are as different as night and day in many ways. But rather than get into a fruitless “yeah-but” discussion about who’s got the better software, we want to highlight where the two companies agree – because those areas of agreement are probably where retailers need to focus on the most. After all, to use another oft-repeated phrase, “great minds think alike.” These companies- and their competitors- spend millions to address what they perceive to be the industry’s biggest challenges, and those efforts can take two years or more to yield something useful. That’s why smart CIO’s try to ingratiate themselves into advisory panels or get a peek into the development labs of the big companies – they know that if the big solutions vendors see a problem, it is probably real, and they need to see it too.
It’s the best of times for retailers seeking IT solutions to their business challenges, because there are so many choices out there – and guess what? most of them actually work! It’s the worst of times, because in this recession, capital and time are so scarce, and retailers are under pressure to cut costs. Notwithstanding both Oracle’s and SAP’s promises of fast ROI on IT investments, retailers have every reason to be wary. After all, they’ve heard that before.
Skepticism aside, the truth is that application architectures are remarkably better than they were ten years ago. Many of the things that CIO’s promised in the late ‘80’s have actually come to pass: process automation, business rules that are encoded in such a way that they can be reused in automated processes, data access that is open and fast, user interfaces that are loosely coupled to the underlying applications to enable flexibility in how data and business rules are accessed, and of course, anytime/anywhere/anyhow access via a network. Both Oracle and SAP deliver on the technical promise – although there are big differences in how they get there.
So where do the companies fundamentally agree? Here are 10 areas of common ground:
1) One view of product, inventory, the customer, and demand across the enterprise is key to localizing the value proposition. In order to be able to localize assortments, price, and promotion, retailers need to be able to see what they’ve got, who wants it, when, and where;
2) Optimization “science” is real, and it’s important. Early providers of optimization technologies touted the “science” of their solutions as a way of differentiating them from the “art” of traditional merchandising practices (much to the derision of retailers at the time). But the ability to optimize assortment, price, promotion, and markdown has real benefits, and Retail Winners are taking advantage of what the “science” has to offer;
3) “Real time” is now. This is a drum that RSR has been beating for some time, and the big solutions providers make it happen. “Real time” (in this context, as opposed to “batch”) information is vital to the fast moving retail business model, on both the customer facing side of the business and on the supply chain side. Although it’s a stretch to think that retail systems can be predictive, they can certainly help companies proactively react to events on the ground as they are happening. This could be a supply chain event such as a shipment delay or the company’s #1 customer logging on to find a product, or anything in between.
4) It’s time to re-invest in retail business intelligence systems. To the extent that “business intelligence” has been automated at all, retailers have “extracted, transformed, and loaded” data collected overnight from transactional systems into data bases or data warehouses, primarily to enable merchandise planning and financial analysis. In most cases, spreadsheets and report writers have been the user tools of choice. But now, there are new types of data available, and more is being invented (for example, via social networks), that can give retailers and their partners new insights into the consumer mindset. The new information doesn’t fit neatly into the transactional aggregations of yore, and to help companies make sense (“intelligence”) out of it, both SAP and Oracle are aggressively offering new solutions (Oracle with Exadata and its BI suite, and SAP with Business Objects Explorer);
5) Operational, financial, and merchandise forecasting/planning need to be synchronized. As RSR’s research has shown repeatedly, soloed forecasting/planning is a key inhibitor to better performance. Both companies are helping their customers fundamentally address this challenge;
6) Cross channel consumer behaviors are here to stay, and need to be enabled by the retailer with consistent rules and information available anywhere;
7) Mobile enablement of both employees and customers needs to be addressed;
8) It’s time to hyper-optimize non-differentiating business processes in order to free up resources to do something interesting. Both Oracle and SAP offer process “prescriptions” (our term, not theirs) for common retail business processes. The notion is that if companies adopt these “best practices,” they will get the value promised from the technology investment. More importantly, companies that hyper-automate non-differentiating functions can generate money and mindspace to innovate;
9) Retailers need the ability to start where they want to. Both companies have made great efforts to enable customers to implement pre-integrated processes and automation where they need to and not necessarily where the vendor says they have to;
10)Middleware is a “must.” Both vendors are pushing more and more of their solutions toward the “middle” of the technology stack, so that it can be presented in any way the end user needs it (mobile, via the web, etc.), and at the same time reducing technical redundancies that typically raise the cost of ownership to unreasonable levels over time.
Back to the quote, “great minds think alike” - that is only the half of it. The full quote is, “great minds think alike, and fools seldom differ.” Not to put too fine a point to it, but Oracle and SAP disagree on how, technically, the issues above (and others we didn’t mention) should be addressed. But we’ll leave it to them to explain.
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