Supply Chain Software And The Google Model

Different Software Models

In the excellent article at the link below, it is described how there are two different software models.

http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html

One is described as the traditional software model and the other as the Google model. Here is how the models differ:

Google, by contrast, began its life as a native web application, never sold or packaged, but delivered as a service, with customers paying, directly or indirectly, for the use of that service. None of the trappings of the old software industry are present. No scheduled software releases, just continuous improvement. No licensing or sale, just usage. No porting to different platforms so that customers can run the software on their own equipment, just a massively scalable collection of commodity PCs running open source operating systems plus homegrown applications and utilities that no one outside the company ever gets to see. – Tim O’Reilly

We have pointed out on several occasions in this blog and in others, that a non web centric approach to supply chain software is retarding the industry and resulting in worse software being developed and lower value implementations. 100% web enabled software is technically feasible, however, most supply chain vendors are still not providing hosted solutions to clients, and the clients are by and large not asking for it. It seems both vendors and customers are stuck in the past. One company that we reviewed called GoMobileIQ. They provide both their software as a service, and actually leverage Google Maps for its product, further extending the web enablement concept. (this company’s offering is described in this post)

http://supplychaininnovation.wordpress.com/2009/06/07/google-maps-and-gomobileiq-for-vehicle-routing/

However, this is so uncommon, that GoMobileIQ is more the exception rather than the rule. The supply chain software industry is following the old lower value added model of software distribution, and is very close to never basing their systems on other systems, as GoMobileIQ does with Google Maps to specialize in their development. Instead supply chain vendors require expensive and problematic integration projects. Either none, or very close to none create an API that can be called and interacted with over the web.

Possible Future

If supply chain software vendors move to a software as a service model, they will find, as Google has found, that the focus moves from the software, to data management. As applications begin to become more open, the disadvantages to being closed will become more apparent. At first only smaller companies will be a market for web enabled software, as large companies are bought into the current defunct model. Smaller companies will use this open software for a competitive advantage, forcing the big companies to take notice. As the vendors become more open, the more closed non-web enabled vendors will be at a competitive disadvantage. At some point a tipping point arrives, and eventually all supply chain software becomes a service.

Any Web 2.0 vendor that seeks to lock in its application gains by controlling the platform will, by definition, no longer be playing to the strengths of the platform. – Tim O’Reilly

Present Discussion of Software as a Service

Many conferences and white papers have been written by vendors on the topic of software as a service. We can say categorically that this is mostly all talk, a way to sound hip and with it. However, the larger and more successful the vendor is using the present model, the less they have an interest in the software as a service model. We saw a presentation by SAP about their vision for software as a service, and laughed. Their vision for software as a service, is no software as a service. For years SAP has used the concept that its very difficult to integrate systems, and therefore you should purchase SAP for everything because its already integrated. SAP has based a large part of its sales strategy on being a closed system. They also happen to be one of the most closed systems currently designed:

1. Queries can not be placed on tables as with other applications but must go through a specialized layer
2. The software continues to send something called IDOCs, which are an antiquated hierarchical format from the mainframe days
3. Tables can not be easily found from the user or configuration interface and many fields are in tables that are virtual tables

Those that propose that currently established vendors want to offer web enabled services because it is “win-win” do not understand how software vendors attempt to lock-in customers to their solutions. There is nothing new about this, companies desire monopoly over free competition or transparency, this was as true during the reign of Standard Oil, as it is now with Oracle.

The history of innovation is difficult to contest, innovation on open systems cannot be made by companies that currently have a business model based upon closed systems. Therefore, no innovation will come from SAP, Oracle and other large vendors. They will continue to publish white papers that theoretically discuss web enablement, but these are like white papers on hydrogen fuel cells (hydrogen is a faux energy alternative has no economically viable fuel source) by Exxon, merely designed to seem cool, while postponing the inevitable as long as possible. This strategy is very successful in preventing true innovation. In the example of hydrogen, it gets close to $1.2 billion in funding, but has absolutely no hope of ever being an alternative fuel. Meanwhile, a real contender, solar gets only $150 million. This is what power in the marketplace and politically means. It means the ability to stop innovation that undermines your business model. This is what the major vendors are doing with web enablement.

Who Will Lead the Way?

That is easy, as always the small innovative risk tolerant software companies with less installed base to protect will lead the way. GoMobileIQ is one company that is already there. A second contender is Arena Solutions. (read more about Arena at this post)

http://spplan.wordpress.com/2008/12/09/bom-and-mtbf-and-product-structure/

They are most of the way there and ready to break out to a new level. However, they cannot fully benefit from their web based model because the industry awareness is not there….yet.