Changing the Politics of Integration

The growing adoption of service-orientedWith so much hinging on better order management,
architectures (SOAs) including SAP's (NYSE: SAP)coordination of all aspects of a product during its
NetWeaver platform and its related applications areintroduction, and the many complexities of pricing, a
having a significant impact on the politics ofhigh adoption rate for SOAs in channels is inevitable.
integration between manufacturers and distributors.In the redefining of these processes for better
The balance of power has already shifted in a fewefficiency between channel partners and
industries to the channel over the manufacturer, andmanufacturers, however, the balance of power in
nowhere is this more visible than in retail, with a casethese relationships is being defined.
in point being Wal-Mart.It starts with greater visibility and control through
There are many other examples, scattered throughsupply chains and progresses into classic
financial services, transportation, logistics, high techpick-and-pack distribution operations synchronized
and other verticals. The point is that service-orientedwith pricing and product content. When you consider
architectures are already redefining many businesseven the best distribution organizations average less
processes that distributors and manufacturers share,than 5 percent return on sales, it becomes clear that
and will continue to redefine these tradingsupply chain synchronization impacts the channels'
partnerships into the future.financials more than any series of demand generation
SOAs Take Over Where Standards Take Offactivities. A lean supply chain is turning into a
The acquisition of Viacore by IBM (NYSE: IBM) thismanufacturers' greatest competitive advantage,
month made me stop and think about RosettaNet,especially if they are relying on indirect channels.
its high-energy, charismatic founder, Fadi Chehade,For the distributor, ability to plan for, shape and
and how his vision of integrating supply chainrespond to demand is a competitive strength. In fact,
processes really was ahead of its time. In researcha former student of mine who worked in Wal-Mart's
I've done on the adoption of RosettaNet in high-techdemand planning section says that demand monitoring
distribution channels, and whether it would eventuallyis such a high priority that during December there are
replace EDI, a couple of interesting insights emerged.meetings every morning to review sales-out data
First, the majority of the high-tech distributorsnetwork-wide for the previous day. Wal-Mart has
interviewed only implemented the order managementthat level of integration to monitor demand.
Partner Interface Process (PIP). In other words, theInsights gained from timely analysis is a major
majority of the 20 distributors interviewed all feltcompetitive advantage, especially for distributors. The
compelled to invest in RosettaNet just to thefollowing processes are just a few that SOAs
transaction level. Second, only one company, Intelincluding SAP NetWeaver will impact in the coming
(Nasdaq: INTC) , completed an intensive RosettaNettwo years:
integration strategy, including all PIPs that includedSupply chain integration. Integrating supply chain
product information and marketing informationsystems between manufacturers and distributors has
management. While Arrow, Nokia, STMicroelectronicsin the past been greeted with lukewarm responses,
and Texas Instruments (NYSE: TXN) are foundingespecially in high tech. That's because product
members and have extensive integration experienceclose-outs and the inevitable strategy of dropping
with RosettaNet, I didn't get a chance to speak toprices by 40 percent or more to move discontinued
them during my survey work.products through channels is easily spotted when
What is so forward-thinking about RosettaNet'ssupply chains' visibility is improved. For many
standards is that they detail the processes by whichdistributors, vendor-managed inventory is also a
the information is used, they are real-time, and theycostly manual process. With supply chain integration
deal with much more complex processes than EDI isand greater visibility, vendor-managed inventory
capable of. RosettaNet's ability to deliver collaborativeprocesses would also be streamlined.
forecasting -- as is evidenced by the firm's work withPricing strategies will start happening in real-time. One
STMicroelectronics and the replacement of EDI byhigh-tech distributor has a room of at least 50 people
Arrow with RosettaNet -- foreshadows the level ofcomputing price tables, as this specific company
change SOAs tailored to the high-tech distributiongenerates well over 1,400 pricing tables every month.
channels will be able to accomplish.With an SOA supporting shared applications, the
SOAs promise to do what RosettaNet is doing in highintensely manual processes of creating these pricing
tech, only on a much broader and deeper scale. Thetables would become much more streamlined and
initial research on SAP NetWeaver early adopters inefficient.
the report, Users Speak Out About SAP NetWeaver,Product introductions synchronized globally. This is the
shows that selecting business processes that areholy grail for so many manufacturers, yet given the
focused on gaining a competitive advantage indisconnects in their channel strategies, it's very hard
selected channels and markets is a primary driver forto achieve. With an SOA in place that includes a
many companies moving to service-orientedstandardized portal and applications for managing
architectures. Where RosettaNet and standards like itproduct launches throughout the many layers and
left off, SOAs are taking over.roles in channels, this goal becomes achievable. PLM
Channel Priorities for SOAsvendors are no doubt thinking about this today.