Fujitsu Poised to (Inter)Stage Glovia's Comeback Part Three: Market Impact

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In October 2003, a leading provider of extended ERP solutions for engineer-to-order (ETO) and high volume manufacturers, Glovia International, announced it formed a strategic alliance with Fujitsu Software Corporation to provide manufacturers, customers, and suppliers with improved collaboration and integration capabilities. Glovia International is headquartered in El Segundo, California (US), and is a subsidiary of Fujitsu Limited (TSE:6702), a Tokyo, Japan-based leading provider of international IT and communications solutions with consolidated revenues of $38 billion (USD) in fiscal 2003. The strategic alliance should allow Glovia to improve its customers' ability to collaborate with trading partners and reduce supply chain costs while enabling Fujitsu Software Corporation to further penetrate the manufacturing industry. Fujitsu Software Corporation, based in San Jose, California, is also a wholly owned subsidiary of Fujitsu, and delivers one of the world's broadest lines of application infrastructure software products, including the Interstage Suite and NetCOBOL.

Glovia is indisputably past its few restructurings and ownership-change hardships from the past few years, and the vendor now has verifiable and clear manufacturing-oriented, extended-ERP product and service offerings, and strategies to execute. The extended period of transitions and restructurings has done a gross disservice to the seasoned vendor whose astute products have been available to manufacturers for over 30 years, and yet, nowadays only some might be aware its longevity.

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Fujitsu Support of Glovia

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After several years of focusing on the manufacturing and field service-oriented, upper mid-market as the Chess division of former MDIS, Glovia as a part of Fujitsu has since produced a plan for launching its comeback attempt, which is built on its sharp focus and expertise within certain industries, improved new product interconnectivity, and quick and inexpensive e-business enablement. To that end, in 2001, it introduced an XML framework, advanced planning, and scheduling (APS) system, and web-enablement, while recently in 2003, as previously explained, it added collaboration and integration capabilities and enterprise-wide SCM functionality. As a result of its commitment and investment in Glovia as a strategic catalyst for Fujitsu's global growth and a vanguard in Fujitsu's effort to globalize its software and service business division, in 2003, Fujitsu elevated Glovia to a business unit from a mere business group level.

To put things into perspective, the Fujitsu behemoth, with close to $40 billion (USD) in revenues, approximately 160,000 employees worldwide, and $2.4 billion (USD) earmarked for research and development expenditures last year, consists of the following four principal business areas: 1) software and services (including IT consulting; application management; systems integration; IT infrastructure management; outsourcing; network services; business integration and systems management middleware; storage management software; business applications; etc.), 2) hardware platforms (including servers; storage systems; PCs and mobile devices; storage devices and peripherals; mobile and wireless systems, etc.), 3) electronic devices (e.g semiconductors; compound semiconductors; media devices; electromechanical components; displays; etc.), and 4) other products and services.

Lately, software and services have become the largest of Fujitsu's four main business groups, generating $16.8 billion (USD) in revenues for fiscal 2003, which was 43.8% of Fujitsu's overall revenue. For the first time, this group generated nearly 10% more in revenue than the hardware platforms group with $13.4 billion (USD) or 34.9% of total revenues. As a matter of fact, Fujitsu is currently the world's third-largest IT services group, trailing only IBM Global Services (IGS) and EDS. This remains a sort of a best kept secret given Fujitsu still remains best known for hardware (e.g., PCs, servers, disk drives, telecom switches, and mobile phones), not software and services.

In many ways, Fujitsu's recent revenues' breakdown shift resembles that of IBM, particularly given that IBM's business model was somewhat emulated by Fujitsu's strategic restructuring in 2002, which included reshuffling several of its businesses, the withdrawal of the DMR Consulting and ICL brand names, and introducing new software packages into US and European markets. Both giant companies are still known mostly for hardware, although their fastest growing business divisions are in software and services. Fujitsu indeed holds leadership positions in several key sectors of the IT, communications, and microelectronic markets. While globally it often trails the likes of IBM, EDS or Hewlett-Packard in the various above-mentioned market segments, the company remains the pride of its domestic Japanese market, either being the No.1 or No.2 vendor in all these relevant segments (e.g., IT services, IT management, storage software, PCs, servers, optical transport, routers, etc.).

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Glovia Background

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Glovia's origins stem back to 1970, when it was founded as Xerox Computer Services (XCS), which then introduced Xerox Business Management (XBM), an in-house manufacturing and financial management applications. In 1984, XCS introduced XBMS application, an MRP II (manufacturing resource planning) and financial management software for high-volume discrete manufacturers with multiple plants, while in 1990, the vendor introduced Chess, one of the industry's first integrated client/server ERP systems and Glovia's progenitor. Fujitsu first became the Asian distributor of XCS in 1992, while McDonnell Douglas Information Systems (MDIS) acquired XCS in 1994, the same year Fujitsu also implemented the solution globally in over thirty of its factories. In the late 1990s, the vendor added a focus on different manufacturing environments and industry requirements. To that end, in 1995, MDIS jointly developed "Seiban" functionality (to be explained shortly) with Fujitsu. In 1998 it introduced projects and material supply solutions, while in 1999 it introduced automotive industry pertinent functionality.

In 1997, Fujitsu made significant equity in the entity by forming a joint venture with MDIS, whereby Glovia International was created. Following a few years of disappointing results, Glovia was fully acquired by major shareholder Fujitsu from the UK-based, former MDIS (now Northgate) in February 2000 (see GLOVIA to be Resuscitated (Hopefully)).

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Fujitsu Poised to (Inter)Stage Glovia's Comeback Part Two: Fujitsu's Support of Glovia

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In October 2003, a leading provider of extended ERP solutions for engineer-to-order (ETO) and high volume manufacturers, Glovia International, announced it formed a strategic alliance with Fujitsu Software Corporation to provide manufacturers, customers, and suppliers with improved collaboration and integration capabilities. Glovia International is headquartered in El Segundo, California (US), and is a subsidiary of Fujitsu Limited (TSE:6702), a Tokyo, Japan-based leading provider of international IT and communications solutions with consolidated revenues of $38 billion (USD) in fiscal 2003. The strategic alliance should allow Glovia to improve its customers' ability to collaborate with trading partners and reduce supply chain costs while enabling Fujitsu Software Corporation to further penetrate the manufacturing industry. Fujitsu Software Corporation, based in San Jose, California, is also a wholly owned subsidiary of Fujitsu, and delivers one of the world's broadest lines of application infrastructure software products, including the Interstage Suite and NetCOBOL.

Glovia is indisputably past its few restructurings and ownership-change hardships from the recent few years, and the vendor now has verifiable and clear manufacturing-oriented, extended-ERP product and service offerings, and strategies to execute. The extended period of transitions and restructurings has done a gross disservice to the seasoned vendor whose astute products have been available to manufacturers for over 30 years, and yet, nowadays only some might be aware of their long product history.

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Enhancements to Its Extended ERP Suite

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The above moves came immediately after the latest version of the company's extended-ERP suite, which was announced in May. The culmination of two years of development effort and customer input, glovia.com 7 represents a substantial increase in Glovia's ability to support the business needs of manufacturers with global operations and complex business structures. The vendor claims its new solution will enable companies to improve their supply chain performance by centralizing demand and supply management while decentralizing production optimization. glovia.com 7 also includes a powerful collaboration and integration platform, more than 60 enhancements to its core ERP functionality and integrates several existing web-based applications.

Possibly the most notable new functionality is the one that aims at improving the performance of complex supply chains containing multiple products, production facilities and business entities that span multiple countries or regions. The solution aggregates enterprise-wide demand and intelligently allocates it to production facilities based on strategic business goals, such as cost reduction or customer service, while allowing for the local optimization of production. To that end, glovia.com enhanced SCM capabilities include new solutions for demand, supply and order fulfillment management.

Glovia's new demand management solution should enable manufacturers to create a comprehensive, enterprise-wide view of total demand by aggregating forecast and customer order data from sales, marketing, channels and customers. It supposedly provides demand planners with views of total item demand and demand allocation, the ability to make forecast adjustments, and drill down to detailed information. With Glovia's new demand management solution, manufacturers should be able to increase the accuracy and reliability of their demand forecasts, improve on-time delivery performance, decrease excess inventory levels and stock outs, reduce costs, and minimize the disruption demand changes have on their operations. Designed specifically for companies with multiple product lines and multiple production facilities, Glovia's demand management solution also incorporates real-time capable-to-promise (CTP) functionality, allowing manufacturers to accurately commit to customer orders and forecasts.

Glovia's supply management solution places global demand in the correct local production facility based on available capacity and inventory levels, while simultaneously considering factors like cost or customer delivery date. The solution enables production planners to optimize their distributed operations to meet demand and allows them to review and adjust how the allocation of orders to production facilities. The new supply management solution aims at providing manufacturers with the flexibility they need to meet changing customer demand while minimizing the impact these changes have on the plant floor.

glovia.com also includes functionality for managing the entire order fulfillment business process, enabling manufacturers to synchronize orders with planned production. Using a memory-resident, constraint-based optimization engine, Glovia's solution determines the best possible supply scenario for given demand. The planning engine takes into account global resources and commitments, including capacity, inventory, orders, critical resources as well as cross-plant and plant-to-customer lead times. The order fulfillment solution includes real-time available-to-promise (ATP) functionality as well as sophisticated business rules that allow manufacturers to instantly offer alternative configurations and substitutions to meet customer delivery dates.

glovia.com 7 also provides manufacturers with a collaborative business integration platform to support their mission-critical operations. As already mentioned, the new platform is built using Fujitsu's collaborative business integration solution, Interstage. The solution includes inbound and outbound XML transaction sets, XML data synchronization capabilities, and functionality for trading partner management, workflow and transaction automation. It also supports the latest technology standards, including J2EE, SOAP, UDDI, ebXML and CORBA as well as industry standards such as RosettaNet.

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Fujitsu Poised to (Inter)Stage Glovia's Comeback Part One: Event Summary

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Glovia International whose capabilities seem to be far greater than its recognition in the global enterprise applications market (largely due to a number of ownership and name changes throughout its history) seems to have finally gotten its ducks in a row, and is now poised for a noticeable return, backed up by a resplendent and committed parent company.

In October 2003, a leading provider of extended ERP solutions for engineer-to-order (ETO) and high volume manufacturers, Glovia International, announced it formed a strategic alliance with Fujitsu Software Corporation to provide manufacturers, customers and suppliers with improved collaboration and integration capabilities. Glovia International is headquartered in El Segundo, California, (U.S.) and is a subsidiary of Fujitsu Limited (TSE:6702), a Tokyo, Japan-based leading provider of international IT and communications solutions with consolidated revenues of $38 billion (USD) in fiscal 2003. The strategic alliance should allow Glovia to improve its customers' ability to collaborate with trading partners and reduce supply chain costs while enabling Fujitsu Software Corporation to further penetrate the manufacturing industry. Fujitsu Software Corporation, based in San Jose, California, is also a wholly owned subsidiary of Fujitsu, and delivers one of the world's broadest lines of application infrastructure software products, including the Interstage Suite and NetCOBOL.

Fujitsu's Interstage Suite provides a collaborative business integration platform that enables companies to relatively easily share and exchange information across disparate systemswhether internal or external. Coupled with Glovia International's extended-ERP suite, glovia.com, the joint Fujitsu solution should enable manufacturers to improve supply chain visibility, increase responsiveness, and reduce costs. Fujitsu's Interstage Suite is one of the world's broadest families of application infrastructure software products for designing, developing, and managing scalable, customized mission-critical applications. The application suite is used by more than 8,000 companies in over 83,000 installations worldwide. As an example, Fujitsu Telecommunications Europe, a leading supplier of high performance telecommunications services and products, has successfully implemented the joint Fujitsu Software Corporation/Glovia International solution to streamline trading relationships with its suppliers and customers and to reduce costs.

Under the terms of the agreement, Glovia International will embed some of the following elements of Fujitsu's Interstage Suite into its extended-ERP solution, glovia.com, including:

* Interstage Integration Manager is the conductor for business-critical systems, controlling and consolidating business transactions and data both inside and outside the organizationvia its systems-centric integration capabilities. Providing a server, adapter kit, and a suite of more than 200 adapters, the product is based on eXtensible Markup Language (XML) and supports web services.

* Interstage Portal lets enterprises integrate a variety of disparate systems and services, thereby presenting users, employees, customers, and partners with one streamlined, consistent visual interface. It provides highly personalized, relevant and timely content, collaborative workspaces, and role-based tasks tied directly to business processes.

* Interstage Application Server is the foundation of supposedly secure, reliable and effective internet and intranet applications. It provides fully compliant Java 2 Enterprise Edition (J2EE) application-hosting capabilities, as well as all the necessary low-level services, fail-over protection, clustering, and other J2EE features for building applications and packaged solutions.

In July, Glovia announced the establishment of the Glovia Innovation Center, which should enable Glovia to share its deep manufacturing expertise and astute extended-ERP solutions more effectively with customers, prospects, and partners. The primary mission of the center has been to educate customers and prospects about the latest advanced solution components of the company's suite--including supply chain management (SCM), collaboration and integration, and business intelligence (BI)--and demonstrate how to use them to increase return on investment (ROI) and deliver a competitive advantage. The Glovia Innovation Center should establish a central knowledge base within Glovia and work directly with the company's sales and professional services teams to disseminate this information.

By increasing the awareness of Glovia's technology and extended-ERP solution components, the center aims at enabling customers to leverage their existing investment in glovia.com more powerfully, and at enabling Glovia to show prospects the comprehensive capabilities of the company's extended ERP suite. To that end, the Glovia Innovation Center has already successfully helped several manufacturers to implement advanced solutions for web procurement and collaboration, including Fujitsu Shared Services Division and Fujitsu Telecommunications Europe.

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Business Planning and Improvement

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A variety of tools and techniques evolved during inflationary times to improve productivity and maximize profits. These include material requirements planning integrated with capacity requirements planning (MRP-II), advanced planning and scheduling (APS), activity-based costing (ABC) and total quality management (TQM). All of these techniques address business problems created by limited capacities. MRP-II and APS tools are designed to maximize the utilization of existing capacity through improved coordination of individual production and procurement activities, without necessarily improving efficiencies or yields. ABC and TQM are essentially diagnostic tools for identifying the root-causes of inefficiencies and defects, and enable management to monitor the effectiveness of corrective actions. Used together, these tools allow management to wring maximum productivity from its existing capital investment, before additional long-term capacity investments are considered.

In a period characterized by stable or falling prices, fewer new long-term capacity investments will be considered. Instead, gradual disinvestment of existing capacity may occur. Before disinvestment, there will be little or no real benefit from using capacity requirements planning, APS, ABC or TQM tools except to improve the coordination and efficiencies of a smaller labor force. But even in so far as labor utilization is concerned, greater business benefits will accrue from short- to medium-term adjustments to the number of resources employed, rather than continuous long-term improvement of labor efficiencies.

Materials management is likely to remain a top priority, for reasons demonstrated earlier. After clearing excess stock, suppliers will be under intense pressure to keep inventories to an absolute minimum, since their value will remain the same or depreciate relative to cash in the event of a deflation. Expanded use of discrete (order-based) master scheduling (MPS), material requirements planning (MRP), manufacturing execution (MES) and warehouse management (WMS) tools can be expected in order to properly schedule and manage materials in small quantities, on a JIT basis. Continued deployment of quality assurance and control tools for the purpose of improving finished product yields and minimizing waste can also be expected.

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Inflation's Demise:Labor Cost Control

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During periods of persistent surplus capacity, manufacturers can be expected to reduce their variable labor costs as much as possible. This may be done through elimination of overtime, shift reductions, work-hour reductions, temporary or permanent pay cuts, temporary or permanent layoffs, and reduction of employee benefits. Further, operations may be scaled back or eliminated at high-cost union shops, as well as within high-cost or restrictive labor markets such Germany and labor markets characterized by low unemployment such as the United States.

These effects will be moderated by substitution of variable labor for fixed assets in the drive to control overhead costs, as previously demonstrated. In doing so, however, manufacturers are likely to accelerate the redeployment of productive capacity from high-cost, capital-intensive locales such as the United States to low-cost, labor-intensive regions such as Asia or Central and South America.

These actions may have adverse and increasing social effects, as dramatized by recent protests in Seattle and Washington, D.C. against the International Monetary Fund and World Trade Organization. Worker demands for improved economic security may lead to renewal of isolationist policies in some locales, which would effectively reverse the economic liberalization and globalization trends of recent years.

Business models designed to optimize performance in the previous climate of unrestricted free trade will have to be adjusted to take account of the artificial incentives and penalties created by any new government regulations. This is likely to create new demand for localized regulatory compliance systems that address taxes, duties, tariffs, prohibited goods and foreign exchange controls. At the same time, reduced demand can be expected for general business and supply-chain management systems designed to integrate the unrestricted operations of multinational enterprises.

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Inflation's Demise:Overhead Cost Control

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Overhead costs are distorted immediately, and dramatically, by surplus capacity. Labor-intensive producers can adjust fairly rapidly through labor-force reductions, but capital-intensive producers cannot. Liquidating properties or fixed assets can eliminate the cost of persistent surplus capacity, but the assets may be difficult or impossible to sell. Manufacturers can be expected to implement a variety of short- to medium-term accounting tactics and longer-term financial tactics in order to minimize the adverse consequences.

Tactical accounting changes can be anticipated in the areas of fixed asset accounting, overhead cost allocation and inventory valuation. Possible financial tactics include restructuring of operations to minimize fixed costs, asset liquidation and, worst case, asset write-offs.

Fixed overhead costs are typically governed by original acquisition costs and pre-determined amortization schedules. The periodic amortization cost thus accrued is divided by production volumes to determine overhead costs per unit. Excess capacity drives these costs up as ever-smaller production volumes absorb constant amortization costs. In markets experiencing falling prices, real overhead costs will constantly increase over the long run because deflation increases the purchasing power of the original investment.

Businesses tend to amortize their fixed assets as rapidly as allowed during periods of inflation and high capacity utilization. This minimizes short-term tax liabilities by reducing pre-tax profits, and reflects the tendency of equipment to wear-out faster the more it is used. But businesses competing in markets characterized by stable or falling prices can be expected to lengthen the amortization schedules of their existing fixed assets as much as allowed, because equipment is not being utilized as much and because there are smaller pre-tax profits to shelter. This tactic has the salutary effect of reducing overhead cost per unit, reducing cost of sales, boosting short-term profits and strengthening the balance sheet, thereby improving apparent business performance. Many of today's fixed asset accounting and cost-allocation systems, however, lack the flexibility to implement such changes quickly. Strong demand for flexible replacement systems can therefore be anticipated.

Related inventory valuations and the resulting cost of sales per unit will be affected, too. During inflationary periods, businesses tend to maximize cost of sales as much as allowed, chiefly to minimize pre-tax profits and the value-added tax base. In the future, however, financial controllers will be pressured to change their inventory valuation methods by whatever means necessary, and allowable, to minimize cost of sales, in order to further boost short-term profits and strengthen the balance sheet. As with fixed assets, many of today's inventory management systems lack such flexibility. Replacement systems will be needed to the extent that surplus inventories are being cleared in the short- to medium-term, and to whatever extent a minimum inventory investment is required to operate the business over the long run.

During inflationary times, automation of plant, warehouse and office operations became an important tactic for minimizing ever-increasing labor costs. Capital resources could be substituted for labor, and written-off in constant, periodic amounts that declined in real value over time as inflation eroded the purchasing power of money.

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Inflation's Demise:Trading

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Just-in-time (JIT) principles became standard business practice during inflationary times. In essence, repetitive purchasing and JIT delivery are tactics for hedging against price increases while minimizing inventory-carrying costs. Buyers negotiate fixed-price repetitive-supply contracts that are fulfilled and paid for over the life of the contract through periodic shipments timed to meet the actual need for goods.

Price stability makes such hedging unnecessary, and deflation makes it highly unprofitable. But buyers will be under even greater pressure to keep inventories low, since the value of inventories remains the same or depreciates in relation to cash. As a result, buyers will insist upon immediate delivery of small quantities whenever they can, at spot prices, although some suppliers will succeed in selling large quantities for immediate delivery by offering "temporary" price reductions, especially during the transitional period. For all these reasons, discrete (order-based) procurement and fulfillment systems can be expected to regain popularity lost to repetitive (schedule-based) systems during inflationary times.

At the same time, buyers and sellers can be expected to monitor competitive spot prices more vigilantly than before. The growing popularity of reverse auctions, data warehousing and data mining testify to the increasing demand for such market intelligence. Demand will increase rapidly for powerful search engines and business-to-business electronic commerce technology to solicit and extract the right information at top speed.

The importance of forecasting systems for short- to medium-term planning is likely to diminish. During inflationary times, suppliers used forecasts, customer orders and future repetitive schedule commitments to anticipate capacity as well as material shortages. Forecast accuracy is critical to the proper timing of business events when capacity shortages exist, but becomes irrelevant when unused capacity is abundant.

Inflation made it profitable for suppliers to be selective about what they sold, and to whom. When persistent capacity shortages exist, profits are maximized by discontinuing low-margin products and rewarding high-margin customers. Performance measures such as Economic Value-Add (EVA), employed in sophisticated sales, product profitability and customer profitability reporting systems, evolved to address this requirement. Suppliers are likely to abandon these tactics when confronted with excess capacity, the sooner the better, and "hunt" instead for as many new customers as they can.

Demand will grow for data warehousing, search engines, opportunity management (OMS), customer relationship management (CRM) and collaborative electronic commerce systems to help the sales force identify and qualify new customers fast. Improved sales incentive, sales engineering and product configuration tools will also be needed to find and close new customer business faster than the competition.

During inflationary periods, non-interest-bearing money owed by trade debtors should be collected as soon as possible in order to maximize its purchasing power, and non-interest-bearing money owed to trade creditors should be paid out as late as possible. In between, this money can be invested in short-term financial instruments or commodities bearing relatively high rates of return, since inflation goes hand-in-hand with higher interest rates and commodity values. Over time, many sophisticated remittance processing, money-management and hedging tools have evolved to meet this requirement.

In periods of steady or declining prices, there is no particular incentive to collect any more money from solvent trade debtors than is needed to meet current obligations. The relative benefits of sophisticated remittance processing, money-management and hedging tools are further diminished on account of the lower interest rates typically associated with price stability. But demand for improved credit management tools and up-to-date creditworthiness data is likely to increase, because of the risk that more customers will be in financial difficulties. Strong demand for sophisticated financial hedging tools can also be expected during the transition, because of arbitrage and currency instability caused by inter-regional disequilibria.

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Inflation's Demise: The Impact on Business Information System Requirements

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Inflation occurs when an abundance of money exists in relation to goods. This creates artificial demand as consumers accelerate their purchases to avoid future price increases. Suppliers, competing to meet this demand, confront temporary capacity shortages that they alleviate by shifting resources to higher-margin goods and raising the prices of lower-margin goods. In addition, they accelerate purchases of material to avert shortages and avoid future price increases. These actions create additional demand for goods, perpetuating the inflationary cycle.

Today's ERP systems originated from Material Requirements Planning (MRP) and Manufacturing Resources Planning (MRP-II) techniques developed in the 1970s and early 1980s. They focus on improving the accuracy, speed and visibility of short- to medium-term resource planning and allocation decisions, thereby improving management's ability to confidently make profitable commercial decisions. They also focus on minimizing operating costs, and maximizing short- to medium-term revenues, through improved coordination and execution of daily sales, engineering, procurement, production, logistics, maintenance and accounting activities. In short, they are designed to maximize profits by timing business events so exactly that productive resources are committed as late as possible, but never too late to miss profitable sales opportunities.

These are very important business problems during inflationary times, because one or two avoidable, critical resource shortages could mean a missed sale and reduced ability to recover fixed costs. For example, accidental over-commitment of a bottleneck work-center or shipping vessel may delay the arrival of finished goods and cause upstream work-centers to shut down until the backlog is cleared. The cost of underutilized upstream capacity is still incurred, even if production or shipping delays cause lost or delayed revenues.

Prices stabilize or fall when an abundance of goods exists in relation to money. This artificially reduces demand as consumers postpone their purchases in anticipation of even lower prices. Suppliers, challenged to recover their fixed costs, now have excess capacity. They respond by cutting the prices of goods, especially their high-margin products, in order to stimulate sales. In addition, they decelerate their own purchases of material to use-up existing stocks, and await future price decreases. These actions further postpone the demand for goods, setting the stage for a deflationary cycle.

At this writing, Asia and other developing regions are slowly recovering from an acute recession and strong deflationary pressure, while other regions (notably, the United States) continue to enjoy robust growth and modest inflation. This disequilibrium has created a combination of inflationary as well as deflationary pressures throughout the world. For instance, demand for goods remains strong in the United States because buyers there still have inflationary expectations. Asian suppliers have cut prices in order to boost export sales and utilize excess capacity.

If, as many believe, the world is in transition from inflation to price stability or perhaps deflation, how will business priorities be affected before, during, and after the transition? How will changes in business priorities affect ERP system requirements.

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Vendor Strategy and Trajectory

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Coming from the creative side of web design, Razorfish holds no particular allegiance to a specific technology vendor - in other words, it is a technology agnostic, which is not an uncommon characteristic of vendors of this genre. The advantages of this approach are that it can in theory better serve its clients by providing the best and most appropriate technologies to specific problems. The downside is that the company must have adequate resources to cover all the technologies it will need. To achieve this, however, means that internal resources - management, corporate knowledge and project management, personnel training, and cross-office fertilization of skill sets - must be efficiently utilized. Razorfish has adopted a number of strategies and developing infrastructures to meet this challenge.

Internal Structure and Culture

In general, as a technology agnostic, Razorfish personnel are divided into functional groups rather than technology areas. This means that the personnel focus on architecture, or design, or technology implementations. People move up in these functions, though often the line between function groups is blurred, enabling at least some to cross between the function groups. In this way, at least some personnel can climb to be Client Partner managers from a variety of backgrounds. A Client Partner is the senior client management interface.

Geographically, Razorfish is divided into two zones: North America and Europe, each with its own managing VP. The two zones are linked through a basic knowledge management and project information system called MOM. MOM allows users on either side of the Atlantic to review current projects and project skill requirements, to plan their agendas and interact with others on the network. MOM is the beginnings of a comprehensive inter-office knowledge management system.

A dedicated high-level executive position currently manned by Bob Lapides (EVP of Global Process, Methodology and Market Transformation.) provides the means to sew management systems together and create a unified international presence. Such issues as technology transfer across offices and efficient utilization of skills for project planning and execution are addressed with office group leaders who create skills communities among the offices. MOM and the skills communities reduce travel and traveling costs.

Razorfish's philosophy is that good technical people are able to deal with many different technologies, learn them quickly, and apply them. Within the organization, mentor programs have been established, often across function lines. The mentor can accept or refuse a request, but generally can take on four or five 'interns'. Apprenticeship style learning means skills are learned through osmosis and on-the-job practice more than by any formal training program. However, Razorfish insists the quality of its people is high, and formal training programs are not necessary.

Culturally, Razorfish is a work-hard / play-hard organization. It is expected that their people deliver quality work, since this is what keeps the customers coming back.

From a personnel point of view, with a growing population currently at about 1360 employees, Razorfish has a billable force of over 900. Of these, roughly 20% (about 180) are strategists ( usually Client Partners), 40% technologists (about 360), and the remaining 40% (another 360 or so) are designers, spread amongst its offices. Some 45% of its skill base - mostly in Europe - are devoted to broadband and wireless solutions such as interactive and enhanced TV, and the skill set includes the physical design (including board level design) and branding of hand held devices. Roughly 25% of the payroll is in support and executive management roles.

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Razorfish Wants to Get its Name Out on Broadband

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Razorfish, Inc. (NASDAQ: RAZF) was founded by Jeffrey Dachis and Craig Kanarick in 1994, and has evolved into a Digital Business Service Provider (DBSP). It was Dachis's second creation following "In Your Face Inc.", a self-described 'guerilla marketing events firm'.

Razorfish describes itself as is an international digital communications solutions provider, and goes under the maxim "Everything that can be digital, will be digital'. The company cut its teeth on animated web design in server-push / client-pull in 1995, working for the likes of IBM Personal Computers, AT&T, and CMP Publications. From its beginnings, Dachis saw digital technology as a means to change the way business works, though at the time most online services were largely no more than web catalogs.

Razorfish's intentions were - and are - to lead the digital revolution rather than be led. Its early success gave it the cash and share value to acquire the strategic building blocks it needed to follow its vision. Recently it acquired I-Cube to give it respectability as a systems integrator, and TSDesign (Boston) whose main function is to provide quality assurance to the user web experience.

In Europe, it extended its reach into wireless by acquiring Spray Ventures and recently opened up a wireless laboratory in Helsinki. Its acquisitions in the U.K. of CHBi for broadband and Sunbather for web design in Europe, and Fuel and Tonga for web design capabilities in the media industry have enhanced its capabilities and strengthened its strategic positioning as a complete service provider.

Razorfish has also grown partly organically, but this is the lesser process, and must pull together the many strands it has built through internal organizational processes and infrastructures, something it is presently busily doing. Razorfish management has recognized that in this game, you must aim for the Holy Service Grail - providing end-to-end solutions (EES) to its clients. To do this it has developed procedures and internal infrastructures to share knowledge and integrate its diverse acquisitions.

In April 1999, Razorfish went public with a share offering, raising about $45M to provide fuel for its expansion.

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