Off the Shelf: The Retail & CPG Blog

World's Factory... Shutting Down???

2012-01-03T09:28:31Z

People's Republic of China's annual average GDP growth for last decade (i.e. 2001 to 2010) was 10.5%, which was equivalent to the combined growth rate of all the G7 countries. The result of this express growth was that by the end of 2010, China's GDP was USD 6 trillion (next only to USA) and one fourth of this was accounted only by exports. China's exports value (as shown in the table) for 2010 reads USD 1.58 trillion, just about India's total GDP. From Apparels to toys, from electronics goods to furniture, you just name it... China produced almost everything at very competitive prices and Global retailers treated China as their one stop shop - the world's factory.

Everything was going well until recently when Chinese manufacturers started feeling the heat of inflation and rising fuel prices. The three main reasons why the world's factory was going all guns were - cheap manpower, low energy cost and low transportation costs. So this low cost production phenomenon was a majorly dependent on the low crude oil prices. But, the crude oil price has gone almost double of what it used to be 10 years back and so do the energy and transportation costs. Also because of soaring inflation, the costs of raw material are going up day by day. Additionally, inflation has also increased the cost of living in China, hence the workers demand more wages and gone are the days of getting cheap manpower. Basically, it will not be wrong to say here that the edge which Chinese manufacturers had over the other manufacturers is getting blunt sooner than later.

The wounds are getting visible now. Few days back Asda, the British arm of Wal-Mart, announced that it is buying some of its fabric from the UK this year. And this is not the only case, many other retailers have been heard moving from costal parts of China to the inland cities where wages are less (though they still have to bear the higher transportation costs) and others have announced to move out of China all together, to the lower cost locations such as Bangladesh, Pakistan, Indonesia, Philippines, Thailand, Vietnam etc. To encounter the high logistics and supply chain costs, the US retailers are also trying to move to the concept of 'Near-Source' Manufacturing. This trend is going to be beneficial for the locations like Brazil, Mexico, Argentina, Central America and Caribbean. Talking about the European retailers, they have one more reason to move to the 'Near-Source' Manufacturing and that is the current financial crisis in Europe. Many European countries are putting extra efforts to strengthen their Manufacturing units to generate revenues and counter the crisis. This means cheaper Denim from Turkey, Ceramics from Italy, Toys from Germany and plastic items from Hungary to name a few.

Though there can be some skepticism in sourcing products (and eventually relying) on already crisis hit Eurozone. Also a worrying fact may be that the European retailers who are paying the Chinese suppliers in US Dollars currently will have to shell out GBPs and EURs which are soaring closer to 1.5 USD and 1.3 USD respectively. But if we see the big picture - overall the Global prospects of this new 'Near-Source' Manufacturing model look good and it seems to be a concept that will prosper in coming future. This will not only diversify the retailers' Supply Chains by decentralizing the production but also will lessen the over dependency upon China. Plus, this surely will encounter the current problems of rising fuel rates and higher wages.

May be this far too early to demean and write off China's manufacturing prowess... May be China will not tank overnight. Yes, this process may take some time but its occurrence is inevitable. Soon we will start experiencing the decline in Chinese exports and over a period of time the 'World's Factory' will be shut down. Eventually the Dragon will fall and others will rise...

This holiday season, what will make shoppers click?

2011-11-27T23:33:13Z

This Thanksgiving Day and day following often referred to as Black Friday witnessed blockbuster results for online retailers. Thanksgiving sales ended up 39.3% over the holiday last year. Mobile traffic on Black Friday was 14.3 percent of all retail traffic compared to 5.6 percent in 2010. This season will definitely be an interesting time for marketers. The National Retail Federation (NRF) projects that 36% of holiday shopping will be done online (leveraging the Web for researching, comparison shopping before making a purchase).

]]> Retailers are scampering to get shoppers attention and mind share to get most out of it. Several things that are of focus this season are:

1. Value for money / good deals: Consumers continue to look for good value. This doesn't just mean the price itself - it's about conveying to the customer how the price relates to the qualities of the product such as quality, durability, fashion quotient, uniqueness, and the like.

2. FREE shipping- According to Shop.org, a record 92.5% of online retailers will offer free shipping this holiday season - and that's not only going to be a Cyber Monday staple. Free shipping offers are likely to be found all holiday season long, as 56% of retailers say their budgets for free shipping are higher this holiday season than last and one-third say free shipping offers will start earlier in the season than last year

3. Well Designed apps! With over half of smartphone users using their devices for shopping this holiday season, it should be an interesting focus group to watch the shoppers in malls run into each other with half of the foot traffic playing on their smartphone. If this wasn't a priority for marketers, it will be the most prolific year for the app in our history.

4. Guaranteed on time delivery: Again, imperative for holiday purchases in particular via clear, visible shipping deadlines calendars

5. And last but not the least durable Operations- a higher priority for 2011 than flashy social or mobile strategy, operationally crucial areas of inventory management and planning, along with site performance will be key to success.

So what do you think shoppers really are looking out for and what should retailers do to meet their needs? Please share your thoughts and comments.

A closer look at the curve(s)

2011-11-15T13:58:10Z

An immediate mention of the Bell curve would ensure no one reads my blog beyond the first line. Talking about the curves that mere mortals are interested in, I remember myself once hunting for a bean filled "Simba" toy in the neighborhood stores in NY. I couldn't find the thing I was looking for; to be handpicked and shipped to a destination of interest. Simba being the protagonist in "The Lion King" a landmark animation movie of our generation, not finding it left me a little disappointed. So, I turned to Amazon and found instantly an abundant choice of the product. I did not get to hand pick it, but got hold of the authentic Disney collection. The reviews helped making sure it was a good buy. Not wasting much time, I shipped it to be handed over on the desired date. Did it reach its destination on time? How was it received? Or it was redirected abruptly while in transit is a story to be told elsewhere.

The fact that I was not able to find it in the neighborhood Toys R Us and Sears but was able to find easily on Amazon.com with multiple vendors with recent reviews implied that there was considerable demand of the product. Did the assortment managers miss a trick somewhere?

Then I wondered the product would have lost out in the assortment optimization/SKU rationalization exercise.

Then I came across a theory which contradicted the fundamental principle behind assortment optimization in the title, "The Long Tail" by Chris Anderson. It talks about how the endless choices available to the consumers are bending the 80-20 rule wherein the top 20% of products make up your 80% of revenues. With the advent of digital commerce, the incremental cost attached with carrying humongous assortment has drastically reduced to become almost negligible. The once seemingly endless aisles of Wal-Mart are no match when it comes to the practically endless, virtual aisles of Amazon.

An interesting statistics published in the book says, 25% of Amazon's music sales are with products which are not available in a brick and mortar retailers assortment. It's more interesting to know that this percentage is getting bigger by the day. The sales of these titles are frequent but small in number and geographically diverse, but they are not the constraints the online retailer has to lose sleep over.

The assortment optimization fundamentally tries to optimize the number of products that would make the maximum sales and SKU rationalization does the same with the SKUs within a product line assuming the consumer picks the product from within the available choices.

If I try and combine in a crude scenario:

A K-Mart aisle has 5 brands of a product line and after the SKU rationalization it decides to do away with one brand which makes the least numbers in terms of sales.

Now when a customer comes and tries to find the brand which has been rationalized, he/she might not go for the available brands but order it online. If this occurs a couple of times, the retailer might just lose out on the customer.

You can't mistake the brick and mortar retailer for optimizing its assortment as it has to maximize the returns owing to the ever increasing costs involved in physical sales viz. the inventory carrying costs, real estate prices, promotional expenses, etc. The only comforting factor is the limited geography a store has to cater to. For the online retailer though the market is limitless, the cost of sales is very low. Only thing is, it has to ensure the search results are accurate enough to show the relevant products on the first page or the consumer would switch websites in a jiffy.

Visualizing the scenario on the bell curve will tell you the brick and mortar retailers are trying to concentrate on the chunk that generates maximum revenue and it makes sense for the online retailers to spend larger efforts on the tail of it. In short, both are waging their battles on the either sides of the curve.

It's not a level playing field. Still, the game never stops!

- Harshad Deshpande

Soap-makers of the world, unite!

2011-11-10T18:53:19Z

Henry Ford once famously quipped about the Model T car in 1909- Any customer can have a car painted any color that he wants so long as it is black. As I hurriedly move around the aisle of the local Kroger Grocery store looking for a particular brand of I-forgot-what; I couldn't help but think that this was perhaps the best instance of SKU optimization ever done!

But this is 2011, and things have become a tad more complex ever since. CPG companies are looking to hold on to their market share- at the added cost of increasing their SKU portfolio; retailers are looking to streamline their aisles, lessening clutter and increasing their efficiency; and above all- customers are looking for simplicity in the choices they have once they enter the retail stores rather than the overwhelming assortment of confetti colored, similar looking products that craves for attention across the aisles.

Although many would have liked us to believe, but the fact is that just having a presence in the social networking bandwagon won't suffice if the CPG companies were to win the battle in the stores. Like a duck which is frenetically paddling underneath but shows a Zen like calmness on the surface- there is hard work being done by the enterprising CPG companies to stay ahead of the curve and optimize their SKU portfolios.

Michael E. Porter's 5-forces model more or less defines the market strategy that an organization can employ to gain the maximum on its limited resources, increase RoI and maintain their competitive advantage. For most CPG companies reducing SKU complexity and joining the lean-trim bandwagon might be the most obvious thing to do. CPG companies are looking deep at their tactical and strategic factors to come up with a win-win formula and SKU Optimization is a clog in that wheel of success; albeit an important one. An ideal situation for strategic decision makers keen on a strong SKU Optimization process is to keep on reducing the number of Stock keeping units as much as possible- which in turn would lower costs, reduce losses due to OOS (Out of stock) of the Power SKUs, and efficient economies of scale.

The devil is in the detail, or in the realm of BI we call it 'data'- sometimes for the lack of it and sometimes for the overkill. In order to generate reports on key SKU Optimization metrics we are looking at synergy between disparate data sources, business intelligence and reporting tools, and various departments within an organization with their own agenda. Moreover, there is always a trade-off between the cost of acquiring the data and analyzing it to make sense vs. the incremental benefit the business users derive out of the report. They must look for answers to critical questions like which bottom SKUs to trim, which are my power SKUs, how much market share I'm willing to lose to retain my cost competitiveness and so on.

BI professionals are looking at combining data from disparate sources like Shipments, SAP, Nielsen, AOD and then normalizing the metrics to give a clearer, common picture of the state of the business and making it simpler (1-2 click reports) for the users to analyze the report more effectively and make real time business decisions in a collaborative mode. For a truly global CPG company, we are talking about similar reports being generated across geographies and more standardized the process, more optimal is the output. A typical SKU Portfolio Optimization report typically consists of SKU Count, Productivity, and Ranking of SKUs details and the decision makers are able to slice and dice the filters to suit their needs.

The data is the hard fact, how it is interpreted to suit strategic and tactical needs is of the essence and to roll it out for multiple categories, brands, SKUs, Business Units, Channel will define the thin line between success and failure. For instance, A Loss Leader strategy employed by a CPG company will obviously have a different philosophy than say a Profit Maximization Strategy.

An example-

While analyzing the SKU Optimizations report details we might observe that a particular SKU is sold only to the Bottom 3-4 Customers.

The questions that immediately comes to our minds are-

· Is that a strategic decision? Why are we even selling this product to the bottom customers only? Are they a strategic partner in some other Geography?

· Can we stop manufacturing these SKUs and replace them by the Top selling SKUs? This will reduce my costs, reduce OOS and will give me more space in the aisles for my Top SKUs.

· Or wait!! Are these my discontinued SKUs that are being liquidated and sold to the bottom customers?

Although the CPG companies may not like it, but reducing their long tail SKUs which makes up for say, the bottom 10-12% volume SKUs as their 'one-size-fits-all' SKU optimization strategy is an adventure waiting to unfold. The objective of a good SKU Optimization initiative remains the same- Reduce OOS, optimize the retail space and save on fixed and variable costs. SKU Optimization, for a fact, is the journey; the traveler needs to decide where they want to go!

At the Kroger store, I saw some promotional packs of a particular brand of chips in the aisles- and then I thought to myself- what a terrible waste!! Extra production shifts, marketing costs, extra packaging, one additional SKU, added complexity and what not.

Am I becoming cynical? I don't know. I just wish for a simpler, clutter free and efficient world. Well, isn't that a truism?!

Are Brick and Mortar companies facing extinction?

2011-11-07T14:38:43Z

The online retail sales have grown by more than 20% annually compared to only 2.9% for brick and mortar retail sales in the last decade. Does this imply that even the large brick and mortar businesses are soon going to be extinct? The answer to this probably lies in adapting rather than fighting the change.

]]> Normal 0 false false false EN-US X-NONE X-NONE

With the online retail sales growing by more than 20% annually compared to only 2.9% for brick and mortar retail sales in the past decade, this is an obvious question which some of the large businesses in the retail industry might be having. Consider the case of Borders, the second-largest bookstore chain in the US. It has closed hundreds of stores, and laid off 11,000 employees. Other bookstores like Barnes and Noble and Chapters are also struggling hard for survival due to cut-throat competition from the online bookseller Amazon.com. Similarly, Blockbuster, once the undisputed king of the video rental industry, with more than 4,000 locations and about 60,000 employees has succumbed to competition from Netflix and other online DVD rental services. The company filed for bankruptcy and was acquired by Dallas-based Dish Network but is now attempting to compete directly with Netflix through its Total Access service that enables subscribers to rent DVDs online.

In past, big stores flourished as they provided clear differentiation from small stores by way of unique combination of large assortment, wholesale pricing and one stop shop experience to consumers. Today, online retailers have extended these benefits by having much better assortments, better pricing and also convenience of shopping anywhere, anytime. The only negativity probably is that shoppers don't get the advantage of touch and feel and immediate gratification of the product. Many retailers now, understand that customers see them as one brand, one company and do not distinguish between their multiple retail locations, stores or e-commerce site. Therefore, they are trying to empower in-store customers with internet access, may be via a mobile experience using a barcode or a QR code scanner or kiosks to provide them with capabilities that they have online like-

· Viewing additional product information, relevant customer reviews, and Q&A, and seeing photos of the product in use.

· Checking product availability, backorder items, or reserve items at store locations.

Considering top-rated products and their category-wise listing via top-rated aisles in stores, showcasing top-rated products, advertising top-rated products with shelf tags to capture shoppers' attention.

Having access to relevant social data like streams of relevant tweets, Facebook status updates, and customer reviews

Having a personalized shopping experience by virtue of display of relevant recommended items or exclusive deals based on the shopper's page views and cart. In stores, many retailers are experimenting with text messages or push notifications as a way to replicate this function.

With rapid advancement in technology, perhaps the only way of survival is to stay nimble and expect the unexpected. So where do we see the future? Please share your ideas and comments.

Essential and Savvy features for your Social Solution

2011-10-03T20:25:20Z

I have discussed about some important strategies that a retailer's social media plan should entail, in one of my blogs earlier. It is extremely essential that we also provide the right features in our social solution. In this blog I have discussed some very interesting features that a social solution must include. This list is a result of an extensive research of various social features currently available in the market and being put to effective use by various online businesses. We had also presented these ideas through a PoV last year.

We have all known of the facebook and twitter share/like button and this has been extensively talked about thus far. We also know about features such as the "Shop" tab on facebook, But there are some very interesting features that can make your social shopping solution savvy and fun.....

]]> Co-browse:

The name of the feature is self-explanatory of what it can provide. This option allows multiple users to browse simultaneously with their friends by sharing the unique link generated by selecting the option co-browse. The user can share this link with any number of his/her friends and the friends' WebPages will automatically get updated with what he/she is browsing on the website. Now that they are on the same page, they can interact using a phone or can chat through one of the social networking / chat platforms and connect with each other. Once the discussion is done, the co browsing session can be closed. Moreover, to make this a more end-to-end solution the retailer may opt to provide an online chat facility to enable customers to chat with each other as well.

Ask My Friends (Discussion boards/consumer forums):

Again, a straight forward solution, but more of a discussion forum rather than a chat facility. This option will allow users to ask their friends what they think about the chosen products, friendsource relevant feedback, and get multiple points of views from their friends from different social networking platforms. When the invite message/mail is sent the template will have 3 sections.

Section 1: Brief description about the product. (For example: Brief description about Apple & Dell Laptops.)

Section 2: The customized message from you (For example: Hey All, I am finding it hard to decide on which laptop to buy, pls let me know you thoughts so that I can confidently go ahead with my purchase)

Section 3: A url which will direct the friend to the Discussions page of your account on Retailer's website.

Reviews & Ratings:

This option will allow the user to check the Reviews and Ratings related to the selected products which he/she is willing to buy. The user should also be able to write reviews for various products/services and also rate the same, if he/she has already experienced any. Amazon.com has been at the forefront in this area. Also widely know are Reviews and Ratings solutions from Bazzarvoice (http://www.bazaarvoice.com/)

Group Deals:

The group deals to be offered by the retailer should be displayed in this section of the retailer's website to leverage the power of collective buying. These group deals offer huge savings to the consumers. As an example the user can add himself/herself to a group deal, and also invite their friends from various social networks to the deal .If a minimum number (as decided by the retailer) of individuals purchase the item, the group deal gets through.

Deals for U (Personalized recommendations):

In this section, the targeted and more personalized promotions from the retailer to the consumer should be displayed, based on the browsing history, products purchased in the past and products added to the "Favorites section" or "Wishlist" etc.

Products purchased earlier:

In this section, the products which you have bought in the past should be displayed. The options provided here could include Co-browse, Recommend, and Rate.

Products browsed recently:

In this section, the products browsed recently by the user should be displayed. Amazon.com leverages this feature very effectively.

Moreover, there are other common features that will make your social shopping solution complete - these are, Popularity Lists, Public Profiles, Follow Lists, Gift Registry, Wish List, Communities, RSS feeds, smart-phone social shopping apps such as ShopKick etc.

These social features executed effectively can have huge benefits to Retailer as well as consumers.

Benefits to retailers:

Differentiating factor: Most of the best features existing in the market have been talked about above and a collaboration of these will be a unique experience for the customers.
Power of word of mouth: Since you are providing the tool to collaborate, there is a greater chance that your product will be talked about. This is the most effective way of marketing your products and services - The viral marketing way!
Research data: The research data about your products and services are available for free for you as you allow the customers to collaborate and discuss on your website, which in turn will save money spending to the external vendors. There is a lot of rich data available to you in terms of customer information, likes, dislikes and preferences, the products that customers browse/view, the products that customers actually end up buying, the products that customers talk about, the products that customers share and recommend etc. This eventually helps the retailer better market the products, design effective promotions, personalize promotions/deals/offers, design better group deals and also to have better tie-ups with suppliers.
A pull in customer traffic from various social networks to retailer's website would have a positive impact on website sales.

Benefits to customers:

Customers rely on feedback from friends and acquaintances more than retailer's advertisements. Therefore a collaborative platform helps customers interact with each other as well as with friends and acquaintances before they make a purchase.
There is always an advantage when the retailer provides personalized promotions and offers based on customer profile, products browsed, likes, dislikes and preferences etc.
Group deals provide a huge cost benefit to the customers as well as their friends.
Features like co-browse can be integrated with features such as co-create to give a better customer experience on the website.
Shopping becomes easy and more social.

Aligning the social strategy for your online business

2011-10-03T14:42:30Z

We do realize that social media plays an important role in the way we conduct business today. Every retailer yearns to be a part of the social revolution. In their quest to stay ahead of the competition, is very important for every online business to strategize a social media plan. How should retailers go about planning their social media strategy?

There are a few important facts that any retailer should analyze before they jump to a strategy:
- What is it that I want to achieve, through a social media strategy?
- Do I really believe this is an unearthed goldmine?
- How should I implement a successful social media plan? How easy is it to implement different social media strategies and what is the timeline I'm looking at?
- What is my budget?

Well, as we find answers to these questions, we do realize that there are two different strategies that a retailer may plan to implement:

1. Retail layer on a social layer:
This strategy aims to build a retail layer on a social layer (For eg. Building a retail layer on facebook). Very recent examples are that of J.C.Penny embedding their complete product catalogue on facebook, and Hallmark cards embedding the "Shop" tab on their facebook page to allow customers to buy cards on Facebook.
Features such as the Facebook "like" button and "share" on twitter may also be considered part of this strategy. Another very important feature would be open id or facebook/twitter login.

Amazon implemented facebook connect in order to provide product suggestions based on likes and favorites pulled from your social graph. By connecting your account, you allow Amazon to scrape the interests and favorites of your friends. You can then view suggested gift ideas based on this data. Amazon also will populate lists of items that are popular among all of your friends, as well as suggestions based on your own interests.

What can I achieve?
In simple words -
- Connectivity to customers and a more informed and a knowledgeable customer.
- Easy Viral marketing on social media.
- Personalized recommendations using interests/likes/dislikes etc of customers based on their social graph.

What about the time and budget?
Easy to achieve. The easiest parts being "Facebook like" and "Share" buttons. The overall strategy is easy to implement and requires a few months of efforts. An agile implementation model helps in interim analysis of the success of various features you implement.

2. Social layer on a retail layer:
This is a comparatively difficult and a time consuming strategy to implement. It aims at building a social network within your retail network. Mysears.com is an example of this. Department store Sears have given their website a social shopping makeover by adding a social layer that allows you to "message" and "follow" other users, see their profiles and their onsite social activity, like products (as well as dislike, want and own them), and join groups.

What can I achieve?
- Connectivity to customers and a more informed and a knowledgeable customer.
- Easy Viral marketing within the retail network.
- Personalized recommendations using interests/likes/dislikes etc of customers based on their social graph within the retail network.
- Though most of the results are same as the first strategy, the following points are worth taking a look at.

What about the time and budget?
Time required to implement this strategy is greater than leveraging an already existing social network like facebook or myspace or twitter to do your job. If you have a greater social media budget and want to own all the trends of your customers without letting a 3rd party to know what your customers like, what they dislike, what are their gift lists etc. then this is the strategy for you to implement.

Which strategy is the best for you?
The answer to this question depends on a multitude of factors, which have been considered above. But if I were to consult you, I would recommend you to go with the first strategy if your budget is not huge and you are ok to let facebook or whoever your social media partner may be, to own all of the shopping and activity trends of your customers. Also, this is the best strategy for you to implement as long as you feel you are only testing the waters and not actually swimming. You may take a plunge into the second strategy if you have a solid budget and have already tested waters for yourself. A detailed analysis of your business format, product portfolio, customer profiles, market demographics, customer preferences and your Social commerce budget will help portray a better picture of your future social strategy.

These are some thoughts that might help you as retailers, marketers, social media executives or as consultants to help align social media strategies of the future.

It's time to dismount the dinosaur

2011-10-01T03:54:14Z

There was a time when mainframes and AS400 machines used to run the world. I stand corrected - mainframes and AS400 machines still run most of the important business of the world. Coming from a mainframe background, that thought actually makes me feel proud. But again, all good things have to come to an end. The end may not be near, but it is not so far either. They have done their part in the grand scheme of things, but now it's time to lay down the sword and make way for newer, younger and better (at least some of you might be frowning by now) successors. In this discussion, I will try to limit my scope to mainframes so that I don't venture into unknown territory (read AS400).

Why are the mainframes so popular even after almost half a century since their introduction? Now that's a solid pedigree to try to emulate for all new comers. Reasons are many, but the most important in my opinion are their incredible computational capability with more than acceptable service levels, high levels of reliability, always-there-for-you type availability and security reminiscent of the Great Wall of China. It is not a surprise that the most important businesses in the world are still powered by these dinosaurs. And I do mean 'important' - banks, financial institutions, big retailers, health care and insurance companies.

Enough of eulogy. If Invariably Bulky Mainframes had any intent to monopolize and control the whole world, they should have made these machines PERFECT. Sadly, they are not. In the world of supply and demand, the prime factor which drives decisions is cost. The most important drawback of managing one's applications on a mainframe is its prohibitive cost. It does not matter whether you buy and keep one on your backyard garage or you host it in a secure and secret location. You have to pay your price to feed this monster. Let's say cost is not a concern for you. If you can bet millions on sports franchises, spending few of them on a computer system might not seem like a big deal. Most of the applications running on these mainframes are decades old and have gone under the knife of generations of programmers. Most of the people who have laid their hands on these machines have moved on - logically and/or physically. Proper skill sets are no longer available - well, how will they? The new generation of computer geeks likes the fancy stuff, not the 'green screens'. Learning mainframe technologies is next to announcing yourself as a hippie. With no suitable talent available to look at these heavily customized legacy (this term might not be suitable here, since some of the Java applications would have become legacy by now) applications, how will these organizations maintain these systems 20 years down the line? So much for application maintainability, scalability and flexibility. It's time to act.

The first and most difficult step will be change management. People who have lived with the mainframe will swear by it and moving away from such an alliance will be difficult. However, in this era when couples married for decades divorce to find a better path, this change is not impossible. Most of this reluctance stems from a fear of the unknown. Our entire business logic is embedded in these 'little' frames. Will we have the same level of performance and availability in the new solution? How can we afford to have a disruption in our business if we undertake this massive migration? Once those concerns are demystified, the actual work can start.

For organizations wanting to move away from the mainframes, there are plenty of options. The three most common and popular options are briefly outlined below.

Package Implementation. Business transformation using an off-the-shelf ERP such as SAP or Oracle. Huge undertaking and usually a multi-year multi-million dollar engagement.

Re-engineering. New solution will be built from scratch, but by leveraging the existing business rules and logic as much as possible. May not be as costly as an ERP implementation program, but is comparable in terms of scale and risk.

Re-hosting. Lift and shift applications from mainframe to low cost platforms. Cheapest and easiest option for legacy modernization. Minimal risk and change management.

There is no magic formula to decide which option to choose. That depends on lot of factors, most of them specific to the organization in scope. But, that's the easy part. As I mentioned earlier, the toughest part is to take the first step - decide and get a consensus to move away from these antique gargantuan mammoths. If not, few years down the line, the so called dumb terminals will need to be renamed. Dumb will be those folks who will be sitting and staring (I mean literally) at those green characters on the screens without having the slightest clue on what to do. All the experts would be turning in their graves. How can they rest in peace?

Written by and submitted on behalf of Rajeev Mohankumar

Evaluation of EAI Monitoring

2011-10-01T03:53:19Z

EAI (enterprise application integration) is an interesting leg in today's IT landscape. I remember the days when started my carrier 13 years back when we all wandered between mainframes, AS400, database and new age object oriented java. With the passage of time I focused my area to be more specialized as the demand of market was to identify from the lot.

Java specialization was becoming readily available as most of the application started becoming loosely coupled. With this said tier based application was the faces of IT in late 90's and start of 2000. With this distributed architecture EAI found its place. I decided to focus myself in EAI technology after putting my fingers in AS400, Java and database technology.

Since then I have been following EAI and its progression. EAI vendors have increased over the period and the stack based companies like SAP, IBM, and Oracle have come up with their own middleware. The top notch players were Tibco, BEA, Seebeyond, webMenthods, Vitria etc. Along with the same group IBM had is Websphere in the market. Enterprise offering company joined in the game late and most of them tried acquiring the independent vendors.

Middleware originally structured itself by hub and spoke or bus modal. With the new age offering SOA, shock wave transmitted within the EAI space. The maturity of SOA was highly dependent on the EAI. The reason being was it actually in true sense de-coupled the application. It was already playing an orchestration role. The only thing needed was the face lift of middleware to SOA suite. It was not easy as said to change the face. It came with its own challenges.

Traditional EAI was even though decoupled the system but the internal offering was vendor dependent. Each vendor interpreted the transmission in its own ways. This led the dependency heavily on the tool. The challenges started visible when transformation business started within the organization. Industry started means of saving cost, improving efficiency and reducing redundancies by consolidating into ERP packaged implementation. During this this time the need of standardization was realized. Where ever the ERP packaged solution was implemented its native EAI came by with cost saving measure. The architecture community was put in spot once again to re-define the co-existence of dual middleware strategy. Lot of company decided to migrate to single EAI this became the revenue for the consulting companies. Even though the data transmission was standardize to an extent but the transformation, orchestration was native to the EAI vendor.

SOA guiding principle made an impact on the middleware strategy. The aspect of re-usability, standardization and discoverability was re-invented for middleware. There was a push within the community to standardize the transformation and orchestration code. Evolution of Standard Integrated Development Environment (IDE) came in place. Eclipse (IDE) for example widely accepted with major IT vendors. Most of the product vendors shipped their software with standard IDE environment with product specific wrappers. This internally became standardization of code.

The future of EAI is now redefined as SOA middleware. The development process is standardizing within the SOA Middleware. The output code (like BPEL) can be ported within any SOA Middleware. The discoverability, standardization and re-usability indeed changed the course of traditional middleware. The openness now largely welcomed by the architect group. Business is now getting more agreed upon technology changes.

Written by and submitted on behalf of Mukundan Iyengar

Business Process Monitoring

2011-10-01T03:52:03Z

The need of hour in Business modal is visibility and ability to react and adapt quickly. IT (Information Technology) being the backbone for any Business execution is in tremendous pressure to turn up tool which can be one pit stop for Business flow. The challenge the IT faces is the turnaround time and keeping cost low with minimal interruption to Business Process. The visibility of interaction is the key driver to success for Business execution.

IT department finds ways to integrate the system, orchestrate the business flow with keeping the rules for business separated from code. With the advent of Service Oriented Architecture (SOA), IT has more avenues for automations. With more company's moving towards business transformation middleware has come in best use than ever. On one hand Business has new technology like SAP, etc. with legacy still remaining on the other hand. Service offering has now become more value by wrapping up and exposing as enterprise service component. It is not a challenge anymore to integrate new technology used for Business Transformation like SAP and legacy system.

The new age middleware are now SOA based platform with integrated BPM that supports Application to Application, Business to Business, User intervention and Web Service scenario. It now fully supports Business process execution and monitoring. Since middleware is now being used as single point of entry for most data interchange it becomes easy choice of unified view enabler for the landscape.

Goal

The objective of the whitepaper is to take IT into next level where Business can run efficiently uninterruptedly and above all knowing what's coming ahead in its path which will help the Business prepare.

It is very important to provide a tool which monitors all the business transactions and flow and provide central monitoring features. Central Process monitoring (IT based Business Dashboard) with Process view and Business activity monitoring is the IT answers to Business.

Central Monitoring tool

The tool design is very important aspect and should be started from Business process requirements gathering stage. This will lead to Business work page of its processes. Upon identification of the processes modeling is an integral part to picture the upstream and downstream systems.

Taking this to the next step each application interacting mostly uses middleware for data exchange. This gives an opportunity to capture the status of each interaction. The BPM component in the middleware should be designed to replicate the Business process modal. The BPM at each step will be provided inputs from the Application component, middleware component and the legacy component as a web service module.

For any error situation notification is generated by each layer and sent to the BPM step which in turn determines the downstream impact for the process. This quality turns the proactive monitoring ability for the tool.

The process view will also depict the work status of any business process. This is a true BPM capability. The next level of tool should be to proactively predict the behavior of pattern. This would be achieved by interacting with the Business intelligence system within the landscape. The Business Intelligence system holds the historic data. These historic data to be over lay with the current process flow and future coarse prediction becomes easily available. This will help the business to forecast. The pattern can be determined.

Summary

The point of view is to leverage the power of middleware outside just know myth "The black box". Take this to the new level of services and visibility to technology process is a key to success for any Business. Central monitoring should be able to provide all the capabilities for efficient issue handling, proactively reporting an issues and intelligently classify the priority and should be able to predict the pattern.

Written by and submitted on behalf of Mukundan Iyengar

Transitioning from your Implementation partner: what to consider?

2011-10-01T03:50:53Z

An important component of the TCO of an ERP implementation is the service and consulting cost. The system integrators cost for the implementation services can be millions of dollars, and the clock ticks by the hour. So how do you minimize it? - do subsequent rollouts internally, consolidate to your primary technology vendor for cost reduction or look for an optimum multivendor strategy based on teams or phases. Any or many of these strategies would work, in any case below are some of the considerations to work with:

- Start with the contract and include therein or in a referenced scope document a comprehensive transition approach from the implementation SI to your organization and partners you determine. Include the methodology and measurable outcomes.

- Consider the accounting impact of transition timing. You may be able to capitalize the post production support and stabilization cost from you implementations SI

- Staffing strategy - an ERP program impacts the organization's jobs and roles in no small measure and almost all organizations cross train the existing people. In IT roles (development, infrastructure) specifically however cross training alone will not work. You will almost always need to do some recruitment externally. Get the new folks in early in the game to have them ramped up on the processes and aid transition from the partner.

- If you are transitioning from the SI in any manner to another partner, anticipate and plan for the political game. Also even if you have no internal resources taking transition, you need to have the management structure needed to oversee and sometimes even micro manage the knowledge transition to avoid delays.

- Process framework and tools - In the transition while you focus on the actual work that is being transitioned, do not miss the intangibles. The processes and interaction points with other teams, the tools, utilities and accelerators, program governance and practices. Now some of these your team may be aware of but this is the time to map the procedures and prepare documentation for all these in addition to the actual work.

- Define clear work responsibilities - Once you have defined the transition scope, define the goals for the team on appropriate tasks. For example if you will be taking over the development support for live sites, do not divert the team's time (even if shows as excess capacity) into development for rollouts or both may be put at a delivery risk.

- Get into the driver's seat fast - Most transitions have a period one where the SI is the primary and then a period two where the team transitioning in primary. Becoming the primary early will give your team the needed exposure and additional settling in time while you still have the SI on the rolls.

- And finally assess the risk but do not underestimate the opportunity cost - Most organizations start the transition after the pilot go-live and transition by phase. While the support for the live sites is transitioned to the organization internally, the implementation partner continues to be responsible for roll-out. Assess if part of the roll-outs can be done by the internal team; that will give you the best savings. Also if it's a long drawn rollout schedule, getting into it somewhere towards the beginning, maybe after the first couple of template based rollouts will give you the best returns over the program duration.

Written by and posted on behalf of Alpna Gainda

Thin client or Native Apps

2011-10-01T03:49:38Z

Smart phones:

We use mobile phones to read news, browse the web, chat with friends, update Facebook status, check bank account balance, check flight status and so on. Of course we make calls with our phones. With the stiff battle between the various smart phones manufactures in the market as who is the best in terms of style, performance, features, the mobile users are provided with too many options to choose from. Yes - Smart phones have become integral part of our lives. We use it everywhere and all the time. It's very difficult to stay long without our phones. I find it odd that I noticed, whenever I was waiting for something - Waiting for a prescription to be filled at a pharmacy or waiting for the food at a restaurant, I always reach out to my iPhone and start browsing. I need my mobile phone to keep me occupied. It did not come as a surprise to me that I missed my phone so much when I recently traveled abroad and forced to use a old mobile phone for calling with no internet.

One key thing to remember that what creates the bond between the user and phone is not just the hardware, style and features of the phone (of course they go a great length) but it's the apps that we use and love so much creates such a strong bond with our phones. The Business world understands it very well, there is lot of research and thinking goes behind every application that we use day in and day out.

Web Application or Native Apps:

There are two types of applications - Web application or thin clients and Native Apps or thick clients. One has to make a choice between a web application and a native application before rolling out an application/functionality to the users.

Both thin and thick clients come with their own advantages. The choice is primarily driven by the type of the application and the target audience. Let's look at the advantages from both the sides.

Advantages of web applications Vs native apps

Web Application	Native Apps
Portability	Rich look and feel
Lower development costs	Usability
Less tied to device	Offline use
Compatibility	Better performance
Security	Multitasking
Less crashes	Use of device features
Scalability	App store advantage

The advantages from both sides look great. But one knows that you cannot have everything, you have to settle for something. As usual the answer on web applications or native applications for mobile is: "it depends". I would suggest, if you are developing a gaming application where the performance and usability are the key and the app connects to the server to publish the scores - then go for a native app. On the other hand, if you are developing a banking application where is purely transactional and real time data - then go for the web application. Write down your requirements, your audience and the key benefits your product will provide them. Then consider your budget and timeline and the choice should clearly emerge.

But it doesn't always have to end that way; there is a third option too. You can have a combination of both. Consider you are building an online ecommerce application but want to offer location based services and rich user experience. You can build an ecommerce mobile website that can cater to variety of devices and also create device specific native apps that can provide rich user experience and offer location based services by utilizing the device's hardware features. The native app can always link the user to the mobile web from within the native app when the user is ready to make a purchase. You may argue that the maintenance becomes an issue in this case. I understand that is a challenge, it's easy to maintain and make changes to the web application where as the native apps maintenance comes with a cost, because not only you need to build and release updates for every devices but the user can see the benefits only when the update their apps. Well, that depends on what you package in your native app Vs the web application. One has to do the due diligence and arrive at a balance between what is packaged in the native apps so that native apps maintenance can be kept at a minimum and you can make most of the changes and updates within your web application.

Written by and posted on behalf of Allan Swamynathan

Mainframes are obsolete - old news!

2011-10-01T03:40:41Z

When I started my IT career in Infosys 11 years back and was allocated to the mainframe training batch and ultimately to a mainframe development project, I felt like an outcast banished from human civilization. For the love of God, why should I (of course along with bunch of others) have to learn and work on some technology older than my predecessors? To add to the grief, the entire world (well...almost) was holding up banners stating "mainframes are like dinosaurs...the end is near" or "MVS and its dumb terminals - rest in peace". Rest of my batch mates, who gained (not earned) the glory of working with 'open' systems used to look down at us with sympathy. Poor souls have to work on a technology which will be nothing but folklore in a few years - so they thought.

How wrong were they? And anyone else who thought that the age of the majestic dinosaur was gone. Mainframes are well and truly here, kicking and alive and will be for years, if not centuries, to come. Open systems and distributed platforms have been around for a long time, but have any of them gained the same level of trust and confidence of its masters as the mainframe? I doubt it. Just look at the big corporations who have to process billions of transactions with tight service levels to run their business. Majority of the banks, financial institutions, big retailers, health care and insurance companies still run their core business off the mainframes. Nothing has stood up and proven capable of taking over from these time tested behemoths.

Apart from being the workhorse that it is known to be, the mainframe is highly regarded in terms of reliability, availability, serviceability, scalability, performance and security. This explains why the above mentioned industries rely so heavily on mainframes even today. What else can handle such scale of transaction processing per second? What else can efficiently support thousands of concurrent users and automated processes? What else can manage and process terabytes of data between the different layers of a complex application? What else can be relied upon to be available for a long (really long) period of time without having to mess with hung transactions, system reboots, software patches and OS crashes? Well....nothing.

Most likely, every one of you reading this article might have interacted with a mainframe at some point - when you did an ATM transaction, accessed an ecommerce site, paid your insurance premiums or did your loan calculation online. People crack jokes about dumb terminals and green screens. Well, green screens are long gone and seldom do these folks realize that green screens were the initial CRT monitors used to access a mainframe, which have been obsolete for decades. Nowadays, those have been replaced by LCD monitors and touch screens. About dumb terminal, how different is that from a PC connected to some application hosted on a virtual environment, a.k.a. cloud? Now that's state-of-the-art, isn't it? But, a dumb terminal connected to a mainframe server situated at the other end of the globe isn't? What a paradox! People...it's the same philosophy. Just that virtualization and centralization have been around for decades since IBM released System 360 back in the 60s. Old wine, new bottle.

Of course, mainframe had its drawbacks, with the foremost among them being cost. Almost all other factors have been nullified or reduced with technological advances and improvements. Additionally, mainframe boxes have become smaller and much more energy efficient, thereby ensuring efficient data center utilization. Mainframes have even become less expensive with these improvements, but remember that cost is relative. If you consider just the cost of hosting and managing a mainframe environment, that might be prohibitive compared to some of the other platforms in the same landscape. However, when you divide the cost by the number of transactions processed by the systems for the same time period, there will be very few platforms which can beat the mainframe's cost per transaction. A similar exercise done on a customer's mainframe system gave the cost per transaction as less than 4 cents/transaction even though the cost of mainframe was considered prohibitive.

With technical improvements and release of the latest Enterprise z server, mainframe is positioned to stay for a long time by enabling corporates to embrace latest industry trends, namely enterprise transformation (SAP on z/OS), cloud computing (z server is an ideal platform for hosting a cloud) and advanced data analytics (no doubts there). Far is not the day when we will have a pocket sized mainframe shipped to Mars to run the first corporate outside Earth.

Written by and posted on behalf of Rajeev Mohankumar

R&D - The Scientific Realm meets Project Management

2011-09-30T17:49:17Z

It has always fascinated me that most Research and Development labs have thousands of ideas and concepts that are developed, evaluated, striken off, re evaluated and finally a few make it through the new product development cycle. The sheer number that trickles down the funnel to make it to a new product is mind boggling. However, in a number of industries (excluding highly structured R&D organizations like Pharmaceuticals), the underlying science of developing these concepts has not been tied to streamlining and managing it like a project. While we all understand that R&D is also an art, the view from the shareholder value also puts a focus on more streamlined and higher visibility into this process so that it is more integrated into the overall Marketing framework of the company and brings about more predictability into the new product pipeline.

We are seeing more R&D organizations embracing these aspects by:

- Using integrated project management tools that not only provide visibility to the concept development but involves the Marketing organization as a key stakeholder in the process to provide feedback.

- Standardizing the Gating process across Global and Regional level New Product Development process.

- Minimizing manual work and updates

- Providing Tools / Mechanism for most accurate and streamlined communications between the teams that is involved in NPD Process globally, to increase the productivity and reduce rework.

- Providing better reporting tools to track KPI's across the NPD Organization.

Are you seeing this happening more in your organization ? After the initial wave of streamlining the new product development is this the next wave of collaboration for New Product Development

Angry Polar Bears!

2011-09-30T16:55:57Z

It has been a very interesting couple of years to watch the CPG companies building their social interactions with their consumers to obviously promote brand loyalty. The fragmentation of the media interactions have left the companies in a tough spot to choose where to invest and how the brand should be built out in the specific media channel. Some of the forays have been highly successful, where as some of them have not succeeded at all. But the iterative nature of the marketing options is what is making it interesting. Something that succeeds can be easily copied, but as is usual with the powerful brands, there is always something new that is introduced in the concept.

Some of the ideas that have succeeded, some have become almost imperative and some have failed

1. Brand extensions through interactive applications: These have been especially successful for food products. Interactive recipes with ingredients, new ideas, store locations have made these the standard for each line of food products.

2. Facebook pages: Every Brand has to have One. How they leverage the pages, the content, the ideas vary a lot (and are also limited by what Facebook offers). Some companies have extended the association of the brands with the consumers (Read Thank You Mom) and have had fantastic results while others are just also exists. These would fall in the category of required - rather than successful or unsuccessful.

3. Games: This is where I have failed to understand the Brand's and how they are trying to get increased consumer loyalty with brand centric games. None of the Brand centric games have reached a level of following compared to any of the commercially released games (and I am not just looking at the success of Angry Birds). Is there a point in churning out these games which actually might be diluting the brand image.

The underlying challenge is that the same brand is being promoted through different media and hence you want to extend the same messaging through the different media's. Do you think that the companies have to think of their brand positioning differently? Is there a need for different brand for the digital media that can augment the overall company image?