On Demand Hits The Supply Chain

A homegrown supply chain management application will go live as a product under the software-as-service model on Monday.

Mitrix, a subsidiary of global trading company Mitsui, plans to grease the supply chain with SCM Live, an offering designed for small to mid-sized enterprises (SMEs).

“There’s competitive pressure on small and midsize enterprises to bring advanced technology and solutions to their supply chains,” said Edward Lewis, president and CEO of Mitrix.

SCM Live is targeted at companies handling $75 million to $750 million worth of goods, with fewer than 1,000 employees. Lewis said the product also is suited for larger companies that have multiple business units with separate supply-chain operations.

That is, companies like Mitsui.

Lewis developed the product as an internal Mitsui effort, after the company balked at the integration costs and timeframe for installing enterprise-class SCM products. Although it’s a global company, Lewis said Mitsui’s many divisions have the same needs as smaller companies.

“Three years ago, they recognized their existing systems couldn’t effectively collaborate with their trading partners or provide visibility and flexibility to their customers,” Lewis said.

Mitsui runs SAP for its back-end financial operations, but each of the business units, handling everything from ore and mining to electronics components, tailored its business processes to suit the needs of key customers making it impossible to extend SAP out to them.

Mitsui has used the Web-based software for more than two years to manage its international trading network, handling about $250 million worth of goods. Mitrix will go to market on Monday with version 3.0.

Because SCM Live is delivered over the Internet without the need for hardware or software installation, Lewis said customers could get up and running within six weeks. They will need to handle integration with their own back-office systems.

But Mitrix has several barriers to overcome. The biggest are integration and customization, two must-haves for software-as-service customers, according to Yankee Group analyst Sheryl Kingstone.

“Companies don’t want a vanilla application,” she said. “They want one that’s in context to their needs.”

Mitrix says its software is configurable, and there’s some customization of reports. While the application itself can’t be customized, Mitrix plans to update features every three or four months, so this functionality could be delivered later.

While early editions of Salesforce.com’s customer relationship management applications were take-it-or-leave-it, adoption took off with its release of sforce, its software development platform, in June 2003. Salesforce.com reports that around 20 percent of all transactions now come in via sforce.

Software on-demand customers don’t necessarily want deep integration with their enterprise systems, Kingstone said, they just want linking to be relatively easy and cheap.

“[New vendors in the marketplace] are going to have to offer customization and integration — and offer it as a very low-cost alternative,” she said.

Lewis said better integration is in the plan.

“At this moment, we have point-to-point integrations with the major enterprise software packages,” Lewis said.

But applications must be individually mapped, and Mitrix is using IBM WebSphere to do the translation. The company hopes to complete the development work necessary to expose SCM Live functions as Web services within a year. It will begin rolling out APIs in batches, with the most popular appearing within six months.

Finally, customers may fear upgrade issues. Mitrix plans to bring its customers onto the next versions of its software carefully and slowly. Existing customers will be moved to version 3.0 over the next 12 months.

But the company plans to operate only two versions of the software; for example, if version 4.0 were released mid-2006 and 5.0 in mid-2007, customers using 3.0 would have to switch to a newer version no later than mid-2007. Even smaller enterprises tend to fear change, especially when it comes to enterprise software.

Then, there’s the application’s Mitsui DNA.

Lewis admitted that while some competitors of Mitsui might balk at using its product, the addressable market is plenty big. A Gartner Consulting study commissioned by Mitrix sized the 2010 market for supply chain management software for SMEs at nearly $1.3 billion.

Finally, SMEs won’t be able to achieve the maximum benefits of efficiency and visibility from SCM Live unless their partners also sign on. Mitrix developed two different modes for suppliers to participate in.

Suppliers that don’t want to subscribe to SCM Live can upload information from spreadsheets into their partners’ systems via a console. Mitrix customers also can send suppliers an interactive e-mail. When the partner responds, the response registers with the application, just as though the partner were logged in, Lewis said.

If Mitrix can deliver on integration and customization, it has a strong lead on this market segment — and even the large enterprise. A recent Yankee Group survey of mid-market companies found that 50 percent wanted to adopt on-demand CRM, and Kingstone said that’s only the beginning.

“I see this as a very large opportunity for both mid-market and large enterprises,” Kingstone said. “There are indications of a trend of large organizations finally understanding the value that software as a service can bring them.”

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