1. How Clear Is Our Crystal Ball
BY JOHN MOORE DECEMBER 20, 2001 ARC INSIGHTS 2001-054E
Keywords:
ATP, CTP, SCP, Logistics, Components, E-Markets, ISMs, TEAM, ERP, Por-
tals
Issue:
At the beginning of the year, ARC’s team of supply chain and enterprise
analysts collectively contributed to making ten predictions for the coming
year. How well did we do? Our predictions were surprisingly close to the
mark in a tumultuous year.
Summary:
The beginning of the year saw a slowdown in many of the world’s econo-
mies, which continues today. While there were faint signs of a recovery at
the end of summer, the tragic events of September 11th, dashed such hopes.
Virtually all software suppliers interviewed by ARC
In a year where many predictions saw a drastic decline in sales during September, which
by pundits belong in the trashcan,
has only recently begun to let-up.
ARC’s analysts did surprisingly well
in predicting the future..
Our overall prediction that there will be little let-up in
the adoption of software technologies did not hold-up
under the weight of an increasingly tough economy. Companies of all sizes
began to closely scrutinize their software purchases, demanding suppliers
to show some real ROI for their solution offerings. In many cases, compa-
nies have simply postponed purchases till the economy improves. We have
also seen a dramatic pull-back from large, expansive, multi-million dollar
deals with implementations that can extend for over a year in favor of
much smaller, tighter and quicker implementations that deliver quick pay-
back. The following is an assessment of the predictions we made for 2001.
We will publish an accompanying Insight at the beginning of the year with
our predictions in 2002.
ENTERPRISE & AUTOMATION STRATEGIES FOR INDUSTRY EXECUTIVES

2. ARC Insights, Page 2
ISMs Struggle to Attract Suppliers and Grow Operations
Our prediction for Industry Sponsored Marketplaces (ISMs) was clairvoy-
ant. Most marketplaces have struggled over the past year to define what
their value-add would be to those companies and industries that funded
their formation. Governance issues, lack of supplier involvement, and an
unclear value proposition still plagues many ISMs. We even saw the de-
mise of a few. The most notably were the Petrocosm oil & gas ISM that was
formed by Chevron and Texaco (before their merger) and Envera, the mid-
market chemical ISM, which was acquired by the neutral marketplace
Chemconnect.
After a Sabbatical, ERP Comes Roaring Back
We saw ERP growth in the crystal ball, but it was not the growth of ERP
software sales, as we had predicted, but the growth (or at least relative sta-
bility) of the large ERP suppliers. It was actually a pretty poor year for ERP
software sales, something that is further highlighted in our soon to be re-
leased Market Outlook Study.
While the large ERP suppliers have weathered the economic storm better
than most, it is not from the sale of ERP systems. Rather, large ERP suppli-
ers have done well by selling new solution offerings, such as CRM and
SCM applications, to their existing customers. Customers who have been
spooked by shaky economic conditions or the demise of many smaller
software suppliers, are returning to the large and relatively stable ERP sup-
pliers for other applications. This has led to the resurgence of such
suppliers as Baan (slowly recovering), Oracle, Peoplesoft, SAP, and others.
Beginning Evolution of Component Software Market
ARC was right on target with this one. The component software market is
developing at a rapid clip, with most software suppliers developing strate-
gies for their products that will leverage a component architecture. J2EE
and EJB (Enterprise Java Beans) have become the de facto standard, with a
major vote for their support coming from SAP when it stated in November
at its TechEd conference that it would be adopting the Java platform for
integrating its various modules. There has also been a rise in Web services,
an off-shoot of a component architecture that we will be hearing much
more about in the coming year.
© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com

3. ARC Insights, Page 3
Increasing Focus on Enabling SCP for Tier 2 and 3 Suppliers
Our psychic abilities continued to shine forth with our prediction here, al-
though like our prediction for the ERP market, the reasons behind the shift
to enabling Tier 2 and Tier 3 suppliers were slightly different than what we
foretold.
Instead of Supply Chain Planning (SCP) suppliers creating completely new
software packages targeted for lower Tier customers, these suppliers have
been forced to unbundled their traditionally large, all encompassing solu-
tions into smaller modules in response to tighter IT budgets that could no
longer support large, multi-million dollar deals. Along with the unbun-
dling of solutions, suppliers have also had to dramatically drop prices to
keep their project pipelines full, creating an opportunity for mid and low
Tier companies to purchase SCP solutions.
Migration from ATP to CTP
We were too optimistic on this one. While we thought that there would be
a rapid migration from Available-To-Promise (ATP) to Capable-To-Promise
(CTP) as manufacturers strive to lower their costs and remain competitive
in an increasingly global market, the reality is that manufacturers stuck to
what they knew in a difficult environment and tried not to “rock-the-boat.”
Moving to a CTP model is too drastic a cultural
Supplier Action
change for most, and companies are hedging their
Arzoon Acquires From2 bets conservatively as they ride through this global
ClearCross Merges with Atrion recession.
Descartes Acquires Centricity and
assets of NeoModal Pricing Management Attracts Attention
Qiva Merges with Capstan This was another prediction where we were slightly
Vastera Acquires SpeedChain
off the mark. Manugistics has certainly been beating
the drum loudly on this one, but to date, adoption has
Strengths of Leading CTP Suppliers
been slow among manufacturers. To Manugistics’
credit, they have made some beach-heads with their pricing optimization
solution being used in - among other areas - for seismic exploration applica-
tions in the oil & gas industry.
ARC research published in our December Strategy Report showed, how-
ever, that the application of activity based costing (ABC) methods in
distribution-centric supply chains is delivering high ROI and has some very
© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com

4. ARC Insights, Page 4
satisfied customers. If this message gets out to a broader audience, we may
see greater uptake in the year to come. We’ll keep you posted.
Semblance of Order in Transportation Logistics
This was another clairvoyant call by an ARC analyst. In 2001, we saw a lot
of consolidation take place with many mergers and acquisitions, as well as
many more ventures that simply went bust. With few exceptions, the
plethora of transportation-centric public marketplaces have all washed-out.
The old-timers have survived the storm, while only a few new players have
persevered long enough to see a new year. In short, the noise-level in the
transportation sector has been significantly reduced.
Mergers, Acquisitions, and Partnerships Dominate TEAM
Market
Our ability to predict accurately in this sector did not match some of our
other successes. While the market for many asset management solution
suppliers continues to be tough, the leading suppliers and countless smaller
suppliers still remain. There has been little if any consolidation and no sig-
nificant partnerships to solidify this market.
The year 2001 saw some of the lowest market valuations for many EAM
suppliers, but none were acquired. Could it be that this market’s projected
growth and opportunity prospects are not promising enough to justify a
move by one of the leading automation suppliers to acquire one of the lead-
ing, public EAM suppliers? Or are leading automation suppliers having
some difficulty in selling their current asset management offerings (which
often include some sort of partnership with an EAM supplier) to custom-
ers?
Enterprise and Plant Portals Proliferate
This was another clear view of the future from ARC. We predicted a good
news/bad news scenario, which came to pass. Our prediction that the use
of Enterprise portals would proliferate has indeed happened, and continues
to grow in importance and relevance as virtually all enterprises try to pull
together disparate information into one comprehensive view that helps the
end user/employee and boost productivity.
We also were correct in predicting that on the plant/shop floor side, portals
would struggle in these tight economic times where budgets are scrutinized
© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com

5. ARC Insights, Page 5
carefully and the ROI for a plant portal is often hard to determine prior to
implementation. Recent reports from several plant portal suppliers sub-
stantiate this point. While these suppliers have reported that their
customers are deriving significant ROI from implementing such portals, it
most often comes from areas that were not expected. As these solutions see
more experience in the market, a clearer definition of ROI will become ap-
parent, which could lead to greater adoption in the future.
Channels Have the Last Laugh
ARC was right on target with this prediction. Indeed, most companies are
no longer trying to side-step their channel partners to directly reach the end
customer. Rather, companies of all sizes are now implementing a wide
range of channel partner management solutions to insure that their chan-
nels have the most updated information to serve the end customer and
make the sale.
For further information, contact your account manager or the author at
jmoore@arcweb.com. Recommended circulation: All EAS clients.
© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com