The advent of the Internet has changed the rules of the game in manufacturing.
When Forrester Research (Cambridge, MA) first assessed U.S. Internet business trade in 1997, it predicted that trade would reach $327 billion by 2002. The surge of Web-based business trade has already far exceeded that initial projection, and the analyst now believes that online trade will zoom to more than $1.3 trillion by 2003. This explosion represents an annual growth rate of 99%, with the online share of business trade in hard goods projected to rise dramatically from 0.2% in 1997 to 9.4% in 2003.
For small- and mid-sized manufacturers, this means it is imperative to get into the e-business competition and fast.
In this effort, smaller manufacturers face challenges that their larger brethren typically do not. First, smaller manufacturers rarely have the capital resources to acquire the hardware and software needed to implement end-to-end e-business systems, let alone to manage their ongoing operations and maintenance needs. Such infrastructure investments may cost hundreds of thousands of dollars a heavy burden for manufacturers of this scale. In addition, small- and mid-sized manufacturers generally have few, if any, full-time IT personnel within their organizations. So, their level of investment in IT infrastructure (e.g., desktop computers, servers, networks) tends to be limited.
Nonetheless, today's competitive business environment continues to mandate having a comprehensive, end-to-end, business management solution.
Fortunately, the Application Service Provider (ASP) has emerged as an alternative for hosting end-to-end systems. It is rapidly becoming a means for small- and mid-sized manufacturers to leverage the core competencies of solution providers as a means to quickly and cost-effectively enter the e-business competition. One example of this phenomenon is m2mEport.com, a new e-business Web site launched by Made2Manage Systems (Indianapolis, IN), specifically for the small- and mid-sized manufacturing markets.
Everything You Need To Compete
"Because competition in the 'New Economy' demands participation in e-business, we were determined to offer small and midsize manufacturers a Web-hosted version of all the capabilities they need to become successful e-businesses," says Christopher Clapp, vice president and general manager, Eport group, at Made2Manage Systems.
According to Clapp, there are three principal areas that manufacturers must address to successfully participate in e-business:
- They must have a strong back office.
- They must be integrated with their supply chain.
- They must have broad and rapid access to information, supporting and extending their knowledge base.
A comprehensive ASP service provides an umbrella for all of these requirements.
"Of particular importance is providing back-office access via the Web," adds Clapp. "This means being able to run back office systems to take orders, issue quotes, buy materials, plan what materials and services are needed, keep the books and so on all from a Web-based browser."
"Smaller manufacturers want to acquire this capability without having to bear the upfront costs of hardware, software, configuration, implementation, and maintenance," Clapp continues. "By providing our back-office product via the Web as an ASP, we relieve them of those front-loaded costs and get them into e-business quickly."
m2mEport.com provides a comprehensive Web site on which manufacturers can run their e-businesses, and it features a collaboration center and marketplace where manufacturers can find new supplies and equipment, while also engaging customers and partners in the design of custom products.
"For years, Made2Manage had provided solutions that were internally focused for the small and midsize manufacturer," says Clapp. "Now these manufacturers are finding that customers and supply chain partners are demanding access to information-much of which is contained in the back office-as the New Economy moves toward what GartnerGroup has termed 'Collaborative Commerce.' m2mEport.com provides the touchpoints necessary for such collaboration, both with customers and with supply chain participants."
The site also incorporates Education and Knowledge Centers containing Made2Manage Time2Value tools, advanced distance learning offerings, and other information resources to supply manufacturers in their efforts to educate employees, suppliers and partners.
"The rise of e-business presents a new set of threats and opportunities for small and mid-sized manufacturers," says David Wortman, president and CEO of Made2Manage. "m2mEport.com was developed specifically to address those issues. By providing a Web platform on which to conduct business, Made2Manage is supporting our customers by accentuating their strengths of agility, focus and responsiveness; and they are simultaneously reducing the systems and resource requirements necessary to compete in the e-business arena."
Partnering for Performance
The ASP at Made2Manage Systems, www.m2masp.com, is being hosted by Allegrix, Inc. (Santa Clara, CA). Allegrix is the first company to deploy a state-of-the-art, three-tier ASP architecture that ensures the highest levels of reliability, scalability, security, and performance-essential elements for users of the site.
"Our relationship with Allegrix takes care of the major concerns of prospective customers regarding the operation of the site," says Clapp. "After all, Allegrix is putting its businesses on the network, so security and reliability issues must be met comprehensively. The participation of Allegrix ensures this."
Chris Claybaugh, CEO of Allegrix, adds, "Our business is to take independent software vendors (ISVs) and enable them to move into an ASP role. To this end, we support the software provider with hardware, software, technologies, bandwidth, infrastructure-allowing Web presentation for use by customers." Allegrix currently serves a wide range of ISVs and VARs with applications running on UNIX, Linux, AS400, Windows and Solaris platforms.
"The success we've had with Made2Manage is based on partnership, whereby we're concentrating on technical issues relating to site operation and Made2Manage is focusing on the essential functionality it delivers to its customers," continues Claybaugh. "The present unified offering at m2mEport.com would have taken Made2Manage a much longer time to construct on its own."
In this sense, the Made2Manage/Allegrix partnership mirrors the partnership that users of m2mEport.com have formed with Made2Manage. In both instances, the core competencies of the participating partner are leveraged.
According to Clapp, this is exemplary of a trend in the New Economy. "As business systems, database management and application software become more complex as a requirement of competition, and as information becomes more critical, it presents a challenge to those who don't have the time or resources available," he says. "As a result, such businesses must reach out."
Because there are so many facets in information systems, it's virtually impossible for any one provider to bring everything that is needed to the table. As a result, alliances like that between Made2Manage and Allegrix are becoming increasingly common.
"Providers are having to partner to bring competencies together to achieve comprehensive end-to-end solutions," says Clapp. Implicit in his statement is the fact that manufacturers should look closely not only at their software providers, but also at the value-added partnerships those providers offer.
A Compelling Case For Choosing An ASP
The most important difference of m2mEport.com as an entry point to e-business for small- and mid-sized manufacturers has to do with the underlying applications that the site provides.
Usage of m2masp.com is provided at a fixed monthly fee covering administration, support, maintenance and provision of applications. All a manufacturer needs is persistent, high-access bandwidth to the Internet and simple browser access to begin to take advantage of the huge opportunity presented by e-business.
"The challenge for small- and mid-sized manufacturers is how to accomplish the implementation and ongoing maintenance and administration of end-to-end business management solutions, while at the same time addressing the costs associated with IT personnel and infrastructure," says Made2Manage's Wortman. "That's where the ASP model comes in."
He concludes, "From a strategic perspective, we believe that an ASP offering presents powerful economic and logistical benefits to manufacturers-particularly those who have not yet made heavy IT infrastructure or personnel investments."