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I make my livelihood by helping clients select, implement and optimize ERP software systems. This blog is a collection of my experiences, surprises, discoveries, insight and advice. I'm enthusiastically grateful to others who choose to share their experiences for the benefit of all blog readers.

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ERP Applications May Aid Corporate Social Responsibility Programs

Enterprise Resource Planning (ERP) applications have been a powerful business tool for a very long time. That's why it feels somewhat surprising when we are still able to find new and innovative ways to use ERP to improve our companies. In an CIO.com article last titled, "Is ERP Ready for Corporate Social Responsibility?" another potential new role for ERP was outlined - how it could be used to help track key business information and metrics to improve corporate social responsibility (CSR) policies.

The idea is that existing ERP applications may be the perfect place to add extensions to help manage voluntary CSR guidelines that are being drafted and finalized by the International Organization for Standardization (ISO) under its fledgling ISO 26000 standards. Two years ago, the ISO launched the development of an International Standard providing guidelines for social responsibility for companies to follow. "The need for organizations in both public and private sectors to behave in a socially responsible way is becoming a generalized requirement of society," according to the ISO. "Our work will aim to encourage voluntary commitment to social responsibility and will lead to common guidance on concepts, definitions and methods of evaluation."

So why is this relevant now? "The importance of documenting and managing CSR practices becomes eminently clear when we consider occurrences such as the tragedy surrounding the 2010 explosion of the BP Deepwater Horizon offshore oil rig," according to the CIO.com article. "BP's reputation as a good corporate citizen has been diminished and they may be held liable for damages due to their actions, particularly if they cannot document that they had been following accepted practices for two of the key areas dealt with in ISO 26000, environmental protection and labor relations."

And how does this tie with ERP? Well, since ERP systems already act as central information depositories for so many important processes and roles in businesses, it is a perfect place to add additional tracking capabilities for CSR programs. That would include things like human relations, labor relations, the environment and corruption, which are all being addressed under the ISO 26000 standard.

This makes lots of sense and is a natural extension to ERP's data tracking, management, reporting and oversight capabilities. It would help provide more concise tracking and flow of critical information in the event of disasters like the oil rig explosion and could help companies improve their CSR by making such incidents more transparent when they occur. Information is power and if the data is there and is being tracked automatically, it can support ethical companies even during crisis situations. Also if corporate decisions and information are being tracked and documented, there is less opportunity for corruption by officials, according to the ISO 26000 proposals.

By building CSR tracking into ERP, it would link new responsibilities to an existing software application that already contains and manages other key corporate data. According to CIO, "Risk management functionality that is embedded directly in an enterprise application rather than a stand-alone solution will be preferable for one simple reason; when risks are identified and a risk mitigation plan created, risk management that exists directly in an ERP system used widely throughout a company will allow execution of that mitigation plan to be automated to a much greater degree. A separate risk management tool will really leave executives guessing as to whether the risk mitigation plan they created is being followed, and that could lead to some very unpleasant surprises."

That's smart thinking and it will be fascinating to see where the ISO 26000 process ends up. The BP disaster in the Gulf of Mexico is only one incident where a link between ERP and CSR could be hugely beneficial for society.

This is a big first step and another example of how much we have come to rely on ERP software, despite its challenges and complexity. ERP may not be easy, but it certainly helps our businesses and it could ultimately help increase corporate social responsibility in our country and abroad. Permalink

Post Posted by: Jeffrey
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ERP
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A New Era For SAP

According to SAP co-founder Hasso Plattner, the CEO appointment of Leo Apotheker is much more significant than may be first recognized. Plattner goes on say that the 37-year-old Enterprise Resource Planning software company needs more than just a new CEO, it needs a change agent to spawn innovation at a business software company that is becoming complacent. Apotheker recognizes the task at hand. "We started out automating back-office functions," he commented at the Sapphire conference. "SAP today is all about enabling clarity and transformation of business, which takes us into a whole different category of applications."

In the last week Apotheker has taken the CEO helm from what was a shared role with Hasso Plattner and Henning Kagermann. At last week’s SAP Sapphire conference, Plattner made it clear that he and Kagermann are the old guard and Apotheker brings a new era to SAP.

Apotheker indicates he driving SAP's culture to become more nimble, responsive, and customer oriented. In a possible sign of greater customer influence, SAP has agreed, at the urging of its user communities and customers, to reach key performance indicators before implementing annual maintenance price hikes which escalate from 17% to 22%.

SAP CEO Leo Apotheker
CEO Leo Apotheker

SAP is also introducing new software technology innovation. Following the acquisition of Business Objects in 2007, the combined companies are introducing a new Business Intelligence (BI) and enterprise search tool named Explorer (didn’t Microsoft already coin that term?) that empowers employees to search large volumes of information using natural-language search input and keywords. This new enterprise search engine is a combination of the Polestar design developed by Business Objects and in-memory database processing created by SAP's Business Warehouse Accelerator. SAP is currently working with Dell, Fujitsu, HP and IBM to configure and tune Explorer for various hardware environments and expects to begin shipping the product this summer. Unfortunately, for now Explorer will only operate with SAP's NetWeaver Business Warehouse, diminishing its use and value for enterprises that use more than SAP as their data repositories.

In his Sapphire keynote address, Apotheker sought to clarify the company’s direction and missteps about the repeat delays and possible death of SAP’s software as a service ERP product called Business ByDesign.

The web-based ERP hosted solution was shipped prematurely, incurred numerous problems and was finally sent back to the drawing board after an unsuccessful introduction. CTO Vishal Sikka indicated SAP may need to replace as much as 70% of the SaaS product’s internal workings of to get the costs down to what SAP considers acceptable. Plattner said a market-ready SaaS ERP product will become available within two years; meaning that the product may make it to market around four years after the company launched the on-demand product with much fan fare in a New York media glitz.

Using the intellectual property for acquired cloud computing company Coghead, SAP indicates it will also deliver new hosted services with integration to its on-premise Business Suite flagship products. SAP wants to position itself in the emerging cloud computing market by managing cloud services front and back office business transactions. The German software giant is also taking steps to support other software manufacturer cloud platforms. Sanjog Gad, SAP's senior VP of advanced technology, is planning to operate SAP’s applications on Microsoft's Windows Azure platform.

Post Posted by: Jeffrey
category Posted in:
SAP
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World's Largest ERP Implementation Shows Success

The first performance measurement metrics are out for the world's largest ERP implementation and the results are surprisingly positive. Following four years of detailed planning followed by two years of limited conference room pilots, the U.S. Navy began their full scale organizational wide ERP system implementation in 2004.

According to Susan Keen, technical director of Navy ERP, “About 11 years ago, we had some visionaries in the Navy who wanted to examine if ERP would be beneficial to use in our government agency”. The Navy wanted to advance from several loosely integrated, custom-built ERP systems to a central commercial software application which would integrate the decision-making processes and business activities in areas such as procurement, logistics and accounting.

According to Valerie Carpenter, the Navy ERP’s program manager, “The Navy needs to modernize and standardize business operations to meet financial compliance law, increase efficiency and improve asset visibility. If we can keep the strategic goals in mind, we can handle the day-to-day challenges just fine.”

The Navy's ERP software deployment is the largest SAP public-sector deployment in the world. The Navy ERP application currently integrates with the Marine Corps Intranet for network and security functions as well as 12 Navy applications and 18 Department of Defense systems. The ERP system scope includes finance and accounting, human resources, supply chain management, procurement and maintenance management across the Navy’s maritime, aviation, nuclear, sustainment and supply business functions. The duration of the entire project spans from 2004 through 2013 at a planned budget of $1.4 billion.

During the implementation planning phase, project team members performed more than 265 business blueprint workshops, designed more than 1,500 SAP product transaction workflow scenarios and designed more than 200 custom reports, system interfaces, data conversions and software enhancements to the standard SAP ERP system. The project team exercised more than 21,000 test scripts, managed more than 1,500 configuration change requests, electronically converted 52.7 million objects and loaded approximately 13.5 million data objects with a 99.99965 percent success rate.

All ERP implementation projects face technical and cultural obstacles and a project of this magnitude was no exception. Two primary challenges included the all too common change management and data migration areas. To proactively address the anticipated user adoption challenges, Navy project team members created 14 Web-based tutorials and 65 instructor-led courses to train users in all aspects of the new ERP system operation. Project team members also secured active executive sponsorship as well as early and broad involvement across several Navy enterprises. Challenges in data-migration were primarily due to the high number of systems and the volume of data to be converted. Anticipating this area could represent an early setback if not proactively addressed, Navy team members performed early data analysis to gauge data quality, performed multiple data cleansing projects prior to the scheduled data conversion and allotted some extra time to resolve other anticipated data quality issues. According to Carpenter. “The earlier you start working these top issues, the easier it is to adopt the new system and new business processes.” The planning paid off and the data conversion met the slated schedule.

The ERP implementation project did incur one additional significant change midstream. The original ERP project management was performed by BearingPoint and IBM, however, in 2006, Navy officials chose to bring program management in-house while still using the contractors in more limited roles. In addition to gaining project management leadership and accountability, the change enabled the Navy to leverage new work breakdown structures, integrated master schedules and earned value management (EVM) systems. The Navy ERP project management office is primarily operated from Annapolis with 55 government staff and as many as 500 contractors.

ERP software release 1 has completed its initial post implementation measurement process. While there are many lessons learned from the process, there is also cause for optimism going forward. Release 2.0 of Navy ERP, scheduled for February 2010, will incorporate the Navy’s supply chain management solution and manage the retail and wholesale functions of the wide-ranging supply system. Release 3.0 will include an information system for managing intermediate-level maintenance management requirements for ships, aircraft and weapons systems.

When fully implemented, the program will interface with more than 49 Navy information systems and 22 DOD applications. An additional 13 commands and 109,000 users will be added, bringing the total number of users to 185,000. By 2021, the Navy ERP application is expected to handle the service’s entire budget, replacing the Standard Accounting and Reporting System.

When complete, “The end result is a better equipped Navy that is better able to support the warfighter,” according to Carpenter.

Posted by: Jeffrey
Posted in:
SAP
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SAP Users Challenge Enterprise Support Program

As first reported in Computerworld and commented on in countless blogs, SAP users are uniting and challenging SAP to support its claims that its new Enterprise Support program delivers significant advantages over the prior less-expensive offerings the German giant has taken away. The world's largest business software application company announced in July that it will require SAP users to replace their Standard and Premium Support programs with a new and more costly Enterprise Support program.

Some critical users claim this is nothing more than a transparent attempt to milk increased annuity revenue streams from a captive customer base. According to Michael Davidson, CIO at Apotex Inc., a Weston, Ontario-based pharmaceutical company, "Supposedly, we're going to get more value. I haven't seen it because I haven't been shown it."

ASUG - the Americas' SAP Users' Group - intends to evaluate the Enterprise Support offering to determine "what works and what needs correction and thus leverage our considerable member base to influence SAP to either change the costs or change the offerings as appropriate." ASUG has also launched a series of Webinars in order to provide its membership with information on the new support program. ASUG CEO Steve Strout indicated that the SAP user group has so far convinced SAP to more gradually phase in the new program's increased fees. Similarly, the SAP UK & Ireland User Group, filed a strong initial protest against the SAP's plan and "is continually engaging with SAP regarding the support issue," a spokesperson said.

The German-speaking SAP user group - Deutschsprachige SAP Anwendergruppe e.V. (DSAG) - posted a written statement indicating that it "cannot support the compulsory replacement of Standard Support with Enterprise Support at this time." The DSAG's membership includes 2,100 companies in Germany, Switzerland and Austria. DSAG board member Andreas Oczko claimed in an interview that feedback from the group's members, "especially from small-to-medium-[size] businesses, is that they have very simple landscapes and are familiar with their systems. They don't see at the moment why they should need enterprise support."

SAP officials have claimed that the ERP software company is implementing the new customer support policy to help smooth users' migrate to the next generation of SAP ERP software applications, which will incorporate its SOA-based NetWeaver middleware technology. The company has begun the phased program implementation for current customers and the program will accelerate in early 2009.

The price escalations will reach 22% of a user's software license fees by 2012. The older support packages were priced at up to about 17% of the ERP software license fees. New customers can only select the higher-priced option with the 22% maintenance fee.

Introduced in May 2008, the Enterprise Support package includes the installation of SAP's Solution Manager portal at client sites. The web portal will supply SAP service staff with a real-time information systems view. The maintenance package also gives clients access to the Run SAP methodology, which was created to better accommodate service-oriented architectures (SOA).

SAP has thus far given no indication that it plans to soften the support program plan. Contrary to much user sentiment, according to SAP spokesman Bill Wohl, "While customers are saying they never like to pay more money, they see the additional value". He reiterated the company's position that the price escalations were implemented to help the company deal with increasingly complex client implementations and not simply to drive increased revenue. Hmmm....

Forrester Research analyst Ray Wang, suggested that SAP users work together to determine the value of the new support program. Wang commented that there is a "broad consensus" among Forrester clients that they may have to offer "some concessions" to SAP, "but it's also important to understand what value they may receive."

I am certain we haven't heard the last of this program.

Posted by: Jeffrey
Posted in:
SAP
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Oracle Impresses with Enterprise Performance Management

Last week Oracle introduced the Fusion Edition of its Enterprise Performance Management (EPM) software system. The release incorporates much of the Hyperion acquisition of April 2007 - and sets the stage for Oracle to compete against rival SAP in the emerging analytical software market.

New functions are impressive and now include key performance indicator (KPI) analysis, financial ratio calculations and alert notifications with flexible triggers and sophisticated routing. Typical processes now include modeling, budgeting, analysis, consolidation and extremely flexible reporting. For example, users can now drill-down from the Hyperion Planning application into Oracle's E-Business Suite to extract accurate planning data directly from transaction accounting software and other business systems. Oracle says it next plans to extend this integration to its PeopleSoft software and even with SAP's ERP software.

Just as transactions were individually processed through silo'd applications before the single-platform advent of enterprise resource planning systems, Oracle claims EPM will result in an integrated system suite that can replace the pervasive use of spreadsheet silos and disparate business intelligence applications. Oracle crafted a 'Strategy-to-Success' construct into the application software and offers optional line of business add-ons such as a profitability and cost management which measures lines of business and activities in terms of profit and loss. There is also a new software module that correlates financial plans from business segments with operational plans and budgets set by the accounting department. The enterprise-wide roll-up viewing is very useful.

The EPM suite consolidates the Hyperion performance management system, the Essbase OLAP (online analytical processing) and data warehousing and Oracle's Business Intelligence Enterprise Edition. And for the first time, Essbase has been extended as a business intelligence server which supports multiple types of analysis, including relational (ROLAP), OLAP, or the combination of the two.

Oracle EPM extends business intelligence (BI) using a web-based portal EPM Workspace, integration to Microsoft Office that now includes Word and PowerPoint and new desktop gadgets. The performance management software leverages Oracle's Fusion middleware, including Enterprise Manager, Identity Management, Application Server, BPEL Workflow and Oracle Data/System Integrator. It's also extendable to third-party databases and applications.

In all likelihood, these advancements are a competitive reaction to SAP's acquisition of Business Objects and the dawn of native BI deeply embedded and tightly integrated to ERP software systems. In many ways, Oracle is playing catch up with Business Objects and IBM's Cognos which previously offered read-write integration with MS Office and support for Word and PowerPoint. Whatever the driver, Oracle's EPM release is impressive and the company's jump to a much improved EPM application puts it ahead of arch rival SAP in many regards. While SAP has a road map to rationalize its BI portfolio-which includes technologies from Business Objects, Cartesis, OutlookSoft, Pilot - it has had less than six months to pull all the pieces together and has yet to release anything nearly as substantive as Oracle EPM.

Posted by: Jeffrey
Posted in:
Oracle
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SAP Backtracks on SAAS

Not long after the New York City media rich SaaS product announcements and follow-on happy hour parties were over, SAP has disclosed significant setbacks in its yet to be released software as a service CRM and ERP solution titled Business ByDesign.

In fact, more than just an indefinite delay, SAP has reduced the customer acquisition projections, revenue forecast, R&D budget, staffing of the Hosted ERP software system and release date by 12 to 18 months. Analyst firm Gartner found itself in an 'I told you so' moment as the research firm was extremely cautious when it first called SAP's entry to the hosted software market "a big bet" about a year ago.

Technical problems have plagued the Business ByDesign on demand ERP system. InfoWorld blogger Bill Snyder suggests that Business ByDesign is too closely tied to Netweaver 7.1. “SAP’s latest iteration is the big honking platform that nobody likes.” SaaS is designed to reduce complexity, but SAP spent nearly four years developing Business ByDesign — and precious little of that time apparently went to coming up with a workable model."

Other skeptics concluded Business ByDesign dead on arrival, assuming it would ever actually arrive, due to SAP's mandate that the software not be customized. Prohibiting software customization and thereby requiring mid-market enterprises to adjust their business processes to accommodate the software application is akin to putting the cart before the horse.

InfoWorld's Snyder also astutely points out that SAP's hosted platform may be more of a monster than middle market companies want to absorb and that SAP doesn't understand that companies smaller than the global 1000 don't necessarily want an entire software stack from the same vendor. Snyder writes, "The wave of consolidation that has swept the enterprise software world since Oracle bought PeopleSoft has been accompanied by a drive on the part of the largest survivors to build and sell complete software stacks. Although there are reasons that the stack strategy offers benefits to the enterprise customer, it clearly doesn’t serve the interests of the little guy."

Snyder and a host of other industry insiders correctly suggest that if SAP wants to legitimately play in the software as a service industry, the company should consider acquiring Salesforce.com or another credible on-demand software company. However, that would require the German giant to admit it missed the boat to the SaaS industry and was unable to retrench without outside help - two things not within the culture of SAP.

SAP's fallback to a failed on-demand ERP system is now to spin a new "services by design" approach. However, the market is not buying the spin nor the buzzword marketing and SAP looks more like a dinosaur reverting to a part-hosted, part on-premise hybrid approach which will fail to match the value propositions of true SaaS systems such as Salesforce.com, NetSuite and Aplicor. In SAP's defense, the approach is not radically different than that of Microsoft and may ultimately secure the acquisition of some hosted customers which are then transcended to the company flagship on premise ERP system. Expect SAP to ultimately release (late) a watered down, rigid and non-customizable middle market ERP system and aim the majority of their marketing to existing SAP customers looking to extend their on premise systems to decentralized, virtual or remote operations.

Posted by: Jeffrey
Posted in:
SAP
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NetSuite vs. SAP Business ByDesign at London SaaS Conference

NetSuite's CEO Zach Nelson made a forceful, possibly combative, appearance at the London SaaS conference. In an effort to differentiate the NetSuite hosted CRM and accounting software system from the traditional software giants of SAP, Microsoft and Oracle, who seemingly have recently found SaaS religion, Nelson seemed to emphasize the following points:

  • SAP and Microsoft do not understand the hosted software marketplace, however, their marketing and public relations messages substantiate the market.
  • SAP and Oracle enter the software as a service industry without focus and instead run their hosted solutions as a "side business."
  • SAP and Microsoft find themselves in a precarious position as any success they incur with online software will likely also result in cannibalization of their flagship non-hosted software.
  • The SAP software as a service solution - Business ByDesign - is inherently weak due in large part to its restrictive customization capabilities. Nelson claims that "every customer needs customization" and suggested SAP either doesn't understand this or simply chooses to ignore this market demand.
  • Nelson scoffed at what he calls the “you host, we host, everyone hosts” option offered with the Microsoft CRM product. However, Nelson did not elaborate on the fact that NetSuite has only one data center with no redundancy to a fail-over data center.
  • Nelson refers to NetSuite's target market as the "Fortune 5 million", points out that the information system needs of small businesses can be complex and suggests that the one-size-fits-all approach is short sighted and cannot be successful.
  • Nelson emphasized this point further by stating “Every one [of NetSuite's clients] has customized the application; no one is using 'vanilla' NetSuite. [Hosted] SAP is a non-starter if it's non-customizable.” He went on to say “The minute you customize SAP or Great Plains you never want to touch it again for fear of blowing it up.”
  • NetSuite will continue to evolve vertical market and industry specific hosted solutions.

Nelson was quick to point out SAP's much delayed software as a service offering. Despite lavish announcements and media press events, the Business ByDesign SaaS product remains unavailable. As commented by Nelson, “I've heard this is the most complete product ever, with one exception: you can't buy it. Are they going get their $3 million sales reps to sell it? Good luck!”

Although NetSuite has its own partner channel, Zach Nelson predicted "a world of pain" for partner channels desiring to work with hosted software companies. It's no secret that NetSuite itself has incurred frequent executive turnover of channel management positions and repeat complaints from partners who claim to find themselves competing with the company's direct sales force. However, it is a surprise when the CEO of a company that claims to operate with an indirect channel suggests that SaaS solutions are better delivered from a direct sales force rather than an indirect channel such as VARs (Value Added Resellers) as according to Nelson, the indirect partner channel is slow and unresponsive to customers. Nelson predicted this NetSuite's direct sales force would grow to 200 staff this year. I suspect the NetSuite partner and VAR channel will shrink in about the same proportion.

Posted by: Jeffrey
Posted in:
NetSuite
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NetSuite's Net Customer Loss

I have recently discovered some disturbing information from NetSuite which really questions the company's business growth and casts new light on the often presumed sky high customer churn rate. As first reported by Jason Carter in an article titled Customers are running away from NetSuite, over the prior five year period, NetSuite has lost more customers than it has acquired. Exceeding 100 percent client turnover during this period is not exactly a hallmark credential for a company selling a business software product which claims to improve customer relations.

While NetSuite refuses to report customer churn rates, information available from the company can be deductively reasoned to provide a strong glimpse of a big problem. On March 27, 2003, NetSuite issued a Press Release announcing top management changes and stating "... the company has reached the unprecedented 6,000-customer milestone ...". However, in the recently filed 2007 NetSuite S1 statement the company indicated that it retained "over 5,400" customers. Similarly, in the February 2008 financial results, the company indicated it added 432 customers, however, instead of a total of about 592 (5,400 + 432), the total was instead "over 5,600", suggesting to me that the excessive customer churn of the last five years is continuing as of the most recent quarter. How a CRM software company can have fewer users now than five years prior is a mystery of Tom Clancy proportion.

While not necessarily indicative of the total customer population, there are more web-based posted NetSuite customer complaints than I have ever witnessed for an ERP system (or any business software system) - The BusinessWeek site shows pages and years of passionate and frustrated Netsuite customers posts, ZDNet's Dennis Howlett moderates a few user forums such as NetSuite Nightmares and NetSuite Nightmares: part deux, which largely bash NetSuite, CRM Landmark's user forum site shows similar negative reviews, a self proclaimed Frustrated NetSuite User setup his own blog and has received dozens of follow-on blog posts and one very frustrated user setup a site to organize a customer class action lawsuit NetSuite. It's a very clear indication when this number of users go to this extreme to voice their displeasure.

Posted by: Jeffrey
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NetSuite
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Oracle's Top Challenges

My prior blog post commented on the top challenges facing SAP in the coming year. To provide a meaningful comparison point to SAP and the ERP software industry in general, this post will take a similar approach to identify and propose solutions for the #2 ERP software manufacturer - Oracle.

First, settle the lawsuit with SAP. At the moment it appears SAP has violated ethical business practices, Oracle's intellectual property and the law. I'm confident SAP would like to remedy the situation to the best of their ability and implement mitigating measures to prevent future reoccurrences. Oracle's continued pursuit of this litigation beyond its legal remedies and simply to humiliate SAP in the court of public opinion may backfire. I recommend Oracle recover their legal entitlement and be gracious about a settlement.

Second, deliver a major Fusion release. Don't take the approach of delivering small and pretty much worthless Fusion components simply so you can say you made a projected delivery date no matter how inconsequential the delivery. Nobody cares about small Fusion components. ERP users from Oracle Financials, PeopleSoft, JD Edwards and Siebel CRM users care greatly about seeing the framework that will leverage these autonomous systems into a cohesive platform that will extend the value of their ERP investments into the future. The market wants to see the originally proposed Fusion release in 2008; nothing less.

Third, show some definitive and genuine direction with regard to Oracle's software as a service (SaaS) strategy. It confuses existing customers and prospective buyers when CEO Larry Ellison indicates his distaste for SaaS solutions and then says Oracle is moving to make every business application available as a hosted solution. The general consensus is that Oracle is fighting the typical hosted solution which offers thin client delivery and subscription-pricing in a futile effort to redefine software as a service and simply leverage the redefined hosted model as a marketing tool to sell more of the flagship product. If true, I recommend Oracle reconsider this strategy. Otherwise, expect to lose handsomely to SAP's Business ByDesign hosted solution.

Fourth, acquire NetSuite. I'm talking to you Larry. You know you want it. Actually, you already own it, you just want it under the Oracle umbrella. At the moment you're facing a clear conflict of interest. You are a majority shareholder in two competing ERP software companies. You're setting yourself up for another class action lawsuit (I'm sure I don't have to remind you what happened in the last one). Either acquire NetSuite or dispose of your ownership in the company.

Posted by: Jeffrey
Posted in:
Oracle
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SAP's Top Challenges

There's no bigger name in Enterprise Resource Planning (ERP) software than SAP and for the first time in over a decade SAP faces some of the biggest challenges the company has ever seen. I've highlighted the top four SAP challenges as well as my recommendations in conquering these obstacles.

First, settle the lawsuit with Oracle. The SAP/TomorrowNow fiasco has harmed SAP’s credibility and threatens to cast an even bigger shadow over the software giant. Every day the legal wrangling with Oracle continues is a day where SAP’s reputation in the public market is tarnished. At the moment, most industry observers believe that the alleged theft was committed by a group of rogue staff from the semi-recent (January 2005) TomorrowNow acquisition. Most also believe that because SAP got caught with their hand in the cookie jar, Oracle would enjoy nothing more than to promote this case in the media and drag this litigation out as far as possible. Another risk to SAP is the threat of other yet unknown acts which may only come out as a by-product of what is sure to be a wide and thorough legal discovery process by Oracle. I recommend that SAP take its lumps, come clean, offer a full apology, pay Oracle any damages and put into place preventative measures to assure the market this type of unethical acts does not repeat. Lastly, as TomorrowNow is a liability and will always be a shadow on the company, sell off the organization and put this ugly chapter behind the company.

Second, upgrade the customer base. It’s not a good sign when only about 6,000 of 34,000 SAP customers have upgraded to the most current SAP ERP 6.0 product released over 19 months ago. Most SAP ERP customers remain on the prior MySAP 2005 version, My SAP ERP 2004 version or one of the more aged R/3 versions. SAP has a planed life for ERP 6.0 through 2010, however, it appears that most SAP users will not upgrade to this version before it is retired. In my experience, most users are fearful of the cost and complexity involved in upgrades. For SAP to advance its user base to current product versions, I recommend SAP invest in a far more streamlined upgrade architecture and provide a suite of complimentary upgrade tools.

Third, enlist a competent Business ByDesign channel. SAP’s Business ByDesign announcement in September 2007 was a welcome acknowledgement that the company will cease chastising, defaming and otherwise casting doubt on the non-stoppable software as a service (SaaS) movement. While SAP has clearly hampered Business ByDesign so that it does not threaten or cannibalize the company’s ERP 6.0 flagship product revenues, the hosted solution appears it will be quite respectable when released sometime in 2008 (hopefully). However, product release is less than half the battle in winning customer acquisitions. SAP will have to enlist a large and qualified business partner channel of VARs (Value Added Resellers) and system integrators in order to successfully distribute this product to its intended target market. The company has indicated it plans to eventually have approximately 1,000 channel partners, however, there are currently only 22. While SAP may get some converts from its 1,000 Business All-in-One partners or its 1,300 BusinessOne partners, it’s likely that conversion will not result in anywhere near the 1,000 partner goal in large part because SAP will only permit Business ByDesign partners to act as sales agents for the foreseeable future. This type of business partner relationship limits a partners product earnings to a referral fee and pretty much eliminates any opportunity to earn professional services fees. I recommend SAP reconsider the sales agent relationship and equip partners with the more traditional VAR software sales margin and fulfillment of professional services.

Fourth, carefully integrate Business Objects. I think the bigger challenge with the Business Objects acquisition is not the company and culture integration which plagues so many troubled acquisitions, but the technology integration. I strongly recommend that in the near term and over the longer term SAP resist the temptation to upgrade Business Objects industry standard technologies to SAP’s NetWeaver proprietary technology. Such a move would alienate the Business Objects ecosystem, lessen interoperability across complimentary computing platforms and reduce the product’s value proposition for most Business Objects users who use the product beyond their Enterprise Resource Planning software systems.

Posted by: Jeffrey on 01.08.08
Posted in:
SAP
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NetSuite IPO

NetSuite (NYSE: N) today announced the initial public offering of 6,200,000 shares of its common stock at a price of $26.00 per share. As NetSuite’s on-demand ERP system is targeted and limited to small and midsize businesses, I’ve not actually implemented or used the product, however, I’ve seen the product multiple times and do follow the company as I think it’s an exciting company with a lot of upside potential.

The stock opened today for trading on the New York Stock Exchange (NYSE) under the ticker symbol "N" and seems to have raised about $161.2 million. Surprisingly, the stock release price was double the original investment bankers recommendation who predicted a price of about $13.00, however, the Dutch auction set the price at $26.00 (the bankers still netted $9.2 million as part of their completely inaccurate price setting advice).

NetSuite minimized the opportunity for investment banker artificial stock spiking by relying on the Dutch auction process, an infrequently used method to set the IPO price. In almost all public offerings, the investment bankers set the price after measuring interest from institutional investors, who then receive most of the shares. Critics have long held that the investment bankers deliberately set the IPO price artificially low to increase the odds of a big payoff for the investors who first get the shares. NetSuite’s Dutch auction democratized the public offering process by allowing more individual investors to submit bids. The Dutch auction process was of course made famous by Google during its highly touted IPO in August 2004. The net effect of this IPO method is to maximize the amount of money raised by the company issuing the shares, leaving less room for the IPO investors to profit. And it worked for NetSuite, which raised nearly $70 million more than the company envisioned.

CEO Zach Nelson was quite a happy man today. In addition to his 3.4 percent of the company now having a value of about $73 million, he rang the opening session’s bell and commented, "This has been a surreal experience." I can only imagine. He later went on to say "Going public on the New York Stock Exchange is a dream for any start-up, and NetSuite is excited to have reached such a milestone today" … "Our IPO and NYSE listing allow us to help small and medium-sized companies achieve their dreams by delivering a comprehensive software application to run their businesses."

However, the biggest winner today was Oracle’s Larry Ellison, who owns or controls about two-thirds of NetSuite’s stock and his just under 32 million shares are now valued at about $832 million. Ah, the rich just keep getting richer.

Posted by: Jeffrey on 12.20.07
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NetSuite
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Market Prediction: IBM #3 in ERP

Permit me to be the first to predict that IBM will acquire an ERP (Enterprise Resource Planning) software product and shoot to the number four market share position within 4 years and the number three market share leader position within 5 years. To put this prediction in perspective, it's important to note that IBM categorically denies any ERP acquisition plans. Also recognize that IBM only four years ago stated that the company is not moving toward acquiring business applications and has since acquired Ascential, iPhrase, FileNet, MRO and most recently Cognos.

The basis for my prediction is largely based upon the pressures being imposed by IBMs shareholders and competitors. There are not a limitless number of routes for a $90 billion organization to show sustained growth. As IBM and its operating margins have become much more dependent upon software - and especially business application software - since liquidating major portions of its hardware business, the ultimate software growth plan ends with mission critical ERP business applications.

IBMs competitive landscape is changing. The value-added software components which generally compliment business application systems are vanishing and in fact being absorbed directly into those business applications. As evidenced in the highly coveted business intelligence (BI) space, the business models for standalone BI are dying. Microsoft bought Proclarity, Oracle bought Hyperion (for $3.3 billion), SAP bought Business Objects (for $6.8 billion) and now IBM will acquire Cognos (for $5 billion). However, unlike the other acquisitions, IBM has no vested ERP applications partner and in fact has increased competition as those ERP vendors up until recently may have entertained an IBM BI solution within their client bases. No longer. The path and evolution of BI systems will be followed by other complimentary component solutions. ERP vendors are showing an appetite for owning and delivering more of the 'stack'. SAP, Oracle, Infor and others demonstrate sustained acquisition strategies and surprisingly, the ability to integrate acquisitions for synergistic value. If IBM intends to compete in the business software market, it will be forced to acquire an ERP system and go toe to toe with Oracle and SAP. While these two formidable competitors have significant early market advantage, IBM could carve out massive gains simply climbing to the number three or four ERP business applications position.

Posted by: Jeffrey on 12.01.07
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IBM
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Oracle's Game Plan

The three day Oracle OpenWorld conference in San Francisco just finished. Like a lot of ERP (Enterprise Resource Planning) software conferences it wasn't hard to separate the fact from the fiction. However, trying to understand how the conferences main messages merge into users utilization of existing ERP software products can take some guesswork. The four primary messages from Oracle to the attendees of this conference were about virtual technologies, green technologies, software as a service (SaaS) and Oracle's new 11g database technology.

Oracle clearly has an aggressive push and not so clearly understood vision for virtualization. Oracle kicked off the OpenWorld keynote speech with the Oracle VM (virtual machine). This virtualization tool is based on the open source Xen hypervisor and from most announcements it appears Oracle's business model around this tool is the typical virtual support, maintenance and professional services. Virtualization has become mainstream and the database implications with virtualization are fairly obvious. However, I'm not really sure why Oracle chose to make yesterday's news their opening announcement - particularly as they seem to be riding the coattails of another product without adding any substantive value. Maybe there's more to come on this.

Even if only in talk, Oracle has finally picked up on the green wave. Jonathan Schwartz, the CEO of Sun and a guy who really does advance green causes, used his keynote to candidly share with the crowd that the "eco" in 'ecofriendly' actually stands for economic and not ecology. As a personal advocate of green technologies I appreciated his straight forwardness as I firmly believe green technologies will not gain mainstream adoption until they deliver financial economies and savings. Fortunately or unfortunately the economies are coming primarily as the results of non-stop demand for increased computing cycles along with continued demand (growing above supply) of energy pushing costs to unpredictable levels.

Larry Ellison demonstrated three new Sales Force Automation (SFA), SaaS-based, Fusion applications during his keynote address. Oracle went a step further stating that every application the company creates from 2008 forward will be SaaS-ready. Most who follow Oracle and hosted software view Oracle's comments as nothing more than lip service. While Oracle makes its business applications 'saas available', this strategy is little more than creating another sales outlet for licensed software. Outside of the Siebel OnDemand product the company acquired, Oracle's hosted offerings do not offer subscription pricing, short term period to period contracts or other commonly available SaaS features (available from competitors) thereby missing most of the saas value proposition.

Finally, Oracle claims the new 11g database makes big strides in terms of simplified implementation, administration and maintenance. I still have Oracle 9i and 10g databases so my quest following this OpenWorld conference will be to evaluate the benefits, costs and upgrade paths in advancing to 11g. Perhaps that evaluation will be the subject if a future blog post.

Posted by: Jeffrey on 11.16.07
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Oracle
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Larry Ellison Relinquishing Control of NetSuite? I Doubt It.

In an SEC filing, NetSuite announced that controlling shareholder Larry Ellison was reducing his influence on the SaaS company trying to go public by placing his shares into a "lock box" managed by an appointed third party. Ellison owns about 61% of NetSuite shares, and his children own 13%. Given that NetSuite and Oracle are competitors, have had a difficult to understand and less than arms length relationship for the past several years, there appeared to be both conflicts of interest on the part of Ellison and concerns by upcoming IPO buyers.

The NetSuite IPO has been long delayed - seemingly from events such as an unexpected change in accounting firms to the stepped up Larry Ellison conflict of interest concerns raised by many. However, does Larry Ellison lessen control with voting shares held by an administrator? I doubt it. Don't forget that NetSuite co-founder Evan Goldberg and current CEO Zach Nelson are former Larry protégé's from mother company Oracle. Nelson seems inclined to please Larry in any way possible - including being the banner sponsor of Larry's most recent racing yacht - a complete embarrassment for Larry and a (predictable) multi-million dollar advertising debacle for NetSuite.

Posted by: Jeffrey on 10.31.07
Posted in:
NetSuite, Rants
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Salesforce.com Security Beached. Repeatedly Hacked.

Salesforce.com got hacked and the only things worse that the very large amounts of customer data stolen from the hosting software giant were the lack of timely customer notification and completely evasive responses by Salesforce.com and its customers. The Washington Post first reported the hack against salesforce.com and unleashed on customers of SunTrust Banks. Then MarketWatch reported another salesforce.com phishing scam against customer ADP (Automatic Data Processing) and other salesforce.com customers. As first reported by the Washington Post on October 19:

"A database of e-mail addresses and other contact information stolen from business software provider Salesforce.com is being used in an ongoing series of targeted e-mail attacks against customers of several Salesforce.com business clients, including SunTrust and Automatic Data Processing Inc. (ADP), one of the nation's largest payroll and tax services providers."

The hacking incident was detected by a SunTrust customer who received a malicious e-mail in mid-September. The email used the customer's name and business email address and provided instruction to download a PDF which included a malware payload (presumably a trojan). The recipient then received an email from SunTrust indicating a third party database was improperly accessed. I guess that's the spin to say "our hosted CRM vendor was hacked, your data was compromised and you may now be phished by the hackers directly or whoever the hackers sell your data to." Way to be forthcoming about your customers' most sensitive data SunTrust!

SunTrust spokesman Hugh Suhr later commented the hacked information included the personally identifiable information (PII) of about 40,000 SunTrust customers. He said the customer list was stolen from a database held by Salesforce.com. Suhr indicated that at that point SunTrust received about 500 customer complaints of targeted phishing emails - several of which were successfully penetrated against customers - and that they were aware of several thousand dollars of losses. In an apparent attempt to make somebody else look bad and somehow lessen his own inexcusability, he also indicated that the personal information for ADP customers, a different Salesforce.com customer, was also stolen from Salesforce. In fact, ADP later indicated that data related to 900,000 customer records had been breached.

In a continued showing of complete customer disregard, Salesforce.com's Bruce Francis, the company's vice president of corporate strategy, refused to acknowledge whether any customer-specific data was stolen, and refused to answer direct questions about the incidents. He did, however, say several times that "phishing is a fact of life for any company that does business on the Internet these days." I guess this is true for at least Salesforce.com.

Posted by: Jeffrey on 10.26.07
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Salesforce.com, Rants
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Hosted ERP Software Selection Complete

I recently assisted a client with a software selection project and thought I would share several of the discoveries and things learned in this post. This company required accounting software (general ledger, budgeting, accounts payable, accounts receivable and cash management), distribution software (sales order, purchase order and inventory) and customer relationship management (primarily sales force automation (SFA), but also marketing and customer support). As the client has about 145 users dispersed throughout the US and Canada as well as a few dozen users in satellite offices in the UK, France and Greece, we decided that an on-demand or hosted ERP solution would provided the greatest connectivity at the lowest cost and restricted our software selection to hosted or software-as-a-service (SaaS) products. Here's some of the take-away's from our project.

  • We first looked at NetSuite. We began discussions with a NetSuite VAR (value added reseller), however, later a direct sales guy became our point of contact. We were impressed with the enterprise-wide software capabilities. NetSuite started off as an online accounting system, however, has since developed full CRM and an integrated e-commerce storefront. The system offers every component of enterprise resource planning software. We had previously heard a lot of rumblings regarding the system being difficult to use but overall I thought the system navigation was reasonable. Late in the sales process we were exposed to a number of "add-on" fees which had the potential to ratchet up the cost significantly. One of the project team members had a negative NetSuite experience at their prior employer. Add to that the high number of rants and negative NetSuite reviews floating around the Internet and you are left with a cautious (somewhat skittish) project team. However, the final nail in the NetSuite coffin was the ridiculous and unacceptable disregard for system uptime and safeguarding of client data. While the company does provide a Service Level Agreement (SLA), we stumbled upon numerous web sites that had extracted text out of NetSuite's recently filed S1 statement highlighting the fact that NetSuite has no backup for any of its services.

  • We then looked at Aplicor. A few members on our project team were aware of Aplicor, however, most on the team were not. Like NetSuite, Aplicor offers a full ERP software system which includes accounting, distribution, manufacturing, HR and CRM software. Aplicor also has an e-commerce storefront, but also like NetSuite it wasn't that impressive. As a side note, NetSuite and Aplicor were the ONLY hosted products we could find that offered both ERP and CRM. We came across a few other SaaS vendors making the claim to deliver both, however, their idea of ERP was not credible. Aplicor is a much smaller company than NetSuite. While some may consider this a negative, we positively verified their company viability and thereafter considered their size to be a strength in terms of forming a more meaningful vendor partnership. After demo's, the project team believed Aplicor's number one product strength to be ease of use. Other areas of advantage included simple (non-technical) customization, a workflow module to easily automate activities and business processes and really cool reporting. Aplicor also offers an SLA and actually backs up their claims of assured uptime with multiple redundant data centers.

  • Lastly, we looked at Intacct. A decent product although our IT lead had concerns about the product's scalability and interoperability in large part because the product was developed in PHP (and not Java or .NET). He seemed to feel that PHP isn't an enterprise level development platform and had reservations about performing integration and customization to a PHP solution. Intacct uses IBM for their hosting facilities and we acquired a good level of assurance for uptime and security. The downside for Intacct in our selection was the fact that the company didn't have any CRM - which then required an additional third party CRM purchase from Salesforce.com's AppExchange - which then dramatically increased the total cost of ownership (TCO) to an unacceptable level. We were also a bit leery of the company's viability (4 CEO's in the last 4 years, not profitable and seemingly living on venture money).

In the end we chose Aplicor. We're only about 30 days into the implementation and while so far everything looks good, I'll reserve my final opinion until at least the first post-implementation review.

Posted by: Jeffrey on 10.15.07
Posted in:
SaaS, NetSuite, Aplicor, Intacct
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Larry Ellison and SaaS Software

Having done a few software as a service (SaaS) ERP implementations over the last couple of years, I've definitely become a fan of the SaaS model. I recognize it's not for everybody and every situation, however, it clearly brings a huge value proposition to many. Unfortunately, I don't think Oracle's Larry Ellison sees it the same way. In a recent financial performance discussion, Larry said, among other things:

"It's very expensive to do ERP implementations in small businesses. The cost of sales is high. The cost of implementation is high. There are virtually no synergies in sales, marketing, and product development and support ... So while we think it's an interesting market -- the small market -- because it's large, we just haven't figured out a way to make a substantial profit in that market. We think it's hard to make money. Our strategy: add more value, go upstream, sell industry-specific software to our existing customers, and we'll watch and see how SAP does going after small companies. Especially with in Software as a Service which we think is very interesting, but so far no one has figured out how to make any money at it."

What most surprises me about these statements is that Oracle is the relatively new parent of the Siebel On Demand hosted solution and Larry is personally the majority owner of soon to be public NetSuite. I think this kind of statement by Oracle's CEO forces pause by any buyer previously considering a SaaS solution from Oracle.

Posted by: Jeffrey on 09.26.07
Posted in:
SaaS, Oracle, Rants
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SAP's Business ByDesign SaaS Solution

Consider this post a shout-out endorsement to SAP for their Business ByDesign (formerly known as A1S) announcement. As I've seen nothing more than a few selectively chosen screen shots, I can't yet endorse the product, however, I commend SAP for finally embracing SaaS in the ERP software market with a purpose built thin-client hosted solution --- something arch rivals Oracle and Microsoft have failed to do.

Business ByDesign compliments the existing Business One, Business All-in-One and SAP Business Suite (R/3) products. Business One is limited to the small business segment. Business All-in-One is intended for midrange companies that require industry-specific capabilities (or what SAP calls micro-verticals).

The technology is not exactly my favorite. Business ByDesign is purportedly using the NetWeaver development environment, SAP's MaxDB open source database and Unix. I don't care for NetWeaver and MaxDB as they are proprietary to SAP and I really don't have the time or energy to learn yet more technical skills that only relate to a single vendor.

The early scoop is that the product is relatively weak (compared to much smaller competitors NetSuite and Aplicor who got a much bigger head start), however, fairly priced $149.00 per user per month with a minimum 25 users) and positioned for growth. While the product roll-out looks as though it won't be ready for prime time until late in 2008, SAP estimates that there are 1.5 million SME (small and midsize business) prospects in the 100 to 500 employee range (with 60,000 in the US and Germany alone) and has outlined an aggressive goal of acquiring 10,000 new customers and $1 billion by 2010.

Posted by: Jeffrey on 09.20.07
Posted in:
Raves, SAP
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Resistance to SaaS is Futile Fatal

Hey Microsoft! I'm disappointed with your all hype and no hope software as a service (SaaS) strategy. To give you credit, I recognize your adding the word 'live' to lots of software products and your near delivering a half hearted multi-tenant hosted CRM software product (Titan). I also recognize you've renamed the "software as a service" industry phrase to "software plus services" in order to appease your business partner channel; and to your credit the professional services element is a necessary one within the context of enterprise business software systems. However, now that I've finally seen a preview of the Dynamics Live CRM product I recognize why it's at the same price point as ACT! - because (in my opinion) it's fairly equivalent to ACT! in terms of functionality, feature sets and flexibility. Both systems are fine contact managers, however, woefully lack as enterprise customer relationship management (CRM) software applications.

Okay, Microsoft, my point of this post is not to rattle your cage but to encourage you to stop dragging your feet, legitimately embrace software as a service business applications and assume a leadership role. You own four impressive middle market ERP systems (Dynamics AX (Axapta), Dynamics NAV (Navision), Dynamics GP (Great Plains), Dynamics SL (Solomon)) - how about adapting at least one of them to the subscription-based, hosted, SaaS delivery model? Better yet, how about abandoning Project Green (which is another soon to be futile project) and creating a purpose built, web-based, thin-client ERP system and dominating the most significant growth market in the ERP software industry?

I recognize it's a fine balance to embrace a new technology that seemingly competes with your cash cow software licensing business and that the prospect of an annuity revenue stream, while attractive, isn't as attractive as all cash up front. Nonetheless, the SaaS industry is advancing with or without you so I'd encourage you to take advantage, bite the bullet, make your R&D investments and truly capitalize on this market movement.

Posted by: Jeffrey on 08.08.07
Posted in:
Microsoft
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Official Name For Hosted Software?

Having completed three hosted CRM software selections and implementations I thought I had this new software delivery model pretty well understood. However, after reading a number of vendor articles and web sites I now recognize I'm not even certain of the official name for hosted software. My confusion stems from the following vendor phrases:

Software as a Service (Gartner, Forrester, SAP, Aplicor)
Services as Software (NetSuite)
Software Plus Services (Microsoft)
Platform as a Service (Salesforce.com)

Maybe the catch phrase is immaterial, however, the anal side of me wants to know and use the best and most recognized name. If anybody has any authoritative references, independent citations or background information on this intriguing question please let me know. Thanks.

Posted by: Jeffrey on 07.07.07
Posted in:
SaaS
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