For most of us, the term "ecosystem" conjures up images of forests and jungles teeming with animals and plant life. But a number of experts contend that ecosystems are emerging in the supply chain software world as well, and that this could affect how logistics and supply chain managers buy and use software applications.
This concept was first put forward by David G. Messerschmitt and Clemens Szyperski in their 2003 book Software Ecosystem. They used the term to describe a community of companies that work together to sell sundry applications based on a common platform, like those developed by major software companies such as SAP, Oracle, or Microsoft. Just as animals and plants in a forest or a jungle have symbiotic relationships with one another, the software vendors in an ecosystem work in concert to provide customers with applications for all of their business needs. "It's competitive cooperation," says Gartner analyst Chad Eschinger.
Two decades ago, such competitive cooperation would have been unthinkable. The big enterprise resource planning (ERP) vendors that provided the software platforms held enormous sway over the market, and these big vendors had big ambitions. Not only did they want to provide the platforms or "backbones" to which all of a company's applications were connected, but they wanted to provide all of the software as well. No way were they going to invite other software developers to the table.
But the information technology world of 2010 is radically different from that of 1990. The emergence of cloud computing, a business model in which a company's data and applications are stored on off-site computers and accessed over the Internet, challenges the dominance of ERP. In short, a company no longer has to install ERP software on its own servers to create the ecosystem platform. The platform can be a "cloud."
That means it's theoretically possible for a major supply chain software vendor—say, Manhattan or RedPrairie—to serve as the center of an ecosystem. In fact, analyst Lora Cecere of the Altimeter Group contends that Google, Amazon, or even Facebook could provide the platform for a supply chain software ecosystem in the near future.
Most important to logistics and supply chain managers is the fact that in an ecosystem, the platform vendor does not seek to own or offer all software applications. Unlike the ERP vendors of the '90s, which tried to offer everything to everybody, the software platform maker recognizes its limits. It knows it can't do it all. And it understands the advantages of having other software makers provide specialized applications for the ecosystem. "Platform vendors can't be experts in everything," says Gartner analyst Dwight Klappich. "Even if they could build the application, the market is not big enough, so they will partner with another vendor that has the expertise."
What types of specialized programs are we talking about? Klappich cites fuel-tax management programs as an example. Others might include network design, inventory strategy optimization, or trailer load optimization.
If software ecosystems emerge the way the analysts expect, logistics and supply chain managers will be able to shop around for their software, choosing from an array of apps offered by smaller suppliers instead of just going with the module in their ERP vendor's software suite. That may require more homework on their part, since they can't go to one big vendor for all of their solutions. But it will also give them the flexibility to choose the best application for their needs. Even better, deployment promises to be hassle-free. Because these solutions will likely be cloud based, they'll require little integration with the other applications in the software ecosystem.
Editor's note: If you plan to attend the Council of Supply Chain Management Professionals' Annual Global Conference in San Diego this month, look for a special panel on software ecosystems. Several of the analysts quoted in this column will be participating in the event.