The anticipated rebound in the supply chain management market has been slow to gather steam and vendors are looking at a dreary sales environment in at least the near-term. Even with a slow uptake in technology sales, these vendors are facing a drastically different sales environment, chiefly one with fewer overall prospects and very wary technology buyers. Many of these vendors have been forced to downsize perhaps even multiple times, in order to protect their technology and keep corporate doors open. In addition, these vendors seem to have hit a wall of disillusionment, and many are reacting with futile stop gaps, rather than drastic organizational changes to ensure survival.Analytical SummarySupply chain vendors need to face the new reality that sales revenues and opportunities may never rebound to the levels seen before the U.S. economic woes. In fact, these vendors need to realize that the sales landscape has permanently changed; technology buyers are deeming few solutions as imperative and are ruling out suite-sized implementations. In response, vendors will need to concentrate on three distinct areas: scaling their organizational structure, protecting and learning from the installed base, and finally, approaching sales as a building block process.PERSPECTIVEThe Supply chain management market is finally facing the harsh reality that the U.S. economy is not rebounding as quickly as anticipated and additional changes in their approach to this market will be required. Vendors, in addition to being very reserved about their investments, have been slowly reacting to a sales environment in which there are fewer overall prospects.To date, the vendors have made incremental changes such as small division specific layoffs, scaled down integration and development initiatives, and smaller-scale marketing campaigns. Although these changes have allowed these vendors to protect their technology and financial stability so far, it is unlikely that the impact of these changes can sustain the corporate environment in the long-term. The supply chain vendors are certainly at a crossroads in which more sweeping organizational changes are required and vendors need to step back and conduct exhaustive overarching evaluations of the entire business process. This should be followed by vendors concentrating on the implementation of these changes simultaneously, in order to realize the benefit of operational synergies, instead of continuing to carve out isolated cost savings.In evaluating the current state of the market, there are three distinct areas which, when implemented concurrently, will have a direct impact in creating a healthy corporate environment moving forward: scaling back of the organizational structure, protecting and leveraging the installed base, and approaching sales as a building block process. While most vendors have already embarked on some type of downsizing, and some have even reached multiple rounds of layoffs by now, the organizational changes need to take on a more global approach. Vendors should estimate resources required to fulfill initiatives while approximating a flat sales growth rate through the end of 2003. Vendors should pay special attention to any lingering redundancies in resources or facilities brought on by rapid acquisitions. In response to consolidating facilities, vendors should leverage remote workers, which will allow access to a larger talent pool to select from while lowering overhead costs. In addition, professional services organizations have lower margins and have typically been large cost centers because of the inability to maximize these resources due to seasonality of demand. Therefore, vendors should leverage SCM consulting firms and systems integrators to fulfill these needs. Finally, it is imperative that vendors make these changes swiftly, rather than in stages, which often negatively affects employee moral.Because of the marked decrease in overall number of prospects seeking SCM solutions, vendors need to reevaluate and concentrate on their installed base. It is important the vendors begin to streamline development plans, concentrating on new functionality and enhancements that can drive additional value for their current customers. In addition, vendors should seek customer input whenever possible in driving these development initiatives. Not only will vendors be able to ensure that solutions are being architected to support current customer and market needs but this will also create a very referenceable customer base. These customers, in turn, can be leveraged in the sales cycle to reassure new customers of the vendor and product stability. This is becoming increasingly important as customers seek low- risk vendors with proven technology, solutions, and rapid ROI.Finally, vendors need to revamp their approach to the sales process, treating this as an on-going relationship with the customer rather than a one-time engagement. Customer preferences are moving towards smaller bite-sized implementations that can show results quickly without a large up-front investment. The days of selling suites of solutions are virtually over, and vendors need to be prepared to react to shorter, yet more demanding, sales cycles. Vendors that continue to approach customers with proposals for suite-sized implementations or multi-phase deployments will find themselves alienating customers and quickly cut from contention. It would be helpful if vendors would take an active approach in speaking with many levels of the customer's business to ensure that requirements have been effectively defined and that an on-target pilot program can be delivered. Vendors should also realize that their customers as well, have been impacted by the economy and therefore, be willing to take on creative pricing strategies that delay payment until certain milestones are exceeded, or allow for flexible installment payments. These initiatives in fact, will help to create a satisfied new customer that will be eager to look into follow-on modules that can deliver additional value. We anticipate that recurring revenues from the installed base will begin to take on a bigger presence than in the past, perhaps eventually overshadowing initial customer wins, since follow-on sales are direct evidence of project success and customer satisfaction.Clearly, the current reactionary approach to rightsizing the business structure will not withstand a prolonged economic downturn. Although slicing and dicing development plans, sales initiatives and staffing levels will provide immediate relief, it does not build healthy companies moving forward. In fact, many of these vendors do not realize that their short-term decisions are only causing mounting internal grief and an outward impression of instability. Vendors must grasp this opportunity to make swift sweeping changes throughout the entire organization that will sustain the sales, marketing, and product development initiatives, given that the current economic situation is not an anomaly, and actually, the new economy.RECOMMENDED ACTIONSVendor ActionsFirst and foremost, supply chain vendors need to realize that the U.S. economic rebound may be several quarters, or even perhaps, years away and that it may never resemble the late 90's boom. In turn, these vendors need to take a proactive look at their overall business processes and make sweeping changes that will support continued survival rather than stop gap reactionary changes that are being employed today.Supply chain vendors need to downsize internal operations in order to be more in line with current sales opportunities. Vendors should look to eliminate redundant positions, which may have resulted from lingering acquisitions, and look to outsource professional services requirements which are often associated with drastic variations in workload and lower margins. Vendors should also streamline physical office locations into a few core centers globally, and leverage remote employees that add talent at minimal overhead cost.Supply chain vendors need to approach the sales cycle as an on-going process due to customers concerns over purchasing large suites of solutions up front. The vendors should aim to sell just one or two initial modules, which after proving success, will yield follow-on sales within those accounts.Supply chain vendors need to concentrate more heavily on protecting its installed base. These customers serve as invaluable references and can help to drive product development towards relevant customer and market requirements.User ActionsCustomers need to broaden their horizons in terms of evaluating supply chain vendors. Customers should realize that emerging vendors out of the dot.com era have been able to weather the storm and therefore, warrant evaluations especially in light of financial difficulties at market leaders, such as i2 and Manugistics. Customers should recognize that many of these smaller vendors have experience in smaller scale, rapid deployments and are often willing to try creative pricing methods.Customers must allow for qualitative characteristics, such as financial stability and customer satisfaction references, to weigh more heavily in the search for an SCM vendor. In the past, customers have concentrated chiefly on functionality and product comprehensiveness, which although is important, does not give the full picture of what is likely to be a long-term relationship.Customers want to be sure to clarify requirements, quickly putting solutions that are out of scope or second phase initiatives, to the back burner so as not to cloud the sales cycle. In addition, these customers should be more insistent on pilot projects to ensure that the short list vendor's solutions will meet expectations.Customers should make sure that the SCM solutions they are seeking are within the vendor's core business process areas. Otherwise, customers may be at risk if vendors decide to eliminate non-essential product lines in order to reduce development and support expenditures.