QuickREAD

November 15, 2006

Sarbanes-Oxley Is a 'Nightmare' that Costs Business Too Much, Says Greenspan
Alan Greenspan, the former chairman of the U.S. Federal Reserve, aimed sharp barbs recently at the Sarbanes-Oxley Act governing U.S. public companies.
Greenspan, who stepped down from his role at the Federal Reserve in January after 18 years, was the keynote speaker at AMR Research Inc.'s Executive Leadership Conference in Boston. In a wide-ranging look at the U.S. and global economies, Greenspan gave his take on the Sarbanes-Oxley legislation, which was implemented in the wake of major corporate accounting scandals.
A lot of financial reporting is less of a historical record and more of a forecast, according to Greenspan. "What the chief accountant creates is a work of art," he added to audience laughter. So, requiring CEOs and chief financial officers to sign off on company accounts is a good thing, he said, since they have the best sense of where the value of a business lies.
However, he described Sarbanes-Oxley Section 404 as a "nightmare" and extremely costly. That section requires a company's auditor to attest to the effectiveness of internal controls implemented to protect financial reporting systems and processes.
"What can you expect when you get virtual unanimity in both houses [of government]?" Greenspan asked. "Any bill that gets that can't be good." He said he believes that the vast majority of the members of the U.S. Senate and House of Representatives failed to actually read the bill, which passed largely uncontested in 2002.
Greenspan is hopeful that changes to Section 404 are likely, praising the efforts of Sen. Chuck Schumer (D-N.Y.) and Rep. Barney Frank (D-Mass.) seeking a re-evaluation of the legislation.
Source: Computerworld, http://computerworld.com

Your Customer Wants Some Answers Now or He Walks. Can You Give Them to Him?
Imagine this scenario: One of your largest customers calls at 8 a.m. and wants to know if he can increase his purchase order of a product that is about to go into production at your contract manufacturer in Asia by 20 percent. And he wants your answer by 3 p.m. that day. Could you gather enough information from your contract manufacturers and suppliers to decide whether you could make the change? Could you do that by the customer's 3 p.m. deadline? And--by the way--determine how much it would cost?
Your answers say a lot about your company's competitiveness--or lack thereof.
Source: EDN, http://www.edn.com

U.S. Companies Give Soviet-Era Factories in Central Europe a Second Chance
Alcoa Inc.'s mile-long rolling mill south of Budapest seems like a throwback to the Soviet era. The sun struggles to penetrate smudged skylights. Massive Russian-made machines from the 1960s grind away amid clouds of steam. Forklifts the size of flatbed trucks rumble by, stacking coils of aluminum sheeting like giant rolls of toilet paper.
Yet the 65-year-old factory in the city of Szekesfehervar isn't the dinosaur it appears to be. Those brutish Russian machines, long since retrofitted with computer controls and precision rollers, need just 15 minutes to reduce an ingot the size of a sofa to a roll of sheeting a few millimeters thick. In fact, Alcoa Inc. is so pleased with its Hungarian operations that it's spending $83m to add more modern equipment to the plant and make more sophisticated products. "The investment projects show our long-term commitment," says Bela Forgo, Alcoa's country manager for Hungary.
Across Central Europe, U.S. companies are getting great mileage out of old factories they bought on the cheap. That these soot-stained giants are worth something may come as a surprise to anyone who has spent much time in the former Warsaw Pact region. The countryside is still littered with the carcasses of factories that didn't survive the transition to market economics. But some were always more competitive than they looked.
Source: Business Week, http://www.businessweek.com/

Thicket of Regulations for Sales Outside U.S. So Dense, You Should Automate Compliance Efforts
For manufacturers that sell goods outside U.S. borders, complying with governmental regulations that prohibit selling to a restricted party or for a restricted use can be a heavy burden. Each company must weigh the risk of violating regulations against the need to have an efficient, globally competitive supply chain.
For companies selling products that could be used in weapons of mass destruction, achieving equilibrium is trickier still. If your product should fall into the wrong hands, the outcome could range from simple bad publicity to exorbitant penalties to a terrorist act. These manufacturers must automate the screening of orders and customers to have any hope of surviving the onslaught of regulations created by the U.S. Department of Homeland Security post-9/11.
Source: Managing Automation, http://www.managingautomation.com

Supply Managers, From Nowhere to the Executive Suite?
Back in the days before intensified global competition, increased risks of supply chain disruptions, and faster product cycles, procurement was an undersung corporate function. Its primary purpose was to purchase what the company needed at the lowest cost. But in today's fast paced, highly competitive world, manufacturing industry leaders are elevating supply management to new level of importance, using it to help drive a company's strategy and ultimately, its success. As a result, supply managers who help companies innovate products, save costs and become more agile competitors get more than just respect. Often, they find themselves on a fast track to the executive suite.
Source: Industry Week, http://industryweek.com

Two Duke Studies Find Outsourcing Costs U.S. Engineering Jobs. Or Not.
Ever since the offshore shift of engineering work blew up into a national issue four years ago, a question has nagged at economists and policy makers: Is outsourcing hurting America's engineering workforce? Or is it actually boosting engineering careers by making U.S. tech companies more competitive and allowing them to deploy engineers more effectively?
Duke University has been at the forefront of assessing this issue with two major research projects--one by the Fuqua School of Business and the other by Pratt School of Engineering. What's interesting is that the two studies, both involving surveys of U.S. executives, are coming to completely different conclusions.
One finds that companies are going offshore because they are desperate for talent and are shifting more complex work to nations such as India and China for strategic reasons. The other Duke study concludes that the offshoring phenomenon is all about cost and that there is no shortage of engineers in the U.S. Therefore, the labor shift is coming at the expense of U.S. jobs.
How do you reconcile these opposing views?
Source: CIO Today, http://www.cio-today.com

2007 to See Major Changes in Outsourcing Landscape
We live in interesting outsourcing times. As we face 2007, two trends are gathering speed like hurricanes brewing in the ocean.
Trend No. 1: The dramatic increase in demand for outsourcing.
One stimulus for this increased demand is buyers have discovered the value of labor arbitrage and now understand how to use this powerful business advantage. Those vaunted savings are real! And outsourcing has become (finally) an accepted business practice, shortening the learning curve and the sales cycle.
Trend No. 2: Major Changes in the Supplier Landscape
Increased demand should be great news for outsourcing suppliers. But the second major change is mitigating this. The number of suppliers has exploded. There used to be three major global suppliers with half a dozen second-tier organizations plus a handful of niche players. No more. Currently there are more than 4,000 outsourcing suppliers; 3,200 are in India alone.
Now, more than ever, it's become trickier to select the right supplier since there are so many to choose from. There are now too many suppliers, so their numbers will contract. That adds another variable in the dating game.
Then add another layer of complexity: location proliferation. In the old days (two years ago), buyers interested in offshoring would tell us they wanted to send their work to India. They had no other locations to consider.
Today, in keeping with the industry's new direction of specialization, different locations around the globe have chosen to become experts in specific types of outsourcing. For example, Eastern Europe has become the low-cost support area for European languages. It offers a better cultural fit than non-European locations. Central and South America have become convenient spots for real-time processing for North American companies. India is still the leader in overall BPO support.
Buyers have a third option: setting up their own captives instead of sending the work to an offshore provider. The number of captives will continue to expand in 2007 because of low entry barriers, the desire to capture supplier margin, and the need to establish a base to grow local market presence.
Source: Outsourcing Journal, http://www.outsourcing-journal.com

'Clipped' Tags Could Ease Privacy-Invasion Fears About RFID
When Wal-Mart started talking about using RFID technology to get a better handle on the demand signal in its supply chains, one frightening image embedded itself in consumers' collective imaginations: a manufacturer, retailer or both tracking the use and disposal of an individual's razor blade, toothbrush or can of deodorant.
In point of fact, RFID technology was not at that time developed enough to track single item use. Now, however, the technology has reached the point where it is possible to do so, and consumer fears about privacy violations remain unchanged.
A year ago, IBM scientist Paul Moskowitz delivered a paper at an industry event about a device he invented that could address these concerns. Called "Clipped Tag" technology, it involves an RFID tag small and flexible enough to allow consumers to tear off most of its antenna, thus reducing its read range to just a few inches.
This way, Moskowitz says, consumers still can benefit from having the device embedded in the product, without fear of the manufacturer or retailer tracking how it is used.
Source: CRM Buyer, http://crmbuyer.com

E-Sourcing Here to Stay, And Growing, in Importance, Survey Finds
The percentage of spend going through e-sourcing tools almost doubled in the past year from 16 percent in 2005 to 31 percent in 2006, according to Purchasing magazine's annual Benchmark E-Sourcing Survey. And buyers are shooting for up to 50 percent next year.
In its sixth year, the survey also showed increases in the percentage of buyers using e-RFx tools, data warehouses and cost estimating tools as well as an increase in the average number of online events held in the past year.
"We are looking at additional tool sets in order to run more complex bidding events," said one buyer in the survey. "We are looking for a tool that will offer more bidding options and increase ease of use for our suppliers."
Source: Purchasing, http://www.purchasing.com

Airfreight Growth in Middle East Is Booming, Regardless of Political Stability
There were widespread fears in the trade world when the brief but brutal Israel-Hezbollah fighting at its peak shut down Lebanon in August that the conflict would spill out into the rest of the region, undermining what has become the air freight industry's fastest-growing market.
If air trade slowed down at all, however, few in the air cargo business noticed. Instead, the continued expansion of airborne shipping in the region from North Africa to the Persian Gulf and beyond was the latest example of the resilience of business in the Middle East to the region's political conflicts and the rapid up-and-down swings of oil prices that drive many of the region's national economies.
After leading the world with international air freight growth of 14.6 percent in 2005, more than four times the worldwide growth rate, Middle East freight traffic was up 16.8 percent in the first eight months of this year, according to the International Air Transportation Association, primarily due to the booming economies in oil producing countries.
Source: Air Cargo World, http://aircargoworld.com

Is the IT Revolution Over, or Could It Be Reinventing Itself?
If there is a stunting of innovation in the enterprise application market, it could be that the market itself is partly responsible. Consolidation in the ERP market has led to power being concentrated in the hands of just a few vendors, namely SAP and Oracle, which is stagnating innovation.
The problem is that radical consolidation, several years of recession, and a major change in corporate buying preferences have combined to stunt the growth of most of the hundreds of smaller software firms that once drove much of the industry's vibrancy and innovation. These companies, which have traditionally distinguished themselves on the basis of vertical, functional, or geographic specialization, simply don't appear to be participating in the economic recovery.
Adding to the problem is that the ERP vendors keep expanding into niche realms, effectively cutting off their oxygen and with it the innovation that niche players bring.
Source: AMR Research, http://amrresearch.com

You Don't Have to Be First--Just Know What Your Customer Wants, and When
Business dynamics are changing, especially among mid-sized companies trying to establish themselves as market leaders. To succeed, mid-sized businesses must anticipate the needs of customers and create innovative ways to deliver products and services. Even more important for the long haul, they need to find ways to perpetuate innovation. Their efforts in this regard carry profound implications for the economy at large, considering that, under the "long tail" theory coined by Chris Anderson in his book by the same name, small and mid-sized businesses in aggregate generate more revenue than the relatively few large ones.
"We're witnessing a profound shift as many markets and business activities become knowledge-based," says Curtis Carlson, president and CEO of SRI International, an independent research institute in Menlo Park, Calif., and co-author of Innovation: The Five Disciplines for Creating What Customers Want (Crown Business, 2006). "Innovation is the primary means for growth, prosperity, and improved quality of life," he adds, noting that there's a wealth of opportunities for innovation and entrepreneurship in all major market segments. Companies that fail to take a proactive approach to the market will eventually go out of business, he warns. IT, which enables so much business innovation, plays a critical role.
Innovation doesn't necessarily mean getting to market first, or even second, Carlson says. Rather, "you should get there at the right time"--neither too early nor too late. The key, he says, is to determine what the customer wants, and when.
Source: Optimize, http://optimizemag.com

Go on, Get Closer to the Customer--See if That Makes You More Profitable!
Organizations have been steadily evolving toward closer alignment with customers. But the changes required by this evolution are disruptive in the short run and add coordination costs in the long run. These countervailing pressures are a warning to CIOs that while closer customer alignment may be correct, it is not sufficient to support a wholesale shift in strategy and organizational structure. The appropriate structure is guided as much by implementation realities as by the strategic imperative to get closer to the customer.
So is it worth doing? The findings from a study of 347 mid-sized to large firms are mixed. Among those companies that made the shift, accountability for customer relationships sharply improved and information sharing was better. Firms organized according to customer segments were also easier to do business with and better at dealing with problems and queries. But these benefits didn't immediately translate into superior financial performance. There was no direct correlation to increased profitability.
Source: CIO, http://www.cio.com

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