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Showing posts with label Plex. Show all posts
Showing posts with label Plex. Show all posts

Monday, June 10, 2019

Getting ERP Users to Upgrade—Cloud vs. Traditional Systems

One of the great challenges facing traditional ERP vendors is getting customers to keep up with the latest version. Cloud ERP systems are supposed to solve this problem, by making the vendor responsible for upgrades and keeping all customers on a single version.

However, sometimes, even SaaS providers need to make changes that are so significant and potentially disruptive that customers resist the change.

Read the rest of this post on the Strativa blog: Getting ERP Users to Upgrade—Cloud vs. Traditional Systems

Tuesday, February 12, 2019

When Are On-Premises Systems Justified?

There is near-universal agreement that cloud computing is the future for enterprise IT. Our research at Computer Economics certainly indicates so. In just one year, our annual IT spending survey showed the percentage of IT organizations with 25% or fewer of their application systems in the cloud declined from 72% in 2017 to 61% in 2018. We expect a further decline this year.

Four Factors Favoring On-Premises

Even though the trend is strongly in the direction of cloud, are there situations where on-premises deployment is still justified? In a recent article, Joe McKendrick outlines four situations where staying on-premises may be preferable to cloud, at least for now. He writes:
To explore the issues of when staying on-premises versus cloud makes sense, I asked industry executives about any areas that were not suitable for cloud, and better left on-premises -- especially from the all-important data perspective. The security implications, as well as geographical presence requirements, are obvious. But there are also other facts that may make staying on-premises the most viable option.
Joe goes on to outline four factors:
  • Legacy entanglements: where the system is just one part of an integrated set of applications, especially where there are dependencies on certain database or platform versions. “Monolithic legacy applications” with custom system administration tools are another example.
  • Cloud sticker shock: where data storage requirements are so great that cloud deployment is simply not economical.
  • Security: where “some data cannot risk even a hint of exposure.”
  • Need for speed: where large data sets are maintained for “real-time user data interaction, high-speed analytics, personalization, or recommendation.” Some IoT applications may fall in this category. 

The Four Factors Not as Great as They Once Were

While these four factors are worth considering in a cloud vs. on-premises decision, I find them to be less of a factor than they were even a few years ago.
  1. The legacy system factor is certainly reasonable in some situations. To this I would add, staying on-premises may be justified when requirements for a new system can more easily be accommodated with an add-on to the legacy system. Be careful with this, however, as this can be a prescription for further entrenchment of the legacy system.
  2. In my view, cloud sticker shock is only a factor for a small percentage of cases, perhaps for very large data sets. Declining costs of cloud storage should lead to fewer instances where this is a legitimate objection. Often, IT leaders making a case for on-premises systems based on cost are not factoring in all costs, such as the cost of personnel to maintain and back up that on-premises storage.  
  3. The security factor I find to be largely an excuse. Although business leaders often underestimate the impact of a potential security breach, they also tend to overestimate the capabilities of their own security staff members, processes, and technology. The level of security maintained by internal IT organizations is usually far less than what is achieved by cloud services providers. If one of the big three credit data providers (Experian) could not protect consumer data maintained on-premises, what makes you think that your security capabilities are greater?
  4. The need for speed, in some cases, may be a legitimate reason for keeping some systems on-premises. However, most enterprise applications do not have this requirement. Even manufacturing execution systems—systems with low latency requirements—have been successfully deployed by cloud applications providers, such as Plex. In other cases, local buffering of data may be possible to accommodate any latency between the local system and the cloud provider. In such cases, it may be better to make investments in high-speed data communications, with redundancy, rather than continue to maintain such systems in local data centers. 
There is one more factor in favor of on-premises systems: Where there are regulatory requirements that the organization demonstrate control over the production environment. This includes FDA-regulated companies where a system is used to support regulated processes, such as quality control in medical device or pharmaceutical manufacturing. Although it may be possible to meet the requirement in a multi-tenant cloud environment, many regulatory affairs professionals are more comfortable not fighting that battle. In such cases, it may justify an on-premises deployment or at least a single-tenant hosted deployment where control of the production environment can be more readily assured.

Cloud First the Best Strategy

As discussed, there are situations where a true on-premises systems may be legitimately justified, although the case is getting weaker year by year. Nevertheless, for most new systems, business leaders should be adopting a “cloud-first” strategy, even if "cloud only" is not practical for now. If there is a cloud solution that will meet business requirements, that should be the preferred path forward. The advantages of cloud systems, especially in terms of alleviating the burden of system upgrades, are too great to ignore. On the other hand, if no true cloud system meets business requirements, or there are other limiting considerations, an on-premises solution may be a legitimate option. But even then, we would prefer to see a hosted solution, in order to achieve some of the benefits of getting application systems out of on-premises data centers.

Thursday, June 08, 2017

Manufacturing Is a Huge Opportunity for Cloud ERP

In many markets for enterprise software, the battle between cloud and on-premises (or hosted) systems is over. Salesforce, the market leader in CRM, will soon pass the $10 billion mark in annual revenue. Workday, with its cloud HCM offering and growing financial management applications, expects to hit the $2 billion mark in 2018. Traditional Tier I providers, SAP and Oracle, are certainly not out of the race. But the only way they have been able to compete is by building, or buying, their own cloud services for CRM and HCM. Cloud has won.

Nevertheless, there is no cloud ERP provider the size of Salesforce or Workday, and there is certainly no cloud ERP provider for the manufacturing industry with that scale. NetSuite was founded in 1998, around the same time as Salesforce. But it only reached the $741 million revenue mark in 2015, before being acquired by Oracle. Claiming more than 30,000 companies, organizations, and subsidiaries in more than 100 countries as customers, it is by far the largest cloud ERP provider. Although it has done very well with professional services firms, software companies, and other services-related businesses, manufacturing companies form only a small part of that number. Plex Systems has a pure cloud ERP system for manufacturers dating from 2000 and has been rapidly growing over the past four or five years. But its customer count is under 600. After NetSuite and Plex, the number falls significantly: Cloud-only systems such as SAP’s Business ByDesign, Rootstock, and Kenandy,  each have even fewer manufacturing customers.

To understand how great the market opportunity is for cloud ERP in manufacturing, consider that, according to the U.S. Census, there were about 63,000 manufacturing firms in the United States in 2014 with 20 or more employees, as shown in Figure 1. Considering that the estimated customer counts by vendor in the preceding paragraph include customers outside of the U.S.,  it is safe to say that manufacturing cloud ERP probably has less than 2% market share in the U.S. The market opportunity going forward, therefore, is enormous.

Read the rest of this post on the Strativa blog: Manufacturing Is a Huge Opportunity for Cloud ERP

Friday, May 06, 2016

Plex Developing a Taste for Food & Beverage

Plex Systems, a long time cloud ERP provider, primarily to automotive and industrial suppliers, has recently been expanding its focus to the food and beverage sector. T

To see Plex now actively pursuing opportunities in food and beverage indicates that Plex is serious about this market. Nevertheless, even within this sector, Plex is selective in its focus.

This post outlines the capabilities of Plex for food and beverage manufacturers along with steps that it is taking to better serve this industry.

Read the whole post on the Strativa blog:  Plex Developing a Taste for Food & Beverage

Tuesday, March 24, 2015

With Manufacturing ERP, the Best UI is No UI

Among industry analysts, there is much talk these days about smart devices. The story is that information technology is being embedded in a host of products, from your household thermostat to your wristwatch to your toothbrush. These smart devices can be connected to each other and to cloud-based systems, resulting in an Internet of Things (IoT) that enables a whole host of new products and services. They also throw off enormous quantities of data—big data—that can be analyzed for insights and predictions and further leveraged for information-based services.

All this is new and exciting. But there’s one industry where smart devices are very old news: manufacturing.

Yet, for the most part, today’s ERP systems do not leverage those smart devices on the factory floor. In the typical factory, the intelligence of the factory equipment is used almost exclusively by manufacturing engineers, process engineers, and quality assurance professionals to control production. But when it comes to recording transactions for production control, inventory, or accounting, they are often performed by human operators hand-entering the data.

Read the rest of this post on the Strativa blog: With Manufacturing ERP, the Best UI is No UI→

Tuesday, September 16, 2014

ERP Customer Deployment and License Preferences

As we all know, a major transition in the ERP market is underway, from traditional sales of perpetual licenses deployed on-premises to subscription services deployed in the cloud. But not all buyers are ready to make the switch. Some prefer to stick with the traditional model, while others are going whole hog to the new model. Others still, are somewhere in the middle, sticking with a traditional vendor offering but having the system hosted by the vendor or a third-party partner.

Customer preferences are complicated by what is offered by their chosen vendor. When a new customer selects a cloud ERP vendor, such as NetSuite, Plex, or Rootstock, are they doing so because of the cloud subscription model, or in spite of it? Likewise, when a customer selects a traditional vendor with on-premises or hosted deployment, is it because they are opposed to the cloud model, or is it because the functionality of the traditional vendor was a better fit?

Acumatica as a Test Bed

As it turns out, there is one vendor’s experience that can help us answer these questions: Acumatica. Acumatica is a newer cloud ERP vendor, and it has some interesting characteristics that make it a good laboratory for testing customer preferences.
  • It is a fairly new provider, founded in 2008, that built its product from the ground up as a multi-tenant cloud system. It now has about 1,000 customers--a good sized sample--in manufacturing, professional services, and a variety of other industries. Moreover, there is no legacy installed base to influence the numbers.
     
  • The system is sold exclusively by partners, and—this is the key point—partners have flexibility in how they deploy the system. They can deploy it as a multi-tenant cloud system, with multiple customers on the same system instance, or they can deploy it in the customer’s data center or a hosting data center as a single tenant deployment.
     
  • The licensing model is also flexible: customers can buy Acumatica as a subscription service, or they can buy it as a perpetual license.
The combination of deployment flexibility and licensing flexibility yield three main groups of customers that I’ll refer to as follows: 
  1. Perpetual License Customers: these are customers choosing the traditional license model with on-premises deployment or hosting by a partner. (Acumatica refers to these as “private cloud.” I think that term is confusing, however, as when deployed for a single customer, the system loses its cloud characteristics, such as pooled resources and elasticity.) 
     
  2. SaaS Customers: these are customers choosing cloud deployment along with a subscription agreement.
     
  3. Subscription On-Premises Customers: these are customers that choose traditional on-premises or hosted deployment but pay according to a subscription agreement.
In theory, according to Acumatica, there could be a fourth category: a customer could choose cloud deployment with a perpetual license. In practice, however, no customer has asked for this. If a customer were to choose this option, they would pay the license fee up-front, plus traditional maintenance fees, plus a hosting or cloud services charge on a monthly basis.

What Deployment and Licensing Options Do Customers Prefer?


Richard Duffy at Acumatica was kind enough to share with me the customer counts for each of these three categories for the years 2013 and 2014. This allowed me to calculate on a percentage basis what options customers are choosing and—just as importantly—how those preferences are changing.


As shown in Figure 1, perpetual licenses (either on-premises or hosted) form the largest category of customers. This group accounted for 63% of new Acumatica sales in 2013, but it is falling dramatically to 42% of new customers in 2014. The SaaS customer group is picking up some of the difference: 29% in 2013 rising to 33% in 2014. But the largest increase is coming from the so-called “Subscription On-Premises” group, which accounted for only 8% of sales in 2013, rising to 25% this year.

A Trend to Cloud, But Even More to Subscription

Although I am an advocate for cloud ERP, these results indicate that—at least for some customers today—the attraction of cloud ERP is more in the subscription option than it is in cloud deployment itself. Acumatica’s experience shows from 2013 to 214, the majority of Acumatica’s sales shifted from perpetual licenses to subscription agreements. But a significant percentage of those did not deploy in the cloud: they chose the subscription agreement with on-premises (or hosted) deployment.

Duffy is quick to point out that the choice of licensing and deployment options are influenced by Acumatica’s partners. Some are accustomed to selling perpetual licenses and appreciate the up-front cash that comes from license sales. Others are accustomed to on-premises deployments or hosting in their own data centers and unless challenged by the customer may steer them toward those options. But if this is the case, the trend in Figure 1 is conservative. Without partner bias toward perpetual licenses and on-premises/hosted deployment, the trend toward subscription and cloud would be even greater.

What Does This Mean for Buyers and Vendors?

As outlined in other research from Computer Economics, the benefits of cloud ERP are clear: speed of implementation, ease of upgrades and support, agility, and scalability. But do not underestimate the benefits that come from subscription pricing—whether or not it comes with cloud deployment:
  • Up-front cash savings. Unlike perpetual licenses, subscription agreements give customers pay-as-you-go pricing. Some vendors may require customers to commit to an initial contract term (e.g. one year) and pay for that up front. But even so, this is significantly less than customers would pay up-front under a perpetual license.
     
  • Risk mitigation. Under a perpetual license, if the implementation fails, or the customer decides to switch systems after two or three years, the customer loses its entire investment in the software. With a subscription agreement, the customer only loses subscription fees paid prior to cancellation.
     
  • Alignment of vendor’s interest with customer’s. Closely following the previous point, under a perpetual license, a failed implementation does not cost the vendor anything (assuming there is no legal action requiring vendor concessions). With a subscription agreement, in contrast, vendors must continually satisfy customers, lest they lose the ongoing subscription fees. This tends to focus the vendor’s attention more closely on customer success. 

The combination of cloud deployment and subscription agreements is, no doubt, a powerful combination. But notice that the three benefits outlined above are the same, regardless of whether the system is deployed as a cloud system.

Does this mean that all customers should go for subscription pricing? Based on interviews with some Acumatica customers that chose perpetual licenses, it seems the answer is no. Some customers do not like the idea that they will be paying subscription fees for as long as they use the system. They like the thought that, if they implement successfully, they have lower out-of-pocket costs for the long run.

Personally, I think such customers are underestimating their ongoing costs, including maintenance fees and the cost of money. I also think they are under-appreciating the risk mitigation and alignment benefits of subscription agreements.

Nevertheless, Acumatica’s experience shows where customer preferences are today and where they are heading. Cloud deployment is the future of ERP, and subscription agreements are attractive, even without cloud deployment.

These findings also suggest that traditional vendors that are slow to adapt to cloud deployment may be able to benefit in the short term simply by offering and promoting subscription agreements.

Wednesday, August 20, 2014

A Guide for Cloud ERP Buyers

In working with clients over the last decade, I've watched as cloud ERP vendors have been steadily encroaching on the territory of traditional ERP providers. As a result, ERP selection projects today are more and more becoming evaluations of cloud ERP providers.

However, buyers need to realize not all ERP systems that are labeled “cloud” are the same. To help buyers better understand these differences, I've just completed a new report for my research firm, Computer Economics, entitled Understanding Cloud ERP Buyers and Providers, based on my experience in selection deals as well as extensive analysis of vendor offerings over the years.

Figure 2 from that report sums up the differences:

In brief:
  • Cloud-Only Providers: These are the “born-in-the-cloud” ERP vendors that do not have an on-premises offering and include such companies as NetSuite, Plex, Workday, Rootstock, Kenandy, FinancialForce, Intacct, and several others. These tend to be newer, smaller vendors (although Workday and NetSuite are each in the range of $500 million in annual revenue). Because cloud-only vendors have a single deployment option, they each can focus their entire business—from product development to sales to implementation and ongoing support—on the cloud. As a result, they make fewer compromises and tend to deliver the maximum benefits of cloud solutions in speed, agility, and scalability.
     
  • Traditional ERP Vendors: These are larger, more established providers such as SAP, Oracle, Infor, Microsoft, and a number of others. They are growing more slowly than cloud-only providers. They have more complex businesses as they have to support their on-premises customers as well as their hosted or cloud customers. Because they have developed their solutions over many years or even decades, their functional footprint tends to be more complete than those of cloud-only providers.
There is much more in our analysis of the cloud ERP market, which describes these two major categories of cloud ERP providers in more detail. In addition, the report also segments cloud ERP buyers into two categories: first-time buyers looking for their first ERP systems and established companies replacing their legacy systems. As it turns out, generally speaking, these two categories of buyers have different pain points and different criteria driving their decision-making. 

At this stage of cloud ERP market maturity, each of these provider categories has its advantages and disadvantages, and there is no one right answer for a given buyer. Organizations considering cloud ERP need to carefully consider their requirements, their choices, and what tradeoffs they are willing to make. We, therefore, conclude with recommendations for buyers looking at cloud ERP. We also have some advice for providers that seek to serve these two types of buyers.

As a practical aid to buyers, the full report includes two lengthy appendices, which provide profiles of the key ERP vendors of hosted and cloud solutions today, along with an assessment of their market presence. Cloud-only ERP providers profiled include Acumatica, AscentERP, FinancialForce, Intacct, Kenandy, NetSuite, Plex Systems, Rootstock, and Workday. Traditional ERP providers with cloud/hosted solutions include Epicor, IFS, Infor, Microsoft Dynamics, Oracle, QAD, Sage, SAP, Syspro, and UNIT4.

Related posts

The Cloud ERP Land Rush
Computer Economics: Choosing Between Cloud and Hosted ERP, and Why It Matters

Wednesday, February 19, 2014

The Cloud ERP Land Rush

Oklahoma Land Rush
For those unfamiliar with US history, in 1889 the US government opened unoccupied lands in Oklahoma to settlement. Settlers could claim up to 160 acres, live on and improve the land, and then legally obtain title to it. Such an opportunity led to a land rush, in which thousands of settlers raced into Oklahoma to make their claims.

Today, cloud ERP is like Oklahoma in 1889, mostly unoccupied land, and there is a race as cloud vendors rush in. NetSuite and Plex were two early settlers. Today NetSuite has more acreage (number of customers), while Plex has fewer acres but more development of those acres (functionality)--at least in manufacturing. Cloud-only providers such as Rootstock, Kenandy, AscentERP, Acumatica, Intacct, and SAP (ByDesign) are also in the race. Traditional providers such as Microsoft Dynamics, Infor, Epicor, Oracle, UNIT4, and QAD have also entered the land rush, although they are moving more slowly, as they need to pull wagons full of their traditional on-premises software along with them.

In the larger suite of enterprise applications, such as CRM and HCM, the land rush is further along.  Salesforce for CRM and Workday for HCM have already staked out large claims and are rapidly developing them. But Microsoft with Dynamics CRM, SAP with SuccessFactors, and Oracle with its Fusion HCM are also adding to their acreage. Core ERP functionality, on the other hand, is earlier in the land rush. There is still a lot of open territory with a lot of unclaimed land.

FinancialForce Staking Its Claim

One provider that is clearly in the land rush is FinancialForce, which today announced new branding to signal its claim in cloud ERP.

The company is now referring to its suite of enterprise applications as FinancialForce ERP. The new branding is necessary because FinancialForce long ago ceased to be a provider only of financial management systems.

FinancialForce previously added professional services automation to its portfolio and late last year acquired Less Software, which provides inventory management and order. Vana Workforce is another acquisition from last year, which adds human capital management (HCM) functionality.  FinancialForce also added its own functionality in areas outside of financials, such as advanced quoting and revenue recognition. With this broader footprint, FinancialForce now qualifies as a cloud ERP provider.

Building on the Salesforce.com platform, FinancialForce has direct integration to the Salesforce cloud applications as well as to all of the other providers in Salesforce's AppExchange marketplace. The recent evolution of this platform to Salesforce1 gives FinancialForce additional capabilities for building out its mobile deployment options.

How many acres will FinancialForce claim? The signs are hopeful. The company is reporting strong results: 80% growth in its revenue run rate, and 62% growth in headcount year-over-year, bringing it to over 260 employees globally.  FinancialForce now has customers in 27 countries with users in 45 nations worldwide. By all accounts, the company is on a strong growth trajectory.

Plenty of Land for Everyone

The economic and strategic benefits of cloud computing accrue to end-user organization that completely or at least largely eliminate their on-premises IT infrastructure.  Our research at Computer Economics shows that cloud user companies save more than 15% in terms of their total IT spending, and the money that they do spend goes more toward innovation and less towards on-going support. But it is difficult to move away from on-premises infrastructure if an organization's core ERP system is still on-premises. Therefore, the move to cloud ERP is essential if organizations are to fully realize the benefits of cloud computing. You can move your CRM and HCM systems to the cloud--but if you are still running on-premises ERP, you still have one large foot stuck in the old paradigm.

In my view, there does not need to be one clear winner in cloud ERP. Just as there were dozens of on-premises ERP vendors in the 1990s, especially when sliced by industry sector, there is plenty of room for many more cloud ERP providers. There is plenty of land for everyone.

Related Posts

Computer Economics: Cloud Users Spend Less, Spend Smarter on IT
Four Cloud ERP Providers on the Salesforce Platform
NetSuite Manufacturing Moves on Down the Highway
Kenandy: A New Cloud ERP Provider Emerges from Stealth Mode
The Simplicity and Agility of Zero-Upgrades in Cloud ERP (Plex)
Plex Online: Pure SaaS for Manufacturing
Computer Economics: Cloud Players Storm the Gates of ERP
Key success factor for SaaS suites: functional parity

Tuesday, January 28, 2014

Plex's Growth Strategy: Glass Half Full

Those interested in cloud ERP know that Plex was the first provider to offer a cloud-only manufacturing system. Yet Plex has had nowhere near the growth of other cloud enterprise system providers, such as NetSuite. SAP receives a lot of criticism for only having sold 1,000 or so customers its Business ByDesign system--but ByD has only been in general distribution for three or four years. Yet Plex, which launched its cloud offering over 10 years ago, has fewer than 500 customers.What's wrong with this picture?

Last year, encouraged by Plex's new private equity owners, CEO Jason Blessing and his management team formulated a growth strategy, which they presented at the Plex user conference. Afterwards, I outlined what I thought Plex needed to do to execute on it.

Following up now half a year later, Jason circled back to give me another briefing, and it was a good opportunity also to see what progress Plex was making. Here is my take: 
  1. Management changes are part of the growth plan. Plex this week announced the appointment of Don Clarke as its new CFO. He appears to be a great candidate for the job. He comes most recently from Eloqua, a leading marketing cloud vendor, where he oversaw Eloqua's growth to nearly $100M in annual revenue, its initial public offering, and its eventual sale to Oracle last year, which put Clarke out of a job.

    I joked with Jason that Oracle's acquisition strategy has been serving Plex well in terms of recruiting, as several of Plex's top management team have come from companies that Oracle acquired: Heidi Melin, Plex's CMO, also came from Eloqua, Karl Ederle, VP of Product Management spent time at Taleo, which Oracle acquired in April 2012, and Jason himself came from Taleo.

    If Plex's growth strategy is successful, there is likely to be an IPO in Plex's future. Clarke's experience in taking Eloqua public will serve Plex well.
     
  2. Plex added 59 new customers in 2013, bringing its customer count to "nearly 400." As mentioned earlier, in my view, the total customer count is well below where it should for a decade-old cloud provider. Jason compares it favorably with the 500 or so customer count for Workday, overlooking the fact that Workday launched in late 2006 and that its typical customer is several times larger than Plex's.

    Still, Plex's growth in 2013 represents a 15% increase in its customer base and signals that its growth strategy is beginning to take hold.

    The new customer count includes some accounts that are larger than Plex has sold to in the past, such as Caterpillar, which is running Plex in a two-tier model for some smaller plants. In my previous post, I outlined some of the functionality improvements that Plex would need to make to better serve these large customers, and there are signs that these enhancements are underway.
     
  3. Plex doubled its sales force last year. This, no doubt, is behind the uptick in new customer sales. The new sales headcount is serving primarily to expand the geographic coverage outside of Plex's traditional Great Lakes concentration to the South and also to the West Coast. (As part of the expansion, Plex opened a Southern California sales office, which happens to be a short walk from my office near the John Wayne Airport.) There are also increased sales to organizations outside North America, another hopeful sign.
     
  4. Plex's industry focus remains in three industry sectors: motor vehicles, food and beverage, and aerospace and defense. In my view, this is probably the greatest constraint to Plex's growth strategy. Short-term, having more feet on the street and expanding geographically are low-hanging fruit. But at some point, there will be diminishing returns. Manufacturing contains dozens of sub-sectors, many of which are adjacent to Plex's existing markets. It is not a big jump to build out support and sell into these sub-sectors. We discussed a couple of these, and hopefully, Plex's product management team will have the bandwidth to address them.
     
  5. Plex's platform remains a weak spot. Most cloud systems today provide a platform for customer enhancements and development of complementary functionality. For example, Salesforce.com offers Salesforce1, a mature platform-as-a-service (PaaS) capability that has spawned an entire ecosystem of partners. NetSuite, likewise, has its SuiteCloud platform.  Although Plex has the beginnings of such a platform, it is still limited to use by Plex's own development team and a few carefully-vetted partners. Jason knows this is a need, and hopefully we will see more progress in this area. 
There is a lot to admire about Plex. Of the few cloud-only ERP providers that are addressing the manufacturing sector, Plex has the most complete footprint of functionality, rivaling mature on-premise manufacturing systems. In addition, customer satisfaction is readily apparent when I speak to installed customers, both new and old. Hopefully, Plex will build on these strengths and see growth accelerate.

There is a Plex 2013 year-end recap available on the Plex website.

Update: And right on cue, Dennis Howlett has done an on-camera interview with Jason Blessing about Plex's 2014 strategy. He also comments on Plex's approach to SaaS pricing. 

Related Posts

Plex Software and Its Mandate for Growth
The Simplicity and Agility of Zero-Upgrades in Cloud ERP
Plex Online: Pure SaaS for Manufacturing

Monday, January 20, 2014

Four Cloud ERP Providers on the Salesforce Platform

As cloud ERP solutions mature, they are becoming viable alternatives to traditional on-premises and hosted ERP systems. Dreamforce 2013, the annual conference of Salesforce.com users in San Francisco last November, offered a good opportunity to review the progress of four such cloud ERP systems—all built on the Salesforce.com platform.

Salesforce1: The Next Generation Salesforce Platform

During the conference, Salesforce unveiled the latest iteration of its platform, now dubbed Salesforce1, as shown in Figure 1.  The platform has a lot going for it.
  • It provides a complete applications development environment (a platform-as-a-service, or PaaS) running on Salesforce.com’s cloud infrastructure. Developers building on Salesforce1 can interoperate with any of Salesforce.com’s applications, such as its Sales Cloud, Service Cloud, Marketing Cloud, as well as other third party applications built on the platform. 
  • It includes social business capabilities. Developers can incorporate Salesforce.com’s social business application, Chatter, as part of their systems. 
  • The platform puts mobile deployment at the center, allowing apps to be written once and be deployed simultaneously on a variety of user platforms, including desktop browsers, tablet computers, and smart phones. In support of the so-called "Internet of Things," Salesforce1 can even be deployed on connected devices. 
  • Finally, the platform provides a way for developers to market and sell their applications, by means of Salesforce.com’s AppExchange marketplace. 
For a detailed view of Salesforce1, see this review by Doug Henschen over at Information Week.

With Salesforce.com now the market leader in CRM, it is no wonder that its platform has become more and more attractive to developers. Building on this platform, third-party developers become, in essence, an ecosystem around Salesforce.com, with strong network effects. The more popular the platform becomes, the more it attracts developers. In return, the more developers build on the platform, the more attractive it becomes to other developers. It is a virtuous cycle.

In our consulting work at Strativa over the past three to five years, I’ve seen several cases where organizations first implemented Salesforce.com’s CRM system, then based on that success started looking to see whether they could replace their existing on-premises ERP system with a cloud-based solution. And, when they search the AppExchange, they find four cloud ERP providers: FinancialForce, Kenandy, Rootstock, and AscentERP.

I’ve been following these four providers for several years, and this post serves as an overview and update, based on briefings and interviews I conducted with these four vendors during the Dreamforce user conference.

FinancialForce

As the name implies, FinancialForce started in 2009 as an accounting and billing system. It was formed as a joint venture between UNIT4 and Salesforce.com. The company expanded into professional services automation in 2010 with the acquisition of a PSA system from Appirio, built on the Salesforce platform, and by building out its own services resource planning (SRP) functionality. More recently, Financialforce developed offerings for revenue recognition and credit control on the new Salesforce1 platform for revenue recognition, pushing these functions out to sales and services users in the field.

The company lists 50 customer case-studies on its website, an impressive number for a vendor that is only four or five years old.

At Dreamforce 2013, FinancialForce took two more steps to expand its ERP footprint. First, it announced acquisition of another AppExchange partner, Less Software, which provides configure-price-quote (CPQ), order fulfillment, service contracts, inventory management, and supplier management modules. Founded just two years ago, Less Software was already partnering and doing joint deals with FinancialForce, so the acquisition does not appear to acquire much if any integration work. FinancialForce refers to Less Software as having supply chain management (SCM) capabilities, but I would view that as somewhat of an exaggeration. There are some light warehouse management capabilities, but no transportation management or supply chain planning functionality that I can see. Less Software has had particular success in selling to value-added resellers, such as Cisco resellers, as well as to industrial distribution organizations and one manufacturer of children’s furniture.

The second step, announced during the conference, was the acquisition of Vana Workforce, a human capital management (HCM) software provider—which is also built on the Salesforce platform. Vana's HCM functionality includes core HR, talent management, recruitment compensation, time management, and absence management. Payroll is not provided, but the system can connect with a number of popular payroll systems. As with Less Software, Vana Workforce was already partnering with FinancialForce, so the integration effort, again, would appear to be minimal.

Organizations in the professional and technical services sector should take a look at FinancialForce, as well as anyone needing a financial management solution. With its acquisition of Less Software and Vana Workforce, FinancialForce now qualifies for the short list for distribution and light manufacturing companies. There were hints during my briefings that FinancialForce may continue with an acquisition strategy, so it is likely that additional industry sectors may become potential targets for this solution provider.

Kenandy

I covered the launch of Kenandy back in 2011, when I interviewed its CEO Sandra Kurtzig. Sandy was the original founder and CEO of ASK Group, the developer of the well-known ManMan ERP system. Her coming out of retirement to launch a new ERP system made a big splash at Dreamforce 2011, where she appeared on stage with Salesforce CEO Mark Benioff and Ray Lane, former Oracle President and now Kenandy board member representing investor firm, Kleiner Perkins. Salesforce.com is also an investor in Kenandy.

Since that launch, Kenandy has been rapidly adding functionality. It has its own financial systems, including general ledger, invoicing, accounts receivables, and accounts payables. Multi-company and multi-currency support were added earlier this year, with up to three reporting currencies. According to Kenandy executives I interviewed, the system also supports multiple plants with multiple locations in a single tenant. There is a full MRP explosion. Lot tracking and serial tracking allow Kenandy to sell into foods and other industries that require track and trace. Item revision levels are tracked with multiple revisions allowed in inventory.

Only three years in existence, the installed customer base is small but growing, with some impressive wins. During Dreamforce, Kenandy touted its recent win with Del Monte Foods, which implemented Kenandy for its acquisition of Natural Balance, a pet food manufacturer. I spent some time one-on-one with the Del Monte project leader, who provided quite a bit of insight into the dynamics of the implementation. Del Monte was able to implement Kenandy’s full suite—financials, customer order management, and distribution—in just three months. This included integrations with third-party systems for EDI, warehouse management, and transportation scheduling.

He also shared with me that he wrote a trade promotion management (TPM) system on the Salesforce platform, integrated with Kenandy, in just six weeks—and he did it by himself. He had previously built a similar system integrated with Del Monte’s legacy system, but that effort took seven months with a team of seven developers. Even discounting the fact that his previous experience might have made development of the second system easier, by my calculations this is about a 50 to 1 improvement in productivity, illustrating the power of the Salesforce platform.

Del Monte is not finished with Kenandy. The firm reportedly plans to eventually move all of Del Monte’s ERP processing from something like 60 internal systems to Kenandy.

More information Del Monte’s experience can be found in a case study on Kenandy’s website.

Rootstock

Rootstock Software is another manufacturing ERP provider with an interesting history. The management team, headed by CEO Pat Gerehy and COO Chuck Olinger, has decades of experience building manufacturing ERP, most recently at Relevant. Following the sale of Relevant to Consona (now Aptean), the team embarked on a new venture to build a manufacturing cloud ERP system from scratch. They developed their first iteration of Rootstock on the NetSuite platform in 2008, interoperating with NetSuite for financials and customer order processing. In 2010, however, they disengaged from their NetSuite partnership and rewrote Rootstock on the Salesforce platform. (That the Roostock developers could build a complete system so quickly on the NetSuite platform and then again on the Salesforce platform speaks to the power of these modern cloud platforms for rapid software development.)

As a result of the replatforming on Salesforce, Rootstock developed its own customer order management product and now partners with FinancialForce for its accounting systems. It also has good functionality for purchasing, production engineering, lot and serial tracking, MRP, MPS, and capacity planning, shop floor control, manufacturing costing, and PLM/PDM integration. The system can support multiple companies, multiple divisions, and multiple sites, all within a single tenant on the Salesforce platform.

On its website, Rootstock highlights an impressive list of 25 customers. These include Astrum Solar, a residential solar provider with operations in a dozen states in the US. EBARA International, a manufacturer of pumps and turbine expanders in the energy industry, with 77 subsidiaries and 11 affiliated companies worldwide.

Over the past year, Rootstock has been gaining traction. After the Dreamforce conference, it announced four more wins in the month of November: Microtherm, a business unit of ProMat International; Proveris, which provides testing protocols for drug developers; Source Outdoor, an outdoor furniture manufacturer; and Wilshire Coin, a coin dealer.

Buyers looking for strong manufacturing functionality, including hybrid modes of manufacturing, should consider Rootstock. Project-based manufacturing is also a sweet spot.

AscentERP

AscentERP approaches manufacturing ERP from the execution side of the business. Its co-founders, Michael Trent and Shaun McInerney, have a long history in warehouse management and data collection, and it shows in the capabilities of the product. Built from the start on the Salesforce platform, AscentERP supports production modes of build-to-order, assemble-to-order, and configure-to-order along with repetitive manufacturing capabilities. It can take opportunities from Salesforce.com and convert them into sales quotes and into sales orders in the production system. The system supports the complete manufacturing process from master planning, purchasing, production, and shipping. Reverse logistics is also supported through an RMA process.

Like Rootstock, AscentERP supports the accounting function through partnership with FinancialForce. In addition, the system also integrates with Intacct, another SaaS financials system. For smaller companies, Ascent created an integration with Quickbooks.

During Dreamforce, AscentERP announced advanced manufacturing functionality, including workflow and alerts, multi-plant and multi-location support, production scheduling and tablet computer data collection using the new Salesforce1 platform.

Reference accounts include Chambers Gasket in Chicago and All Traffic Solutions, a manufacturer of electronic roadside signs. Both of these customers use FinancialForce for financials. Other reference accounts include The Chia Company in Australia, the world’s largest grower of Chia seed and products, so familiar during holiday season, and SolarAid, an international charity that provides access to solar lighting.

Buyers may want to short list AscentERP if they are looking for a nuts-and-bolts production system with good support for warehouse management and data collection. Smaller companies may find the Quickbooks integration an interesting option, allowing them to implement ERP without having to give up Quickbooks.

One sales strategy I wish more enterprise SaaS providers would follow: AscentERP offers a free 30 day free trial on its website.

Cast a Wide Net

All ERP systems have their strengths and weaknesses, and these four are no exception. For example, all of these systems are relatively new. Although they are rapidly building out their functional footprints, there are still gaps in their functionality. Buyers that insist on having every box checked on their RFPs may not like this, but those buyers who are willing to do some system enhancements on the Salesforce platform may find that the advantages of speed and flexibility outweigh any short-term gaps. It all depends on whether buyers are viewing pure cloud deployment as a strategic advantage.

The four vendors outlined in this post are not the only cloud ERP providers in the market. Buyers should also consider other providers, not built on the Salesforce platform. These include established cloud players such as NetSuite and Plex, as well as newer entrants, such as Acumatica. Finally, some of the traditional providers of on-premises ERP systems, such as SAP, Oracle, Microsoft, Infor, and Epicor, offer hybrid cloud deployment options that may be alternative to these cloud-only providers.


Choosing the right ERP system—whether cloud, hosted, or on-premises—can be challenging. Those looking for more in-depth analysis and independent advice in navigating the process should consider our software selection consulting services at Strativa.

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Wednesday, June 05, 2013

Plex Software and Its Mandate for Growth

As the first cloud-only manufacturing ERP system, Plex Systems has a wide footprint of functionality, going beyond what is offered by newer cloud vendors.

Nevertheless, after more than a decade of development, Plex has fewer than 1000 customers and its presence is limited mostly to smaller manufacturing companies in a few sub-sectors.

As evidence, there were about 700 attendees at last year's PowerPlex conference. This year's PowerPlex, which I attended this week in Columbus, Ohio, saw about 750 Plex users in attendance.  Granted, overall, these are highly satisfied and enthusiastic customers. There just needs to be more of them.

On the one hand, Plex claims a compound annual growth rate of nearly 30% over the past three years--an impressive number. But as the first fully multi-tenant manufacturing cloud vendor, Plex could have, and should have, been growing at a faster pace. Now, there are several other cloud vendors taking aim at Plex's market, such as NetSuite, Acumatica, Rootstock, and Kenandy

Plex must grow more aggressively, for two reasons. First, the company was acquired last year by two private equity firms. Private equity is not known for patience. Second, as CEO Jason Blessing pointed out in his keynote, growth protects the investments of existing Plex customers. Software companies that do not grow do not have the resources for continued innovation. Eventually, they only provide enough support to keep current customers--at best. They become, in effect, "zombie vendors," to use Blessing's term.

So, what does Plex need to do to grow at a more substantial pace in the coming years? I see six mandates. Some of these are fully embraced by Plex, while others, in my view, could use more emphasis.

1. Get Noticed

If some cloud vendors need to tone down their marketing hype, Plex needs to kick it up a notch. Plex was not only the first truly multi-tenant cloud manufacturing systems, it was also one of the first cloud providers period. Yet still the majority of manufacturing systems buyers have not heard of Plex. Reflecting Plex's home turf in Michigan, discussions with Plex insiders about this often includes the phrase, "midwestern values"--in other words, not blowing one's own horn. However admirable this humility may be on a personal basis, it is not useful from a business perspective.

Hopefully, this is about to change with the hiring of Heidi Melin as Chief Marketing Officer. Melin worked with CEO Blessing at Taleo, and more recently she was CMO at Eloqua, which was acquired by Oracle. In my one-on-one interview, Blessing was high on Melin's arrival, and indicated that she would be especially focused on digital marketing to reach the many thousands of companies in Plex's target market.

2. Put More Feet on the Street

Blessing also indicated that he intends to beef up Plex's sales efforts, which to date have been concentrated largely in the Great Lakes region. This has left many sales opportunities poorly supported in other US geographies, such as the southern states (home to many automotive suppliers), Southern California (home to many aerospace suppliers), and other parts of the country that are home to many food and beverage companies. Increased sales presence in international markets is also needed.

This is a step long overdue. When my firm Strativa short lists Plex in ERP selection deals, Plex is often flying in resources from across the country, which does not sit well with most prospects. Opening regional sales offices, like Plex has now done in Southern California, will help put more feet on the streets of prospects.

3. Move Up-Market

Historically, Plex's system architecture is oriented toward single-plant operations. There is some logic to this approach. As Jim Shepherd, VP of Strategy, points out, most of the information needed by a user is local to the plant he or she is working in. However, even small manufacturers often have needs that include multiple plants, cross-plant dependencies, and central shared services. Plex does have some multi-billion dollar customers, but these are primarily companies with collections of plants that are relatively independent of one another.

In response, Plex is building out its cross-site and multi-site capabilities while keeping its primary orientation around the single plant. In my view, this will be a key requirement in Plex moving up-market and serving larger organizations.

4. Build Out the International Footprint

The bulk of Plex's sales are to US companies, but if Plex is to grow more aggressively it will need to better support the international operations of these companies. It will also need to sell directly to companies outside of the US.

In his keynote, Shepherd pointed to the new ability for Plex to print reports on A4-size paper, commonly used in parts of the world outside North America. The fact that Plex is just now getting around to formatting reports on A4-sized paper shows just how US-centric Plex has been. To be fair, Plex does support multiple currencies and has support some international tax requirements, such as in Brazil, India and China, although some of this is done through partners. Nevertheless, Plex has much it could do to improve its appeal to multinational businesses. In this day and age, even small companies--like those Plex targets today--have international operations. Building out its international footprint is another prerequisite for Plex to achieve more rapid growth.

5. Venture Outside of Traditional Subsectors

Plex sees its current customer base primarly as three manufacturing subsectors today: motor vehicle suppliers, aerospace and defense, and food and beverage. Blessing indicates that by Plex's calculations, these three sub-sectors account for about 25-30% of the manufacturing ERP market. Surprisingly, however, Plex currently has no plans to expand outside of these sub-sectors. Blessing believes that simply by increasing Plex's sales execution in its current markets it can continue its compound annual growth rate of nearly 30% for the next several years.

Count me skeptical. First, as indicated above, Plex no longer has exclusive claim to the cloud manufacturing ERP market. Plex is going to have to fight a lot harder than it has in the past for new customers. Second, why is 30% growth the benchmark? I understand that there are risks in more aggressive growth. But aiming higher might be needed in order to meet the 30% goal.

In my view, Plex is not far off from being able to address the needs of manufacturers that are adjacent to its existing markets. These would include industrial electronics, medical devices, and industrial equipment. Plex already has some customers in these sub-sectors, so it's not like the company is starting from scratch. Hopefully Plex will formally target these industries, sooner rather than later.

6. Target the Customers You Want Not Just Those You Have

Over the past 10+ years , Plex has let customer requests drive its product roadmap. In fact, much of Plex's development has been funded directly by customers or groups of customers who desired certain new features. This worked well to minimize Plex's up-front costs of new development and also led to high levels of customer satisfaction. However, it had one major drawback: if you only have customer-driven development, everything you build will by definition only be of interest to the type of customers you have today. In addition, a single customer or group of customers are not able to fund major new development that are more strategic in nature.

Here Plex is on the right track. Recognizing this need, Plex is now allocating product development funds for strategic initiatives, including a revamp of its user interface, cross-browser access, business intelligence and reporting capabilities (Inteliplex), as well as other major initiatives. In conversations with customers at PowerPlex they expressed these as welcome developments, although they have, apparently, diverted Plex resources from some of the customer-requested enhancements they also wanted.

The Way Forward

There's plenty that I admire about Plex: its zero-upgrades approach, its broad functionality, and the fact that it proves manufacturing companies have been ready for cloud computing for many years, contrary to the claims of on-premise ERP providers. Most of all, Plex allows me to roam around its user conference and speak informally with customers. Nearly without exception, everything I hear is positive. Not a single customer has told me they made the wrong choice with Plex, although with any ERP implementation there are always bumps in the road. 

But none of this guarantees that Plex will thrive in the future. Like proverbial sharks, software vendors must continue to move forward, lest they die. The management team at Plex has some new blood, including the CEO, and a new perspective. They understand the opportunities ahead, but will they fully rise to the challenges? We'll be watching.

Note: Plex Software covered some of my travel expenses to their annual user conference. 

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Monday, May 20, 2013

NetSuite Manufacturing Moves on Down the Highway

NetSuite held its annual user conference, Suiteworld, last week, and in his day one keynote, CEO Zach Nelson highlighted "NetSuite for Manufacturing."

I wrote about NetSuite's manufacturing functionality last year in my post, NetSuite Manufacturing: Right Direction, Long Road Ahead. Returning to this subject one year later, it is encouraging to see the progress that NetSuite has made. At the same time, there will be twists and turns that NetSuite will face in continuing down this highway.

If NetSuite is going to continue its growth, reported at 28% last year in its core business, it really has no choice but to pursue manufacturing customers. Manufacturers are the largest market for ERP systems and therefore an attractive target for NetSuite's development efforts. Although manufacturers have been slower to embrace cloud computing than many other sectors have, the situation is rapidly changing. In our ERP vendor selection services at Strativa, we find manufacturing companies increasingly open to cloud ERP. Sometimes, in fact, they only want to look at cloud solutions. In other words, NetSuite is at the right place at the right time.

Balancing New Functionality with Need for Simplicity

To more fully address the needs of manufacturing, NetSuite continues to build out its core functionality, with basic must-have features such as available to promise (ATP) calculations, routings, production orders, and standard costing. In some of the breakout sessions, there were indications of that NetSuite is also exploring functionality that goes well beyond the basics: for example, supply chain management (SCM) and demand-driven MRP (DDMRP).

This leads to the first twist and turn that NetSuite will need to navigate: filling out gaps in manufacturing functionality while not over-engineering the system. Oracle and SAP are famous for having manufacturing systems that are feature-rich, requiring significant time and effort from new customers to decide which features to configure and to implement them. Part of the attraction of NetSuite is its relative simplicity and ease of implementation. If NetSuite wants to remain an attractive option for the likes of small and midsize manufacturers, or small divisions of large companies, it will be wise to pick and choose where to build out the the sophistication of the product.

For example, the availability of multi-books accounting (which I discuss briefly in the video at the top of this post) is a good move, as it has widespread applicability to both small and large companies in the manufacturing industries as well as other sectors. But does DDMRP fall into the same category? Moreover, how much SCM functionality do prospects expect from NetSuite, and where does it make sense to partner with best-of-breed specialists, who can better bridge a variety of SCM data sources?

Netsuite's recent success with manufacturers such as Qualcomm, Memjet (discussed later in this post), and others give it real-world customers to validate its product roadmap. It will do well to prioritize new development efforts to the areas where those customers deem most needed. NetSuite may choose, ultimately, to fully move up-market, to become the manufacturing cloud equivalent of SAP or Oracle. But if it does so, there are already a number of other cloud ERP providers, such as Plex, Rootstock, Kenandy, Acumatica, and Keyed-In Solutions, that will be ready to take NetSuite's place serving small and midsize manufacturers.

NetSuite's PLM/PDM Strategy Needs Openness

NetSuite also announced a new alliance with Autodesk to integrate its PLM 360 offering for product lifecycle management with NetSuite's ERP. This is in addition to NetSuite's existing partnership with Arena Solutions.

By way of background, PLM systems manage the entire life-cycle of product development, from ideation and requirements gathering, through design and development, to release to manufacturing, service, engineering change, and retirement. PLM systems take an engineering view of the product and are generally under the domain of the client's product engineering function. PLM systems generally include product data management (PDM) systems as a subset, to manage all of the product data, such as drawings, specifications, and documentation, which form the definitions of the company's products.

Over the past 20+ years, the integration of PLM and PDM systems with ERP has been a difficult subject. In organizations where engineering and manufacturing work well together, basic roles and responsibilities can be defined and proper integration of data can be accomplished. In organizations where such cross-functional processes are weak, PLM/PDM and ERP often form separate silos.

Autodesk's PLM 360 shows very well, and the story about its cloud deployment matches well with NetSuite. However, it is my observation that the majority of manufacturers would do well simply to establish simple integration between their engineering bills of material (within their PLM/PDM systems) and their manufacturing bills of material (within their ERP systems). Making engineering documentation within the PLM/PDM system available to manufacturing ERP users is also highly desired. Furthermore, there are few engineering organizations that have not already standardized on a PLM/PDM system (e.g PTC's Windchill, Solidworks, and others), and they will seldom be willing to migrate to Autodesk just because the company is implementing NetSuite's ERP.

This is another turn of the highway that NetSuite must navigate: will it offer standard integration to a variety of PLM/PDM systems, or will its answer to engineering integration be, "Go with Autodesk or Arena?" I do not believe that an Autodesk- or Arena-preferred, strategy is the best.

Case Studies Encouraging

To validate its progress in the manufacturing sector, NetSuite reported on several case studies.
  • At the large end of the spectrum there was Qualcomm, the $19 billion manufacturer of semiconductors and other communications products. Although Qualcomm has Oracle E-Business Suite running throughout much of its operations worldwide, in 2011 CIO Norm Fjeldheim chose NetSuite for use in smaller divisions, based on the need for implementation speed and agility. As part of that strategy, Qualcomm  has now gone live with NetSuite in a newly launched division in Mexico. This is a nice "existence proof" for a two-tier ERP strategy in a very large company.
  • At the smaller end of the spectrum there was Memjet, a manufacturer if high-speed color printer engines. Martin Hambalek, the IT director at Memjet, did a short on-stage interview during Nelson's day one keynote. Although the company has just 350 employees, it has engineering and manufacturing operations in five countries. Unlike Qualcomm, Memjet runs NetSuite as its only ERP system worldwide, showing NetSuite's capabilities for multinational businesses. Notably, Memjet is also a customer of Autodesk for its PLM 360 system, mentioned earlier. In my one-on-one interview with Hambalek later during the conference, I learned that he is the only full-time IT employee at Memjet: evidence that a full or largely cloud-based IT infrastructure requires many fewer IT resources to maintain.
Customer stories are the best way to communicate success, and these two NetSuite customers substantiate NetSuite's progress.

Rethinking the Services and Support Strategy

As much as ERP functionality is important to manufacturers, there is another element of success that is even more important: the quality of a vendor's services and support. It struck me during the keynotes that, apart from an announcement of Capgemini as a new partner, there were no announcements about NetSuite's professional services. 

More ERP implementations fail due to problems with implementation services than because of gaps in functionality. Functional gaps can be identified during the selection process: but problems with the vendor's implementation services are more difficult to discern before the deal is signed. Furthermore, functional gaps can often be remedied through procedural workarounds. But once the implementation is underway, failures in implementation services are difficult to remedy. Sometimes, such failures wind up in litigation.

In this regard, NetSuite's rapid growth has a downside: it stretches and strains the ability of NetSuite's professional services group to spend adequate time and attention on its customers' implementation success. In advising prospective ERP buyers, I have much more concern about what their implementation experience will be than I do about any potential gaps in NetSuite functionality.

One solution is to build a strong partner channel of VARs, resellers, and implementation service providers to complement or even take over responsibility for post-sales service and support.

During the analyst press conference, I asked Zach Nelson about this point. NetSuite is building its partner channel, but how does it decide what work should go to its implementation partners and what part should be retained for NetSuite's own professional services group?  Nelson's answer reflected a traditional view, that whoever brings the sales lead to NetSuite should get the services. In other words, if a lead comes through NetSuite's own sales team, NetSuite should get the services work. If the lead comes through a partner, the partner should get the services.

As an advisor to prospective buyers, my own view is that NetSuite should rethink this strategy. The party that happens to find the prospect may not be the best party to deliver the services. In fact, NetSuite may be better served by passing off implementation services to local partners that are willing to spend more time with the customer on-site than NetSuite's own professional services group may be able to provide.

At the end of his answer, Nelson indicated that he would actually prefer that NetSuite not be in the professional services business. If so, this is good news. Let NetSuite focus on developing and delivering cloud ERP, and let a well-developed partner channel compete to provide hands-on implementation services. What professional services NetSuite does provide would be better focused on providing support to those partners. 

Just before leaving the conference, I gave Dennis Howlett my initial thoughts in this video interview on NetSuite Manufacturing and multi-book accounting.

Disclosure: NetSuite paid my travel expenses to attend its user conference. They also gave me a swag bag.

Update: in an email exchange, Roman Bukary, NetSuite's head of manufacturing and distribution industries, comments on NetSuite's PLM strategy:
The fact that today we have a partnership with Arena and Autodesk is not a matter of “just” these two, it’s a matter of those vendors who have a smart, complementary cloud strategy and our own bandwidth to recruit and enable partners. For my $.02, we have an open strategy with the goal to change the kind of solution modern manufacturing can leverage today

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NetSuite Manufacturing: Right Direction, Long Road Ahead.

Wednesday, May 16, 2012

The Simplicity and Agility of Zero-Upgrades in Cloud ERP

I am coming to the conclusion that a primary benefit of cloud ERP is the reduction or complete elimination of version upgrades. This observation was reinforced again this week in my one day attendance at the Plex Systems user conference in Indianapolis. Plex is a great example of what a cloud ERP vendor can accomplish by taking what I call a “zero upgrades” product strategy.

The Goal: Zero Upgrades

Originally founded in 1995, Plex went through a complete product overhaul in 2001, when it completely rewrote its ERP system as a cloud offering. At the time, NetSuite was the only other product that came close to cloud ERP and even then, NetSuite was largely a financials-only service.

Interestingly, in my interview this week with CEO Mark Symonds, becoming a “cloud ERP” provider was not their primary goal, but rather a means to an end. Passing through the client-server era, Plex grew tired of the difficulty in getting customers upgraded to new versions and rolling out patches and fixes to its installed base. The move to an online system (Plex Online)—the term “cloud computing” had not yet been coined—was the means by which Plex would to solve this problem. Customers would not have their own installations of the system. Rather they would access one central instance of Plex, which would be developed and maintained directly by Plex. Customers would never have to upgrade.

Implications of Zero Upgrades

Actually, I've known about the Plex approach for some time. But the implications of this strategy became more apparent as I sat through the keynote and some of the individual workshops.
  1. You Like It? You’ve Already Got It. A good part of the opening keynote included the announcement and live demo of a new embedded report writer, called IntelliPlex. Now I wouldn’t say that the demo blew me away. It's good. It has an easy drag-and-drop method to allow users to create their own reports, generate charts and graphs, calculate new columns based on formulas, produce pivot tables and cross-tabs—all good stuff. Is it as powerful as the embedded BI capabilities that other vendors have demonstrated recently? In some cases, no.

    But here’s the catch. Every Plex customer watching that demo knew that they could immediately log on to their Plex system and have access to that report writer. They don’t need to order it, pay separately for it, install it, or be on a certain version of Plex to use it. Perhaps that’s the reason I didn’t see a single person walk out early from that keynote.
     
  2. Functionality is Front and Center. I attend a lot of vendor conferences. Many of the sessions are taken up with subjects such as “Planning for Version X,” “What’s New in Release 7.2.345b,” “Prerequisites for Migrating Product X to Version Y of Database Z.” The Plex conference has none of these tactical, infrastructure-type subjects. All attention is on what the software does, not what you need to do to get it to do those things.

    For example, I sat in on part of a presentation on work center production scheduling—not a subject that I would consider a major draw. In much larger vendor conferences, I might see 20 or 30 people in this sort of presentation. But, as shown in the photo nearby, there were about 150 (out of 800 total) conference attendees in this session. Because Plex users do not have upgrades to deal with and plan for, they can devote all of their time to learning how to use the functionality that they already have access to. There appeared to me to be a much greater percentage of line-of-business users than I see in many vendor events.
     
  3. User-driven Enhancements. Plex’s approach frees it from having to spend time managing multiple versions of its product, creating sandboxes, and phasing in customers from one version to the next. This gives its developers more time to work on product enhancements, which are largely driven by customer-funded requests. Although one customer may fund a change, all customers have the option to “flip the switch” and use it if they so choose, without having to schedule a version upgrade. All new functionality is delivered with the switch set “off,” so that individual customers can choose what and when to implement it.
Ultimately, the zero upgrades strategy enables business agility for customers. This point was stressed to me in an interview I did with Plex customer Ben Stewart of Inteva. His company has a growth-by-acquisition strategy and needs to be able to bring new plants and new locations on-board quickly. Plex’s zero upgrade approach and rapid response to his change requests (e.g. enable a new EDI partner) supports this strategy of agility to accommodate rapid change. Other customers report Plex implementations of new plants in timeframes of weeks, not months.

Are There Downsides?

I have discussed the zero upgrades approach with other cloud ERP vendors, and many of them disagree. They maintain that ERP is different from CRM or other non-critical applications, that cloud customers want control over their environments, that they want to choose when to upgrade and to be able to regression-test their business processes against new versions. In some cases, I think this is simply a legacy of the on-premises world: we’ve always released new functionality as version upgrades. In other cases, I believe that this position is taken for the vendor’s convenience, especially when their cloud ERP systems are using the same code base as their on-premises systems. Because the on-premises customers have to have version upgrades, the cloud ERP customers of the same system must also have version upgrades. Otherwise, the two classes of customers do not have the same code base.

This does not mean I am against the hybrid model—allowing a customer to run the same system on-premises and in the cloud, or to go from one deployment model to another. I have written that there are some advantages to the hybrid model. But forcing customers to do version upgrades is not one of them.

There is one scenario, however, where version upgrades are desirable, and that is in a regulated environment, an area I have some experience in. For example, current US FDA regulations require pharmaceutical and medical device manufacturers to demonstrate that they have control over software configurations that are used to support regulated processes. This does not necessarily rule out use of cloud computing, but it does make it difficult to claim that the user has control over the system if the vendor is changing it on a daily basis. In such cases, it is easier to defend the use of a cloud ERP version that is frozen in its configuration, where the customer can choose when to upgrade and can run testing to confirm acceptance of the new version prior to upgrade. In non-regulated environments, however, I believe that the Plex practice of delivering new functionality “with the switch turned off” is better, as it promotes agility.

Some may argue that the Plex approach may lead to bugs being introduced into the production system on a daily basis. For example, Plex may implement a new feature in one part of the system and it may affect processing in another part of the system—even though a customer may not flip the switch for the new functionality. One long-standing Plex customer indicated that this does happen from time to time, but still he is strongly in favor of the zero-upgrades approach. I would add, I have seen many cases where traditional on-premises vendors ship code that notoriously bug-ridden, where they are shipping “patch releases” for months, even years, later. At least with the Plex approach, when bugs are discovered, they can be fixed in a few hours.

One final issue has to do with the practice of letting customers drive new enhancements. This approach may have worked well when Plex was small, but I question its wisdom as Plex scales. If uncontrolled, this can lead to many one-off enhancements being introduced into the core system, which only pertain to a single customer.

Fortunately, I heard two things during the conference that mitigate this problem. One is that Plex is establishing a formal product management function to review and clear all customer change requests and to evaluate which ones have merit for multiple customers. Second, Plex has introduced a web services platform capability called VisionPlex, which allows customers and partners to develop their own enhancements to interoperate with Plex, but outside of the core systems. This capability is just being rolled out in several pilot projects, but if successful it will go a long way toward keeping one-off enhancements out of the core system. It also has the benefit of enabling an ecosystem of Plex partners to build on Plex as a platform—something that has been lacking to date in Plex’s strategy.

Plex is not a large cloud ERP vendor, having only about 750 customers. It is narrowly focused on a few manufacturing industries, such as automotive, industrial products, plastics, electronics, and a few others. However, it is showing strong and steady growth—30% revenue growth in 2011 and expecting 20% growth in 2012. Furthermore, it is an existence proof for the principle that a zero-upgrades product strategy has major benefits for both customers and the vendor.

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Monday, February 13, 2012

Glovia Returns to the ERP Market


An ERP sales professional, whom I've know for many years, recently called to let me know he'd taken a new job with Glovia International. I indicated that I hadn't heard anything about Glovia recently. Maybe now I could get an update.

So he arranged a briefing with James Gorham, who heads up Glovia's North American business, for me and two of my senior associates at Strativa, Bob Gilson and Nick Hann.

A Long History

Glovia's roots go back to the 1970s, when Xerox Computer Services launched a time-sharing application for manufacturing companies. The product went through several iterations and was eventually relaunched in client-server form in 1990 as Xerox Chess. The company was acquired in 2000 by Fujitsu, who renamed it Glovia.

For many years, Glovia has been a well-respected mid-market ERP solution for automotive manufacturers, aerospace and defense contractors, capital equipment makers, and other industries. In the past, when I was looking for solid functionality for project-based manufacturers, Glovia would be one of the first to come to mind.

But, as just mentioned, that changed about two or three years ago, when Glovia suddenly fell off my radar. I knew they were still in business--I just never saw them in deals or even in press releases. They wouldn't even respond to my inquiries.

In our briefing with Gorham, we soon found out why. Glovia had undertaken a deliberate strategy three years ago to pull back, abandon all new sales efforts, and invest in rewriting the entire product.

Retrenchment Strategy

Glovia system had been developed in McDonnell Douglas's PROIV 4GL language, which though a good language, was not a platform with a wide developer base. They spent two years to rewrite the product with a service-oriented architecture, migrating the business logic to .NET, developing a new user-interface in Microsoft Silverlight, and providing a full deployment of web services with over 140 integration points. The latest version of Glovia runs on Oracle's database and is being released for Microsoft SQL as well.

Now here's the interesting part: during this retrenchment period, Glovia was profitable and actually grew, through organic growth of its existing customers adding new plants, new acquisitions, and new users. So, retrenchment turned out to be a good strategy during recessionary times: kill off marketing and net-new sales, redouble your service and support for your installed base, and invest in rewriting the product for a relaunch.

This retrenchment strategy (my term) could only work because Glovia had an enviable position as the incumbent for some very large and loyal customers, beginning with its corporate parent, Fujitsu, which deploys Glovia in 43 factories. Fujitsu had the resources to support any fall-off in Glovia's business, but as it turned out, Fujitsu's deep pockets weren't needed. Xerox (Glovia's former parent) is still a customer, as are several other large and well-known global brands, such as Panasonic, Dell, Carrier, Bridgestone, Avery Dennison, Honda, Honeywell, Phillips, and General Electric.

So, now the rewrite is complete. The functionality offered by Glovia for its target manufacturing industries--which was already well established--has grown even more impressive.
  • It offers heavy visualization, with real-time graphical information flow.
  • There is support for assemble-to-order and engineer-to-order, with "available to X" planning calculations, such as available-to-order, to-make, to-buy, and to-service.
  • Production scheduling and optimization is granular down to the minute.
  • There is load-balancing at all levels of production: the plant, cell, machine, skill, and person.
  • The supply chain planning capabilities allow synchronization of supply to demand or demand to supply.
  • Lean thinking permeates the execution functions, with the Toyota Production System natively embedded in the product.
  • For defense contractors, there is the necessary "borrow-and-payback" functionality as well as pegging to contract.
The rewrite also gave Glovia the opportunity to build mobility apps, which appear much further developed than many larger and better known competitors. Apps include work orders, financial apps such as expense reporting, purchase requisition approvals, and executive dashboards. Glovia even provides device management capabilities. Apple's iPhone and iPad are supported, as well as Android devices, Blackberry, and Windows Phone. Everything is developed in HTML5 and available through the appropriate apps store (e.g. iStore).

There are even some nods to social business: Glovia gives engineers at different links in the supply chain the ability to collaborate. Planners also have visibility into customer and supplier engineering changes and inventory positions. Integration with Microsoft's Sharepoint is also provided.

What about the Cloud?

These days, no briefing is complete without asking about cloud options. Glovia offers an on-premise deployment (of course) as well as an on-demand option. Although the on-demand version is currently a simple hosting arrangement, when Microsoft Azure is ready for enterprise applications, Glovia will be able to host its system on Microsoft's cloud, assuming customers demand it.

Separately, Glovia has built a set of manufacturing modules on Force.com to inter-operate with Salesforce.com's CRM system. These are full multi-tenant SaaS applications that provide functionality for product configuration, order management, inventory, manufacturing, invoicing, purchasing, and returns. These are separate and independent from Glovia's flagship G2 system.

My own view is that Glovia's current support and stated direction for cloud computing is probably sufficient for now in light of the industries and size of organizations that it targets.

Where is Glovia Headed?

Behind us in Glovia's conference room was the obligatory "customer wall," with logos of Glovia's largest and most well-recognized customer names. My associate Nick Hann asked, "Three years from now, what will that wall look like?"

This led to an interesting discussion. Customer attrition during the retrenchment period was surprisingly low: a loss of any of these large customers would have been huge, and in fact none were lost. The sales team is now expanding to focus on new deals in addition to incremental sales into the installed base. There are also some resellers being added strategically for certain vertical industries.

Will Glovia be successful as it transitions from retrenchment to new sales? So far, some signs are promising. There are some big names in the sales funnel, including one Fortune 100 company. Interestingly, many of these new sales opportunities have come out of introductions by existing customers.

But will that be enough? The market is crowded, as Gorham noted, with SAP and Oracle gunning for the top tier of customers and Infor, Epicor, and IFS hungry for the mid-market and individual facilities of large multi-nationals. Syspro, Consona, and QAD also play in some markets and industries.

The markets that Glovia competes in are not under-served. In addition to the traditional players that Gorham identified, I would be concerned about newer cloud ERP providers: specifically Plex, which has a big bulls-eye on the automotive sector, NetSuite, and SAP's Business ByDesign.

Nevertheless, circling back to the retrenchment strategy: I like Glovia's story. How to leverage a recession to retrench and recover. In warfare, retreat is sometimes a good strategy, and in Glovia's case, the retrenchment appears to have paid off.

I hope Glovia's success continues, because buyers can only benefit by having a greater number of well-qualified choices.

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