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Showing posts with label cloud. Show all posts
Showing posts with label cloud. Show all posts

Wednesday, August 28, 2019

The Use and Misuse of PaaS

One of the key advantages of modern cloud systems is that they often come with rapid development platforms that allow the vendor, partners, and even customers to build extensions and customizations to the system without affecting the underlying code or architecture of the base system. These are generally known as Platform as a Service (PaaS).

Examples include the Salesforce Lightning (formerly Force.com) platform, the SuiteCloud platform of Oracle’s NetSuite, Acumatica’s xRP platform, Sage Intacct’s Platform Services, Microsoft’s Power Platform, and many others.

However, as with so many good things in life, PaaS can be used and abused.

Read the rest of this post on the Strativa blog:
The Use and Misuse of Platform as a Service 

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.

Friday, May 04, 2018

Big Shift: NetSuite Moving to Oracle Cloud Infrastructure

In recent years, Oracle has been intensely focused on its cloud strategy as the key to its growth. At Oracle Open World 2016, with the announcement of Oracle’s second-generation cloud infrastructure, Larry Ellison said, “Amazon’s lead is over.” It was an ambitious goal: At the time, Oracle’s cloud infrastructure (OCI) business was bringing in less than $200M per quarter.

Uptake of Oracle’s cloud applications is great, but when it comes to Oracle really competing with Amazon or Microsoft as a platform for independent software vendors (ISVs), the story is different.

The absence of multitenant ISVs on OCI is not because of a lack of capabilities. Oracle’s flagship database, since v12c was released in 2013, has built-in multitenancy in the form of database containers, which allow multiple tenants to share a single Oracle database, with individual containers assigned to each tenant. This approach puts the multitenancy into the infrastructure layer, allowing developers to focus their efforts on application development, not on the mechanics of multitenancy.

Oracle’s lack of commercial SaaS providers building on OCI is about to change.

Read the rest of this post on the Strativa blog:
NetSuite on Oracle Cloud Infrastructure: What It Means for Customers

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

Thursday, February 09, 2017

Three Things to Like about Acumatica

Since the turn of the century, there has been an ongoing ERP consolidation trend, with Oracle, Infor, Epicor, and others buying up smaller ERP providers. During this same period, newer ERP vendors have risen up to challenge the incumbents. Nearly all of the new entrants are cloud ERP systems.

One of the most interesting of these is Seattle-area-based Acumatica, founded in 2008—just yesterday in “ERP years.” Like many other ERP startups, it initially focused on services businesses but soon added distribution and CRM functionality to its horizontal capabilities. Its go-to-market strategy is 100% through value-added resellers (VARs), who can add their own industry-specific software on top of Acumatica. Its VAR strategy, in this respect, is similar to that of Microsoft Dynamics and Sage. In fact, many of the new VARs in Acumatica’s channel program have come from the Microsoft and Sage ecosystems.

Acumatica’s partner and customer conference in January gave us an opportunity to update our view of this emerging cloud ERP provider. We find that Acumatica is interesting because of three characteristics that are somewhat novel in the ERP world.

Continue reading on the Strativa blog: Three Things to Like about Acumatica

Wednesday, August 10, 2016

The Growing Circle of Cloud ERP

Traditional providers of ERP systems typically sought to expand their functional footprint to include complementary applications outside of core ERP. Now cloud ERP vendors are adopting a similar strategy, bringing significant benefits to buyers.

For most companies, an ERP system is generally at the center of the business systems strategy. But a comprehensive applications portfolio includes much more than ERP. Most companies, even small and midsize businesses, have a surprising number of important systems outside of ERP.

By way of example, Figure 1 shows our proposed future applications landscape for a current client of my consulting firm, Strativa. (Company-specific references are removed). Although just a midsize company, it has plants and distribution centers around the world. As a result, the future applications portfolio will be quite extensive. At the core, within the red circle are the core ERP functions. Outside the circle are other enterprise system
s that must interact with the core ERP system. Nearly all of these systems will be new, or replacements of current systems.

Read the rest of this post on the Strativa blog: The Growing Circle of Cloud ERP

Sunday, July 31, 2016

Oracle Acquisition of NetSuite Is a Mixed Bag

Oracle took another step in its strategy of growth by acquisition by announcing a bid for NetSuite, the leading player in the cloud ERP marketplace in terms of number of customers. At $9.3 billion, the deal is the second biggest in Oracle’s history, after PeopleSoft in 2005 for $10.3 billion.

The deal was long expected, for several reasons. Oracle Chairman Larry Ellison was NetSuite’s original investor, and Evan Goldberg, NetSuite’s founder came out of Oracle. CEO Zach Nelson was an Oracle marketing executive. Oracle’s database is an integral part of NetSuite’s infrastructure.

But apart from helping Oracle in its race with Salesforce.com to get to $10 billion in cloud revenues, what are the benefits of the deal to Oracle? How does it help NetSuite, and what does it mean to the broader marketplace? Looking at the big picture, there are certainly benefits, but there are also several concerns.

Read the rest of this post on the Strativa blog: Oracle Acquisition of NetSuite Is a Mixed Bag

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

Monday, October 05, 2015

FinancialForce Expands Its Footprint in Cloud ERP

FinancialForce continues to show strong momentum in the cloud ERP market, and it is building out its product capabilities in interesting ways.

In this post, we provide an update on FinancialForce, based on interviews we conducted with its executives at Dreamforce, the annual conference for users of Salesforce.com. We also provide recommendations for buyers considering FinancialForce.

Read this post on the Strativa blog: FinancialForce Expands Its Footprint in Cloud ERP

Wednesday, September 30, 2015

Rootstock's Momentum in Cloud ERP

Rootstock Software is an up-and-coming cloud manufacturing ERP provider, built on the Salesforce.com platform. Last year, I covered Rootstock in a post about four ERP systems in the Salesforce ecosystem. This year, the annual Dreamforce conference gave me the opportunity to interview Rootstock executives and customers about the progress the firm has made over the past year.

In short, Rootstock is showing good momentum, nearly doubling its publicly announced customer count over the past 18 months. It is also building out its product offerings by developing its own native accounting applications and extending its business intelligence capabilities utilizing Salesforce Wave Analytics.

Read the full post on the Strativa website: Rootstock Rounding Out Its Cloud ERP Offerings.

Kenandy Has a Contrarian View Toward Two-Tier ERP

Salesforce.com is proving to be a popular platform for developing ERP systems, and its annual user conference, Dreamforce, has been a great way to catch up with all of them in one place.

Last year, I provided an update on the four ERP providers building on the Salesforce platform in a single post. This year, I want to provide an update on these, starting with Kenandy.

Unlike cloud-only ERP providers such as NetSuite and Plex, Kenandy is not interested in a "two-tier ERP strategy." The strategy of "two-tier" refers to the targeting of small divisions or operating units of larger companies that are running Tier 1 solutions, typically SAP or Oracle, at headquarters and in larger divisions. The cloud provider then targets its ERP solution for smaller divisions of the company with integrated to the corporate system, usually for shared services such as financials, central order processing, or cross-company supply chain management. NetSuite points to customers such as Jollibee Foods and NBTY (China) Trading Company as multinational companies implementing NetSuite in a two-tier strategy. Similarly, Plex boasts of Caterpillar and Inteva Products as success stories in two-tier ERP.  

Going against this trend, Kenandy executives say that, although they will not turn away two-tier opportunities, they would rather work in what they consider a more strategic role with customers. This means targeting (1) large enterprises for a complete ERP solution, or (2) serving as a more agile "orchestration" solution for new lines of business within large enterprises.

Read the full post on the Strativa website: Kenandy: Against the Tide of Two-Tier ERP

Monday, July 06, 2015

More Than a Deployment Option: SaaS Is a Business Model

With the increasingly popularity of software as a service (SaaS), enterprise software vendors today cannot afford to be without a cloud strategy. As a result, traditional vendors have introduced various forms of hosted, hybrid, and SaaS deployment options. These co-exist alongside the vendor’s traditional on-premises license model.

But software as a service is more than just another deployment option, another way to consume software. SaaS is a business model. SaaS not only affects the product: it should drive the nature of how the provider does business, from how the product is developed and maintained to how it is sold, implemented, and supported. It should permeate the very culture of the provider’s organization.
How should the business model of a SaaS provider be different from that of a traditional software vendor? There are at least six aspects.

Read the rest of this post on the Strativa blog: Beyond Deployment Options: SaaS as a Business Model.

Saturday, November 01, 2014

The Maturing of ERP on the Salesforce Platform

Salesforce.com held its monster user conference, Dreamforce, last month in San Francisco, and there were plenty of new announcements. For example:
  • A new analytics cloud, dubbed Wave, which fills out Salesforce.com's offerings to include native business intelligence and analytical capabilities
     
  • A new version of the Salesforce1 platform, Lightning, for developing mobile apps
     
  • An expanded partnership with Microsoft for Windows mobile devices and new integrations with Microsoft Office, Office 365, Power BI, and Excel
But Dreamforce is not just about Salesforce. It's about the Salesforce ecosystem—hundreds of partners building complementary and in many cases completely independent solutions on the Salesforce platform.

For those that follow ERP, this post outlines the latest developments with four ERP providers building on the Salesforce platform: Kenandy, FinancialForce, Rootstock, and AscentERP along with my takeaways from each of them. I'll end with one small caveat for buyers.

Kenandy Goes Up-Market

I first wrote about Kenandy after its introduction on stage at Dreamforce in 2011, and I’ve kept in touch with its management team for regular updates. The big news this year is the success Kenandy has had in selling into large companies.

Exhibit 1 in Kenandy’s march up-market is Big Heart Pet Brands, a distributor of pet food and pet supplies, which was formed by the carve-out of the pet food business from Del Monte Foods earlier this year. Milk Bone, Kibbles, Gravy Train, and 9Lives, are just a few of its well-known brands.

I had an opportunity to interview Dave McLain, the firm’s CIO, who made it clear that this is no two-tier ERP configuration. Apart from a handful of point solutions and an on-premises warehouse management system (Red Prairie), a single instance of Kenandy will be providing all ERP functionality when fully rolled out. With $2 billion in annual revenue, this may well be the largest company running a cloud-only system as its only ERP system.

(If readers have heard of a larger example, please let me know--but before responding, please reread the preceding sentence slowly and note the words “cloud only.”)

Why would McLain trust a young vendor such as Kenandy with such a tall order? First, McLain was attracted to the Salesforce platform and its promise of rapid development. In other words, he was sold on the platform and then looked for an ERP provider that was leveraging it. In my view, it helps that McClain is not your typical CIO. He’s worked in the enterprise software industry, with stints at Aspect Development, back around the turn of the century, and at i2. He is not only comfortable working with a young vendor, but he viewed Kenandy’s youth as an advantage, as he felt he would have more influence over the product roadmap. So far, he’s happy with his choice.

Big Heart Pet Brands is only the first and most visible example of Kenandy’s move into larger companies. In a briefing, Kenandy executives shared with me several large deals they have in implementation and several that are in the pipeline. Although the names are still confidential, they are large and in some cases very large, well-known, global companies.

One point that may keep SAP executives awake at night: some of these prospects are reportedly approaching Kenandy because of a determination to halt further implementation of SAP’s Business Suite in new regions of the world.

My takeaway from Kenandy is that cloud ERP is not just for small and midsize businesses.

FinancialForce Goes Deeper

FinancialForce is another young ERP vendor, founded in 2009 as a joint venture between UNIT4 and Salesforce (UNIT4 is the majority shareholder). I wrote about FinancialForce last year and commented on its acquisition of Vana Workforce and Less Software. These acquisitions expanded FinancialForce from financial systems and professional services automation into HR systems, order processing, inventory control, cost accounting, and functionality for product-based businesses.

This year, in a briefing with FinancialForce executives, I heard about the firm’s work to embed HR activities within operational transactions. Users can give other employees feedback on their performance right within the context of a project in the professional services system, for example. The feedback is then recorded in the HR system so that employee performance data is gathered throughout the year instead of during an annual performance review only. FinancialForce refers to this approach as “Everyday HCM.”

The firm also reports good uptake of the “supply chain management (SCM)” capabilities that it acquired from Less Software, tripling its number of customers for this functionality. As I pointed out last year, the term supply chain management is something of a misnomer. There is no real warehouse management, transportation management, or supply chain planning. Rather, SCM in this context really refers to the detailed tracking of physical and intangible products from supplier, through inventory, to customers.

This can best be seen with the large percentage of deals that Less Software, and now FinancialForce, have done with VARs, resellers, and other tech industry channel partners. FinancialForce can now track and process OEM rebates (a long-standing practice in channel businesses). Product costing allows costs to be accumulated by serial number (specific identification) and can include landed cost (i.e. allocated inbound freight cost). This is a huge need for solution providers that import OEM products. Filling out the needs of today’s channel partners, FinancialForce also has a full professional services automation system, and it supports subscription billing along with management of recurring revenue.

These are not trivial product features. It is a testimony to the rapid development capabilities of the Salesforce platform that FinancialForce has been able to build out these features in such a short time.

Like Kenandy, FinancialForce is also getting into larger deals, although the names are not yet public.

My takeaway from FinancialForce is that in some cases the functionality of these young cloud-only vendors now rivals that of the traditional vendors.

Rootstock Expanding Its Footprint and Presence

The founders of Rootstock have the advantage of having developed a cloud ERP system twice. The firm first developed its manufacturing system in 2008 on the NetSuite platform. In 2010, however, Rootstock disengaged from this partnership and rewrote its ERP system on the Salesforce platform. As a result of the replatforming, Rootstock developed its own customer order management product and partnered with FinancialForce for its accounting systems.

Rootstock scales well to larger companies. It claims to be the largest system on the Salesforce.com platform in terms of the number of objects,pushing the boundaries of what the platform can do. All Salesforce partners, of course, benefit from the scale-out capabilities that Salesforce is building into the platform.

In terms of functionality, Rootstock has good capabilities 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. It also announced this year the development of a product configurator, a module where most cloud ERP systems are still relying on third-party solutions.

The build out of functionality is making Rootstock more attractive to larger companies as well as the midsize organizations it has appealed to in the past. In a briefing with Rootstock senior leadership, they pointed to their win at CSG, a provider of print and managed services, and enterprise solutions in Australia and New Zealand. In New Zealand, it is the exclusive distributor for Konica Minolta. When fully deployed, Rootstock will be serving “hundreds” of users at CSG.

Other wins this year include Northeast Lantern, a maker of high quality brass and copper lighting fixtures; Wilshire Coin Mints, a retailer and wholesale distributor of coins for collectors and investors; Proveris Scientific, a manufacturer of test instrumentation for the pharmaceutical industry; Pioneer Motor Bearing, a maker of high performance industrial bearings; Pacer Group, a wire and electrical cable manufacturer; Plumb Sign, a job shop producing signage for businesses across the US; and Oberfield Architectural Precast, a manufacturer of precast concrete and other custom-built precast products.

In another development, Rootstock added some muscle to its advisory board this year with the addition of Jan Baan, the former founder and CEO of Baan Software, Jim Bensman, former president of SAP North America, Bill Happel, former VP of General Motors, and Lee Wylie, former CIO of Gartner.

My takeaway from Rootstock is similar to that for FinancialForce: the functionality gap in some areas is closing between the cloud-only ERP providers and traditional vendors.

AscentERP Raises Its Profile

I was not able to meet with AscentERP during Dreamforce, so I arranged a call after the show with Shaun McInerney, its co-founder and President. McInerney was positively excited about his firm’s latest developments:
  • The launch of Ascent Rental, a native Force.com application for companies that rent or loan out equipment. He’s already seeing interest from current customers in the construction industries. Event organizers and medical equipment rental businesses are also targets.
     
  • An iTunes app that turns Apple iOS devices (iPod Touch 5th Gen, iPhone 5, and iPad Mini) into true high-speed bar code scanners, through use of a scanner sled available from Honeywell. This plays well with AscentERP’s roots in warehouse data collection and is a key element in the case study I highlight below.
     
  • Integration with Magento for e-commerce, allowing customers to take orders from the web, fulfill them and push shipment information back to customers. McInerney claims over 15 customers already for this functionality, which was only launched two or three months before Dreamforce.

McInerney reports an increase in new opportunities coming from Salesforce, with about half from outside the US. The system supports multiple currencies and base languages of English and Chinese. Like the other three vendors outlined in this post, AscentERP is also seeing its share of larger deals, which includes several in the range of 200 users, a jump from its typical user count in the past.

In my opinion, AscentERP gets the award for the most inspiring customer story. It put together a short video about its client Bosma Industries, a $55 million non-profit distributor of medical supplies, which also happens to be Indiana’s largest employer of people who are blind or have vision loss. AscentERP worked with Bosma to customize its system and to make it fully accessible to Bosma’s visually impaired workforce. This is where that iTunes app for warehouse data collection comes into play.

The best quote is from Bosma’s Adam Rodenbeck, who says, "If Siri can look at Facebook and help us get around on Twitter, why can't it help get us around the warehouse?"

Click the image below to watch the 3-minute customer story.

https://www.youtube.com/watch?v=Z3ySJKSPVu0

My takeaway from AscentERP: don't underestimate the marketing value of being part of the Salesforce ecosystem.

Buyers Should Ensure Adequate Implementation Support

One thing that none of these four vendors mentioned: a lack of new sales opportunities. In fact, they all indicated that they were awash in new prospects. This is in contrast to some of the traditional ERP vendors who periodically call me to check whether I’ve “heard of anyone looking for software.” It’s always a good sign when a vendor can afford to be picky about the opportunities it chases—it lessens the likelihood that the vendor will get into situations where it cannot compete and improves the chances of success.

But the the flip side of all these new deals can lead to problems if vendors are not adequately staffed to support them. Generally speaking, I caution clients to be sure they get adequate consulting help when they are considering these vendors. True, these new cloud-only systems are generally easier to implement, but still, they don’t implement themselves. You don't need system admins or DBAs. But you do need consultants who understand how to configure the system and help you implement your processes within it. In some cases, these vendors may have consulting partners that can assist, but they can be stretched as well. It is not an insurmountable problem, but buyers should be sure they get the help they need to have a successful implementation.

Note: Salesforce paid my travel expenses to attend Dreamforce.

Related Posts

Four Cloud ERP Providers on the Salesforce Platform
Kenandy: A New Cloud ERP Provider Emerges from Stealth Mode

Sunday, September 28, 2014

Infor’s Most Urgent Initiative

After more than a decade of acquisitions, Infor is now the world’s third-largest enterprise software vendor, following SAP and Oracle. In the past, it’s been easy to characterize Infor as a roll-up of older ERP products and point solutions. But that view is no longer fair.

Beyond Acquisitions to Innovation

Under the leadership of CEO Charles Phillips and his mostly-new team of senior executives, Infor is now moving beyond acquiring other products to innovation on several fronts:
  • Hook & Loop: an in-house design agency, which has brought a fresh modern user interface across all of Infor’s products, embracing mobile devices as well as desktops. With Hook & Loop, Infor can now also provide design services to its clients, an unusual competency among enterprise software providers.
     
  • Infor ION: a light-weight middleware capability, which allows quick integration between Infor’s many products as well as third party solutions.
     
  • Ming.le™, a comprehensive solution for social business, process improvement, and analytics.
     
  • Deep vertical functionality, covering dozens of industries, sub-industries, and micro-verticals. For example, where some vendors might list “Food and Beverage” as a vertical, Infor makes a distinction between “Beverage,” “Bakeries,” and “Confectionery.”
     
  • CloudSuite: Industry-specific suites of Infor products pre-integrated and deployed as cloud services,  comprising five industries today with more on the way. It also includes the newly-announced Cloudsuite Corporate, which covers horizontal applications such as finance, human capital management, and purchasing.
     
  • Data Science Lab: a newly formed group, which will develop advanced analytics capabilities across Infor’s product suite as well as offer data analytics services to Infor customers, which might otherwise be out of their reach. The group is based near MIT and includes data scientists, mathematicians, economists and other analytical skills that are beyond the reach of many Infor customers.
These strategic initiatives go beyond market messaging. In fact, until now, Infor has been deliberately muted in its market communications on these innovations, waiting until it had substantive product and capabilities to deliver. Expect to hear more from Infor in its public messaging on these innovations. 

But Infor is Losing Customers

Nevertheless, while Infor is newly invigorated around innovation, the majority of its customers are stuck in the past. Many of Infor’s products were originally developed over 20 or even 30 years ago, and it is safe to say that a good percentage of the customers of those products have not upgraded them since Infor acquired them.

The first and obvious risk to Infor is that such customers may be lost to competitors. Infor does not publish attrition numbers, but some simple arithmetic shows that Infor has actually lost customers over the past four years.

Here’s the calculation. When Charles Phillips was named as CEO in October 2010, Infor indicated that it had over 70,000 customers. At this year’s Inforum, exactly four years later, Infor gives its customer count as 73,000. However, during these four years, Infor has made a number of acquisitions. The largest of these was Lawson Software, which Infor acquired in 2011. At that time, Infor said that Lawson had more than 4,500 customers and that 9% of Lawson’s active customers were also users of use Infor products. That would be a net addition of approximately 4,100 customers. 

So, if we add the 4,100 customers from Lawson to the 70,000 customers Infor claimed in 2010, we come up with 74,100, which is 1,100 more than the 73,000 customers that Infor now claims. The loss of customers is undoubtedly greater, as Infor has done four smaller acquisitions since 2010, apart from Lawson. Bottom line: Infor’s new customer wins are not even keeping pace with existing customer attrition.

Two recent examples from my consulting business, Strativa, illustrate the problem.
  • An aerospace and defense manufacturer contacted us last year about doing a new ERP selection. This customer is running an older version of an Infor product that was installed in the early 1990s. The company customized that product with changes to deal with the Y2K century-dating problem, and it has not upgraded since. The company may consider a migration to the current version of their Infor system, but it also wants to look at other alternatives.
     
  • We recently completed an ERP selection for another company, a mid-sized manufacturer, which is running an older version of another Infor product, again, highly modified. Although we short listed Infor products for consideration, there were few advocates among users to continue with Infor. This client has tentatively decided in favor of Microsoft Dynamics and has started a proof-of-concept as the next step.
In briefings with other vendors, nearly every one of them lists Infor’s customer base as a target for new business. In fact, Phillips noted during his recent keynote at Infor's user conference that NetSuite had sent people into the audience to recruit Infor customers. (What’s good for the goose, is good for the gander. Infor apparently had gotten wind of NetSuite’s tactic and had inserted a slide with a special offer for NetSuite customers to migrate to Infor.)

Personally, I think NetSuite's guerilla marketing tactics are more for show than for real prospecting. If NetSuite wants to target Infor customers, the best targets are not the 6,000 attendees at its user conference. Conference attendees represent those customers who are actively engaged with Infor. They are those who are either on current versions or considering to get there—or they are new prospects altogether. The Infor customers that competitors should be targeting are those who stayed home.

Customers Unable to Benefit from Infor’s New Stuff

There is a second problem with so many Infor customers being on older versions, and that is that they are in no position to take advantage of all of Infor’s new innovations. Because they are on older versions, they cannot get Infor’s new user interface, they cannot take advantage of ION for integration, their users cannot collaborate with the capabilities of Ming.le™, and they cannot benefit from the deep industry functionality that Infor has been adding to its products over the past several years.

From Infor’s perspective, these are lost opportunities to up-sell and cross-sell additional Infor products to these customers. From the customer’s perspective, there is diminished value from their past investments in Infor products, making them question why they are paying maintenance. This again opens them to abandoning ship for competing products.

Upgrading Customers Is the Critical Path to Success

If it is not apparent by now, getting customers to upgrade to current versions is absolutely essential to Infor’s success. Infor realizes this, and over two years ago it launched an initiative it calls UpgradeX.

The features of UpgradeX are aimed at making version upgrades a no-brainer for customers:
  • Value engineering: Infor will analyze the customer’s existing deployment and quantify the business value of eliminating modifications and upgrading the applications.
     
  • Version upgrades. The service will move the customer to the current versions of its Infor products, which can be a daunting project for customers that are behind many versions. Infor’s website doesn’t make it explicit, but I believe Infor will allow customers to switch to a more appropriate Infor product.
     
  • Cloud deployment. Infor uses its cloud to bring up a sandbox version of the new system quickly for the customer to prototype and understand the new version. Infor then migrates and deploys the target solution as a cloud service, assuming day-to-day responsibility for operating the system.
     
  • Bundled professional services. Infor provides all the consulting services required to accomplish the upgrade or migration. User training is provided online. The website does not make this clear, but I believe that Infor does all this as a fixed price contract.
     
  • Ongoing upgrades and support. UpgradeX will not be a long-term solution if newly upgraded customers fall behind again on upgrades. The offering therefore includes services to keep customers current on new versions.
The UpgradeX program has recently been assigned to Lisa Pope, Senior VP of Infor CloudSuite, who appears to be a great pick for the job. She came within the last year to Infor from QAD, where she was VP of Strategic Accounts. Interestingly, QAD was earlier than most traditional ERP vendors in offering a cloud or hosted deployment option, beginning in 2007. According to my research, QAD’s ERP subscription revenue now is in the neighborhood of 10% of its total revenue, which puts it at the high end of what most traditional ERP vendors have been able to achieve to date. In her role at QAD, Lisa was instrumental in this transition. She will need to build on her past experience and move even more aggressively to accomplish an even greater transformation with Infor’s installed base.

Infor Customers Should Consider UpgradeX

Some Infor customers on older versions are determined to go with a different provider. When I speak with such customers, I encourage them to take a look at UpgradeX. In many cases, they are not familiar with the innovations Infor has introduced, and they do not understand that they may be able to get upgraded quicker than they think.

Even Infor customers who have gone off maintenance should consider UpgradeX. Vendors hate to lose customers. If there is a way to recapture a customer that has gone off maintenance, a vendor is likely to make an attractive deal to do so, especially if the customer is also looking at competing products.

It is often simpler to upgrade a system that users are familiar with than to migrate to a completely new system, which reduces implementation risk. Moreover, with Infor’s value engineering services, the opportunity to eliminate or reduce modifications can also lead to longer term savings, as the customer will no longer need to support those customizations.

One word of caution: I was not able to interview any UpgradeX customers during Infor’s user conference, so I’m not able to verify the results that Infor promises. In any event, UpgradeX so far has only touched a small percentage of Infor’s installed base. For Infor to really move the needle, UpgradeX needs to be rapidly scale up to thousands of customers, not the hundreds it has now. I don’t know of any vendor that has ever been able to make such a massive impact on its legacy customers, but Infor's UpgradeX program certainly has all the pieces in place to do so. For Infor’s sake and its customers, I hope it is successful.

Related Posts

Infor's Two-Pronged Cloud Strategy
[Infor] Drilling Deep into Healthcare IT
New Details on Infor's Lawson Acquisition
A Guide for Cloud ERP Buyers

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

Thursday, July 17, 2014

SAP's Revamped Strategy for Small and Midsize Businesses

Dean Mansfield
SAP announced today the launch of a new division focused solely on sales of its systems to small and midsize businesses. The SMB Solutions Group will be headed up by Dean Mansfield and will focus on companies with up to 500 employees. Moving against the tide, Mansfield comes to SAP from NetSuite, where he headed up global sales and operations.

Product Strategy: Simplified Suite on HANA and Business One

What I find most interesting in the SAP press release is its ambiguity on what products Mansfield will be selling into the SMB market. The first part of the announcement appears to be saying that SAP will target the SMB market with a cloud version of its Business Suite, though it does not say so explicitly: 
Mansfield will execute on a board strategy to redefine the SMB business solutions market by creating the next generation of simplified, integrated business applications powered by SAP HANA®, delivered via the cloud that will solve tomorrow's complex SMB business challenges. 
The announcement then explicitly mentions Business One (a separate system from SAP's Business Suite), which will continue to be sold and supported through partners. It also refers to a push to move those partner offerings to hosting on HANA, as a separate deployment option for SMBs:
In addition, Mansfield will lead the current SAP Business One application portfolio, which will continue to operate through the Global Partner Operations organization, and plans to accelerate the adoption of SAP Business One, version for SAP HANA, as well as the SAP Business One Cloud solution, version for SAP HANA. 
What's missing from the announcement? Any mention of SAP Business ByDesign (ByD).

This lack of clarity about the products that SAP will offer to SMBs was also picked up by one analyst in SAP's quarterly earnings call. Adam Wood from Morgan Stanley, noting that SAP appears to have deemphasized ByDesign, asked SAP CEO Bill McDermott what would be the main product focus in SAP going to market with SMBs.

McDermott responded, in part:
ByDesign is still part of our product portfolio and we now have ByDesign on SAP HANA, which is absolutely a game changer because everything is faster and better on HANA as you know. [Emphasis mine.]
McDermott is a careful speaker, and his use of the word "still" is revealing. He wouldn't dream of saying, "The Business Suite is still part of our product portfolio," or "SAP HANA is still part of our product portfolio." The word "still," therefore, indicates that ByDesign is not part of SAP's core strategy.

McDermott continued:  
We also believe strongly that Business One has been going through an indirect channel now and has proven itself to be a very successful, high growth, double-digit business with good margin. So we will continue that. But we also put B1 up on HANA in the Cloud and we go global and we think that can be a very serious category killer.

Once it get into the market place and people see what it can do on HANA and we will continue innovate in that space now with a defined agenda underneath Dean Mansfield. So it's a combination of things we are going to go after the market with.
So, this confirms the implication in SAP's announcement that, in contrast to Business ByDesign,  Business One is strategic to SAP's SMB strategy.

Without directly using the words "Business Suite," McDermott then implied that the Business Suite itself, running on the HANA Enterprise Cloud, would also be a product offering for SMBs:
Related to the HANA Enterprise Cloud and the multi-tenant debate, the bottom line is the HANA Enterprise Cloud and each customer wants their solutions. They want it beautiful. They want them to work and yes, we can make money on it because HANA is the great simplifier.

When you radically simplify the IT stack--I mean SAP
[in context, the SAP Business Suite--ed] used to run on eight terabytes of data. Now it's like closer to 1.5. You dramatically lower your cost of operation and improve the speed of everything in the operation. So it's perfect for "Run Simple." It doesn’t matter whether it's single- or multi-tenant. What matters is the customer gets what they want at the price point in the performance and the user experience they're looking for, and that's precisely what we intend to give them.

Will SAP's SMB Strategy Work? 

I would interpret SAP's strategy as two-fold. For really small businesses, starting at even five or 10 employees, SAP wants to continue its reseller channel strategy with Business One. For small divisions of larger companies, especially those already running its Business Suite globally, SAP will also position Business One, whether on-premises or hosted by partners.

For midsize companies, especially those that are growing and need more comprehensive functionality, SAP wants to position its flagship Business Suite. But this product has not performed well for midsized businesses in the past, even when packaged with preconfigured industry templates as SAP All-in-One, due to its size and complexity. SAP is betting that it will be successful with its "Run Simple" strategy to turn this product into a "Simple Suite." This is what McDermott was talking about when he mentioned going from 8 terabytes to 1.5. And, by running it as a managed service on the HANA Enterprise Cloud, SAP hopes to simplify the implementation and ongoing support experience for SMBs.

In my view, there are two risks in SAP's strategy and they both involve the Business Suite. First, even if "simplified," will midsize businesses find the Suite simple enough? The early signs with SAP's Simple Financials are promising. But is that possible with the rest of the Business Suite? Second, will the experience of the HANA Enterprise Cloud be as friendly as the cloud-only ERP providers, such as NetSuite, Plex, Rootstock, FinancialForce, and others?

In recent years, SAP had a cloud-only solution in Business ByDesign that was more directly comparable to the competition. That's no longer part of the plan. Rather, SAP believes that a combination of Business One and a simplified Business Suite will be a winning strategy. Time will tell.

Update, 5:22 p.m.: Removed references to Business One on Hana Enterprise Cloud (HEC), which does not appear to be part of the solution. Thanks to Dick Hirsch for the clarification.

Update, July 18: Dennis Howlett picks up on my post and provides more analysis, including a history of ByD.

Related Posts

Fighting Complexity: Can SAP Run Simple?

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
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