Two Salesforce Platform-Based Cloud ERP
Providers Become One
On January 11, 2018, Rootstock announced it would acquire Kenandy. Both companies have built Enterprise Resource Planning (ERP) products on the Salesforce Platform. Both sell into manufacturing and distribution companies with supply chain requirements. Both were founded by industry veterans. From those similarities come synergies that should serve to accelerate growth for the combined company. And unlike some other ERP acquisitions in the past, this was a friendly merger. Rootstock wasn’t looking to make a land grab, but it was growing and hiring. So when Kenandy put itself on the block, the opportunity to acquire the exact kind of talent it was seeking made the acquisition quite appealing, especially since that talent came along with a solid product and a revenue stream.
Also, unlike other acquisitions that seem to drag on forever, this one happened very quickly. Therefore the executives at Rootstock are still in discovery mode. But CEO Pat Garrehy has made it quite clear: The intent was not to simply drive out the competition. The Kenandy product will live on; Rootstock will continue to service the customers and it hopes to substantially grow the installed base. While it is still too early to predict exactly where the Kenandy product will go from here, or where that growth will come from, Mint Jutras sees no reason for Kenandy customers to worry, and in fact may benefit greatly from those synergies previously alluded to.
The similarities between Rootstock and Kenandy stem largely from two factors. First of all, both target companies that make, move and sell a physical product. This sets them apart from other ERP companies that avoid the complexities of a manufacturing environment. Manufacturing and distribution are joined at the hip (so to speak) through a supply chain and many today are blended businesses. In fact very early results from our latest Mint Jutras Enterprise Solution study indicate 51% of manufacturers also do distribution and 17% of distributors perform some (usually light) manufacturing. All are active participants in a supply chain.
The other common factor is the underlying platform. Both are built on the Salesforce Platform, and the development teams at both companies have specific experience with the platform itself, and also Salesforce IoT, Einstein Analytics and the same user interface (Lightning UI).
The Salesforce Platform is categorized as a Platform as a Service (PaaS). Does this matter? The short answer is yes. Why? Here’s an excerpt from a 2016 Mint Jutras report on why selecting the right platform is so important.
Platform as a Service (PaaS) is a category of cloud computing services that provides developers with a platform to create software without the complexity of building and maintaining the infrastructure and services typically associated with developing an enterprise application. Clearly developers benefit from using the services delivered with a platform, speeding the development process. But how does this translate to benefits to the business? The obvious answer is in delivering more features, functions and innovation in ways that help companies keep up with the accelerating pace of change. But not all platforms are created equal. Some simply deliver more value through more services, in a wider variety of ways… which makes the choice of platform even more important.
Nowhere is this more critical than in Enterprise Resource Planning (ERP). After all, this is the software that runs your business. In order to survive, grow and compete in the digital age, you need an ERP that is highly flexible and able to adapt. This means it must be easily configurable and extensible. ERP can benefit tremendously from the availability of application services that ease and speed development and customization, as well as from the ecosystem that develops around the platform.
A strong development platform is more of a significant factor today than ever before simply because of the accelerating pace of change, creating the need for more agility and more innovation. By way of proof, we asked survey participants in our 2018 Mint Jutras Enterprise Solution Study to self-assess their own risk of disruption (Figure 1). The vast majority (93%) recognizes the potential, and over half (59%) describe it as medium to high and imminent risk. For the remainder, we might ask: How do you think the taxi industry might have answered this question on the eve of the launch of Uber and how long did it take for it to become a major disruptive influence?
Figure 1: How much risk do you face in your industry being disrupted?
Source: Mint Jutras 2018 Enterprise Solution Study
In order to best address the need for more rapid development and innovation, both Rootstock and Kenandy came to the same decision: to build on the Salesforce Platform. Therefore both reap similar benefits. Salesforce estimates the platform speeds development by a factor of five, and cuts the cost of development in half. This can be a big win, not only for the software developers, but for their customers as well. Both benefit from the ease and speed of development, as well as the vast ecosystem that has grown around the platform.
For the developers (Rootstock and Kenandy) it means fewer wheels to (re)invent, by taking advantage of application services already built into the platform, including:
- Support for a multi-tenant SaaS environment
- A workflow engine, access and identity management
- Other rapid developer services include Salesforce standard user interface templates, (business) object orientation and built-in mobile support
- The ability to tie “social” online chats (through Salesforce Chatter) directly back to business objects
- Embedded analytics with Salesforce Wave, a cloud-based data platform as well as a data-analysis front end designed to analyze both the ERP data, along with any third-party app data, desktop data, or public data you bring in
Use of any development platform requires a unique set of skills, as well as knowledge about the industries the software vendor serves. But the skills required are the same for Rootstock and Kenandy, because they serve similar markets and are built on the same platform. So in acquiring Kenandy, Rootstock embraced the opportunity to strengthen its talent base.
The Ultimate Product Question
So, given the similarities between the two, this begs the ultimate question regarding products moving forward: Will the resulting combined company continue to develop, maintain and support two distinct products? And should it? Mr. Garrehy has already made it clear that the Kenandy product will live on, and has further speculated that the combined company will likely have two distinct product lines, serving at least somewhat different markets. While not cast in stone, perhaps the Kenandy ERP will move in the direction of light manufacturing and distribution, while the Rootstock product will support heavy-duty, more complex manufacturing.
On the one hand, this is smart. Early ERP solutions made the mistake of thinking a “one size fits all” solution was the right approach, or at least a “one size fits all manufacturers.” As a result, the 80-20 rule prevailed. Nobody expected a solution to satisfy all their needs (an 80% fit was often the goal), resulting in invasive (and sometimes expensive) customizations that built in barriers to further innovation. But this can be problematic for companies running a multi-tenant SaaS solution, particularly given the diversity of manufacturing environments. While all manufacturers share some common requirements, the way you plan, fabricate and ship heavy equipment is very different than how you plan, package and ship food and beverages. Making customized products to order is a far cry from shipping a commodity from stock.
Having two different product lines increases the likelihood of Rootstock being able to deliver a more complete, yet simpler solution. But even as a software developer seeks to deliver that “last mile” of differentiating functionality, it can’t forget the common requirements. Every company requires fundamental accounting features and functions. Every manufacturer and distributor has basic purchase requisition and inventory needs. All must manage and account for travel expense reimbursements and paid time off.
Traditionally basic functionality, like accounting, has been developed and delivered through tightly integrated modules, resulting in a monolithic solution. The benefit has been tight integration. The good news: all modules move forward together in lock step. The bad news: all modules must move forward together in lock step. This tends to slow down innovation and prevents different departments within an organization from taking full advantage of new features until all are ready. Of course a multi-tenant SaaS solution addresses some of this challenge by taking much of the burden of upgrading off the shoulders of the customers. The SaaS solution provider does the heavy lifting.
But modern technology allows developers to take a different approach, one that can provide significant advantages to Rootstock. Object orientation and microservices allow developers to replace those monolithic solutions with component-based solutions. For the reader with a technical background, microservices, also known as a microservice architecture, is defined (by Wikipedia) as an architectural style that structures an application as a collection of loosely coupled services. For those nontechnical readers, think of it as constructing a solution from a set of Lego building blocks.
Think about how you build a structure from Legos. Each Lego block is made of the same kind of material and is attached (connected) to the other Lego blocks the same way. In many ways they are interchangeable. But by choosing different colors and sizes, and connecting them with a different design, you can make a structure that is very unique. And once constructed, if you want to change it, decoupling some of the blocks and replacing them doesn’t destroy the parts that are not affected. There is far less disruption introduced than if you had constructed it with timber, a hammer and nails.
How can Rootstock benefit? Continuing with the example of accounting, both Rootstock and Kenandy have accounting modules. Regardless of how the two product lines might diverge in the future, does developing and maintaining two sets of accounting functionality add enough value to justify keeping two different lines of code? Probably not. Could these two product lines share a common set of functionality? Probably.
Will Rootstock move in this direction? Only time will tell, but the fact that the Rootstock product line already provides a choice in terms of accounting packages indicates the architecture is supportive of this approach. Rootstock offers its own offer version of basic functionality of accounts receivable, accounts payable, cash management, general ledger (journals) and the ability to generate financial statements. But it is also pre-integrated with other financial applications, including FinancialForce, QuickBooks and Sage Intacct. It is certainly not out of the realm of possibility that Rootstock could integrate with Kenandy’s global financials. Once that integration is in place, the need for Rootstock to maintain its own accounting modules may just disappear.
The fact that the two products share a common development platform makes it far easier to accomplish. And the synergies don’t have to stop with just basic accounting. Rootstock is currently developing a new module (component?) for time and attendance. What’s to prevent the Kenandy customer base from benefiting from that development effort as well? Kenandy has been using Salesforce Einstein to develop analytic capabilities. What’s to prevent Rootstock customers from benefitting from that development effort?
If Rootstock takes this approach, it could combine the best of two worlds: separate product lines, sharing common components, all built on a common platform.
In summary, the merger of Rootstock and Kenandy would seem to be a big win for all. Yes, there is one less player in the field of ERP for manufacturing, but there is still plenty of healthy competition. The two companies share many similarities. Both target similar markets and are built on the same platform. Rootstock should be able to effectively leverage the talent the merger brings, along with the strength of the underlying Salesforce Platform to provide more focus on delivering a more complete solution to selected industries to be named later.
These similarities, together with a promise that both products will live on, bring synergies that should provide additional growth opportunities while also serving to make Kenandy customers feel welcome and right at home.