Cindy Jutras

Is SAP Still in SMB Stealth Mode? Watch Out, Changes are Looming

Many think SAP is just for the big guys. The company is the closest you get in the ERP market to a household name, and, after all, it was in the large enterprise where it made that name for itself. In reality though, SAP plays in markets that include companies of all sizes. A good 80% of its customers are in the small to midsize enterprise range. And yet today small to midsize companies in search of a solution don’t immediately think “SAP” and they will have a difficult time discovering all that SAP has to offer them.

SAP’s competitors perpetuate the “big guy only” misconception, along with  “expensive” and “complex” qualifiers. They are like a dog with a bone, refusing to let go, hoping to lead prospects away from the 800-pound gorilla. Pundits who largely follow the large enterprise space contribute as well, along with the publicity (both good and bad) from high profile customers that are also household names. But SAP must also share some of the blame because of one thing it is so very good at: Speaking in one voice.

SAP employees stay on message. And the message is couched in the native language of SAP, which is the language of IT in the large enterprise. Although the latest overarching message these days is “Run Simple,” that alone doesn’t say enough. SAPers either talk at such a high level of abstraction that it becomes meaningless (your world will be a better place), or they talk technology.

In speaking to the decision makers and business leaders in small to midsize businesses (SMBs), you might as well be talking Klingon. They have their feet firmly planted on the ground. They want to hear how a solution will solve their immediate problems, address their challenges and bring value to the business. They want specifics. And they want to buy from a company they can trust.

The combination of negative hype and the “one voice” of SAP also might lead SMBs to think SAP is a one trick pony, with only a single product to offer, one that is clearly beyond their reach. Nothing could be further from the truth. Not only does SAP have three separate and distinct ERP offerings, it also has other offerings that sit on the periphery, outside the boundaries of ERP. These include talent management (SuccessFactors), travel and expense (Concur), a supplier network (Ariba), analytics (Business Objects) and a front office (SAP Anywhere). And this is just a partial list.

Let’s start with core ERP. At the top is SAP ERP, which has been brought to market under different names during its evolution. But make no mistake; this is definitely a solution that is meant to satisfy the needs of the largest, most complex enterprises in the world. Older versions were known as SAP R/2 and R/3 but more recently it was simply referred to as SAP ERP or ECC, providing the core of a larger Business Suite(adding CRM, SRM, SCM and PLM to ERP). The latest incarnation is S/4HANA, which is both evolutionary and revolutionary at the same time. It provides the same functionality as SAP ERP but has undergone a rewrite to take advantage of the powerful in-memory technology of SAP HANA. This is the large enterprise ERP for which SAP is famous (infamous?).

But this is not a “one size fits all” solution. SAP also offers SAP Business One and SAP ByDesign. Up until recently, it also marketed Business All in One, but in fact that was/is not a separate product. It was a version of SAP ERP packaged with industry templates and best practices, purportedly designed to simplify the implementation, thereby making SAP ERP more digestible for the mid-market. Because it was essentially the same product but with a different name, it also added some confusion. SAP appears to be backing away from that branding. I think that is smart. Can SAP S/4HANA work for this midmarket? The answer is yes, particularly where that smaller, midsize company is a division of a large enterprise that has standardized on SAP solutions. But these will be the exceptions to the rule.

SAP is also getting smarter about how it targets these three products to different segments. SAP has formed an SMB team to specifically address the market of companies with 1500 employees or less, and has defined “small” as companies with less than 250 employees. It will market SAP Business One to small companies looking for an on-premise or hosted solution (partners will provide the hosting). It will be sold largely through partners, which will provide both advocacy and intimacy to the customer. SAP Business ByDesign is available exclusively as a multi-tenant SaaS (software as a service) solution supported by SAP itself. The target is generally the mid-market but can come down into the small company range for those interested in a true SaaS solution from SAP.

However, both SAP Business One and SAP Business ByDesign have suffered from a lack of respect in the market. Competitors often write Business One off, telling me they hardly ever see it in a competitive deal. And yet Business One is implemented in over 50,000 small companies around the world and SAP is adding about 1,000 new customers a quarter. That tells me there are hundreds of deals where these competitors never get invited to the party.

Rumors of the death of Business ByDesign have been rampant for years and unfortunately SAP has allowed its critics to have had a louder voice in the market than SAP itself. In the meantime, SAP has been (rather quietly) growing the installed base to about 1,000 customers, which is larger than many customer bases of some of those competitors. Respected journalists and analysts have recently admitted ByDesign is in fact not dead. I couldn’t/can’t resist saying, “I told you so.”

This might all seem like SAP 101 to veteran industry observers. But it also might come as a surprise to learn that your typical decision maker and business leader of a small to midsize business doesn’t follow the (ERP) space that closely. Those business leaders are too busy following their own industries. So they are easily confused by the progression of product names and even more easily confused when target markets for different products overlap. And they are not well equipped to distinguish hype and myth from reality. To convince them one way or the other, you have to understand how they approach software selection and you have to speak their language. And you have to speak it loudly and clearly. That is where SAP has not done a good job.

I am optimistic that is about to change under some new leadership at SAP. Barry Padgett took over as President of the SMB team last July. He came over from the Concur team, bringing a new perspective. Barry “gets” SMBs. They need a lot of the same features and functions that their larger counterparts need, but they don’t have the large IT staffs or the deep pockets. They expect products to work seamlessly – open and connected. They don’t go out looking for technology. They go out looking for solutions to problems and answers to questions. They expect value. They need to see a path forward. And to connect with them, you need to be talking in terms they clearly understand.

Barry and his new CMO Mika Yamamoto (who came to SAP from Amazon) also understand how most software searches begin these days. Much of the legwork and due diligence is done before a prospect ever engages with a potential solution provider. Today an online search for solutions for SMBs does not lead directly to SAP. And even if you land on SAP’s website, there is no clear path to show you what you need or how SAP can help. So clearly SEO and website redesign is top on Mika’s priority list.

But both Barry and Mika know that it can’t end there. They must have a louder voice than their critics. And remember all those products in SAP’s portfolio that sit on the edges of a solution: talent management, supplier networks, analytics, travel and expense, eCommerce (front office)? SMBs have the same kind of needs as their larger counterparts in all of these areas. But they don’t have the internal expertise to assemble a solution that is not already seamlessly connected.

It is not enough that these edge solutions are available from SAP; they must be both affordable and integrated to SAP Business One and SAP Business ByDesign. These kinds of connections are certainly on the roadmap, but they can’t come too soon.

The Internet has leveled the playing field, allowing SMBs to participate in a growing, global market. But many won’t be able to compete effectively with their existing solutions. This opens up a world of opportunity to SMB solution providers. Look at the success SAP has had in the small to mid-market already. I am not advocating the SMB folks at SAP go off message, but I am advocating they articulate that message in a different voice. That voice needs to be loud and proud. They need to keep the dialogue going with existing customers and keep the development engines churning. While I also believe there is plenty of opportunity for all those with good, solid, technology-enabled solutions, if the new leadership team can deliver on these fronts, they will truly be a force to be reckoned with.

 

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IFS Helps Customers Accelerate Out of The Curve of Digital Transformation

Making Asset Intensive Industries Lighter on their Feet

Asset intensive industries are quite likely to be capital intensive industries. Cost of entry is steep, but once you are an established player, you are tempted to hit cruise control. Living in a world where product lifespans tend to be measured in decades, growth and change come slowly. Or at least that’s the way it used to be. The digital economy has thrown you a curve. And when you are speeding down the business highway, a serious curve causes you to hit the brakes in order to safely negotiate the turn. But if you are riding a performance engine, there is nothing more exhilarating than accelerating out of that curve.

Digital technologies of today, those that serve to connect operations, people and processes through the power of the Internet, fuel that performance engine. Eighty-two percent (82%) of manufacturers participating in the 2016 Mint Jutras Enterprise Solution Study agree and 86% understand that embracing digital technologies is necessary for survival. And yet, we find the vast majority still coasting or riding the brakes when it comes to digital transformation.

IFS, a global enterprise applications company specializing in solutions for asset intensive industries, is setting out to help its customers accelerate out of the curve. Asset intensive businesses are very likely to be sitting on vast amounts of data gathered from products, assets and equipment. Yet few are able to leverage it fully. IFS IoT Business Connector, recently introduced at the IFS World Conference 2016, helps bridge the gap between data collection and analysis and between analysis and action. Through plug and play connectivity with the Microsoft Azure IoT Suite, customers can identify actionable observations that can trigger user-defined, automated or semi-automated actions for predictive maintenance, service management, asset management and manufacturing.

Need a Little Push?

As noted above, the majority of manufacturers today have an appreciation for the significance of digital technologies. In our 2016 Mint Jutras Enterprise Solution Study we asked survey participants how much they agreed with various statements about these new, advanced technologies (Table 1).

Table 1: How strongly do you agree or disagree with the following?

ifs-table1Source: Mint Jutras 2016 Enterprise Solution Study

Only 3% to 6% disagreed at all with any of the statements above and a relatively small percentage was neutral. The majority of manufacturers understand that digital technologies can be truly transformative. This data is consistent with data collected by IFS from its customers on perceptions about the Internet of Things (IoT) in particular. According to IFS, 86% of its installed base realize the importance of IoT, but 40% have no IoT strategy in place.

Mint Jutras actually finds these findings refreshingly candid. When we asked survey respondents how well prepared they were for the digital economy, we found a high level of confidence, with over half (58%) of all respondents indicating they were very well-prepared or at least close. And manufacturers claimed to be even more well prepared (Figure 1).

Figure 1: How well prepared are you for the digital economy?

ifs-fig-1Source: Mint Jutras 2016 Enterprise Solution Study

Yet subsequent questions about digital systems of record, as well as how activities were monitored, managed and performed, proved otherwise. The vast majority were found to still rely, at least partially, on spreadsheets, paper and manual processes. This not only indicates that many, manufacturers in particular, overestimate their level of preparedness and underestimate the impact digital technologies can and should have on the enterprise applications that are used to run the business, as well as the business itself.

Those in asset intensive industries are perhaps even slower to respond. Because their businesses tend to be more capital-intensive, they can’t turn on a dime like those businesses that require less capital for growth and change, thereby making them lighter on their feet.

So what is IFS doing to make them lighter on their feet and more nimble?

Cloud Helps

First of all, we see IFS offering cloud options. Many of these businesses require capital to be invested in assets necessary to run their businesses. By running IFS enterprise resource planning (ERP), field service management (FSM) and enterprise asset management (EAM) solutions in the cloud, they lighten the load of capital required to manage back office and front office processes. Indeed IFS reports that 34% of new business closed is now cloud-based and running on the Microsoft Azure platform.

While preferences and perceptions vary quite significantly across the different regions in which IFS operates, at least within the United States Mint Jutras research finds software as a service (SaaS) is the most preferred option for new deployments. However, we expect the worldwide market will be in transition for the next ten years or more. This is partially because the United States tends to lead the world, and partially because there are simply so many on-premise deployments today. The inertia that keeps manufacturers from actively researching and investigating new technologies is the same inertia that keeps these solutions in place long after their glory years. IFS addresses this by providing multiple deployment options and also by adding other solutions that allow customers to make strides in digital transformation while leaving existing solutions in place.

Cloud-based IFS IoT Business Connector will play an important role, but perhaps equally important is IFS Enterprise Operational Intelligence (EOI), to which it is connected.

IFS IoT Business Connector

According to IFS, “IFS IoT Business Connector turns IoT insights into actions in IFS Applications” (including ERP, FSM and EOI). The goal is to observe the environment and turn perceived challenges into opportunities – a lofty goal. But what is it and how does it do that?

Before we answer that question, it is important to understand the different steps the IFS IoT Business Connector facilitates in order to transform challenges faced into opportunities for growth and improvement.

Data, Devices and Communication

The first step is in collecting the data itself. This might be done through sensors on assets or equipment on the plant floor or in products in the field. This is not especially new in the world of manufacturing and/or field service maintenance. Often data comes through:

  • supervisory control and data acquisition (SCADA) systems used for remote monitoring and control
  • programmable logic controllers (PLCs) for the control of manufacturing processes, or any activity that requires high reliability and process fault diagnosis
  • OLE (object linking and embedding) for Process Control (OPC), which is a series of standards and specifications for industrial communication of real-time plant data between control devices.

The connections might be made through local network protocols or Internet communication. It has never been hard to collect millions or even billions of sensor readings. The IFS IoT Business Connector isn’t about the data collection. It is more about connecting that data to make better use of it, in real-time where appropriate.

Discovery

In order to take full advantage of the data collected, it is necessary to go through a discovery phase. The IFS IoT Discovery Manager (a component of IFS IoT Business Connector) provides additional management and monitoring capabilities when using Microsoft Azure IoT Suite as the discovery platform.  It automates the creation and connection of all IoT Suite components (hubs, streams, buses etc.) in accordance with the IFS IoT Business Connector reference architecture.

However, it is important to note that Microsoft Azure IoT Suite is not a mandated requirement. A customer may use a different solution for discovery, in which case IFS provides an API (application programming interface) to receive observations to be used in subsequent steps of the process.

Operationalizing the Data

IFS IoT Discovery Manager can receive and store thousands, or even hundreds of thousands of “observations.” But how do you interpret what the data is telling you? In order to operationalize the data, you need to be able to take action.

You will want to analyze data streams in real time in order to mine the data to help you discover potential problems and/or opportunities. You will want to apply some sort of decision-making algorithms that work 24/7, even when humans are asleep, sick or busy with other value-add tasks. And finally you will want to visualize the data, presenting it in a way that highlights issues, both good and bad, quickly.

Often the action taken must be recorded or reflected in the enterprise software that is running your business. The IFS IoT Gateway (another component of IFS IoT Business Connector) enables communications between the cloud-based discovery and analytics of IoT data and the on-premise or cloud-based IFS applications.

The failure of a door to open on public transportation can trigger a service call. A pest trap that is full and requires emptying can alert a service engineer in a pest control company. Variations in vibration, temperature or voltage of a piece of equipment can send a warning signal that results in a call to a maintenance company during off hours, preventing a halt to production. These are just three examples of how early adopters of IFS IoT Business Connector are looking to operationalize the data collected, either with the help of human review and augmentation or through (prescriptive) automated actions, or both.

Business Optimization

But the real results will come only when you effectively use the data, discovery and operations to optimize your business. That means monetizing it to develop new sources of revenue. That may require a different way of thinking. Even companies that have exclusively made money from making and moving product in the past, will likely find new revenue streams through services and/or data. IFS likes to call it the “servitization” of business. Whether you replace or supplement your product sales, new revenue opportunities can come from maintenance or consulting services, software (as a service) or even outcomes like hours of successful operation or output.

IFS IoT Controller (the third component of IFS IoT Business Connector) helps you determine what actions to take based on the analysis of observations about your business. It helps you map your operational technology to your business applications like ERP.

Cascading Effect on Business Applications

However, the connection back to ERP (and perhaps other applications like Field Service) might not be so intuitive. New sources of revenue might require new methods of invoicing and revenue recognition. It is one thing to ship and invoice for a physical product, but quite another to create invoices (and recognize revenue) for services and/or subscriptions.

Guessing how new business models will impact invoicing, revenue and cash is just that – a guess. As the digital economy also becomes the subscription economy, companies today need to be able to handle new and different revenue streams, often in conjunction with more traditional ones. And with the upcoming changes to revenue recognition as a result of the merging of accounting standards (ASC and IFRS), this places new functional requirements on ERP.

Changes to existing accounting software are not insignificant. In fact, they can be quite extensive. IFS is still working on these changes, but with an eye towards the 2018 deadline for implementing new rules.

Apart from these (very specific) accounting requirements, the real key to business optimization lies just beyond the scope of the IFS IoT Business Connector. As we mentioned earlier, equally, if not more importantly, is enterprise operational intelligence. Notice the lack of capitalization. In this case we use the phrase as a goal. Hopefully we don’t confuse our audience in saying IFS Enterprise Operational Intelligence or EOI is the means to this end (goal). The level of importance of EOI is further amplified in that it is one of those solutions that helps customers take those transformative first steps without requiring the full-scale replacement of ERP.

IFS Enterprise Operational Intelligence (EOI)

IFS describes EOI as the the key that unlocks intelligent business operations for its customers, “integrating real-time analytics into business processes to empower organizations to make better, faster decisions based on [their] strategic objectives.” Of course analytics are becoming much more mainstream today, but there are two differentiators here – strategy and action.

The first is that last qualifier, linking analytics to strategy. This starts with the first of three core steps: Map, monitor and manage.

  • Map: capturing and visualizing the business model, which of course is subject to change much more frequently than in days gone by, due to the potentially disruptive nature of digital technologies.
  • Monitor: connecting and visualling performance. After mapping the business, you then connect various data sources, including IFS applications, the IoT, other databases and applications and even Excel spreadsheets. These are presented in “cockpits.” These are more than just pretty charts on a dashboard. IFS distinguishes these from your typical (passive) dashboard by allowing you to take action right from the cockpit.
  • Manage: analyzing and improving business operations. IFS has embraced continuous improvement methodologies including PDCA (plan–do–check–act or plan–do–check–adjust) and OODA (the decision cycle of observe-orient-decide-act).

Customers using EOI prefer embedding this type of solution into their IFS enterprise applications rather than purchasing separate business intelligence (BI) and/or business process management (BPM) solutions that either run stand-alone or must be custom-integrated into the solutions that run their businesses. But even more importantly, it allows them to take some incremental steps in digitally transforming their businesses, without the major disruption of a full-scale upgrade or replacement.

Wrap Up

It seems quite appropriate that IFS’s recent marketing efforts have led the company to sponsor a Formula One racing team. Earlier this year IFS announced it had become a Principal Partner of the Sauber F1 Team for the 2016 FIA Formula One Championship. Why is it appropriate? According to Mark Boulton, chief marketing officer of IFS, “This new partnership between IFS and the Sauber F1 Team is based on strong foundations, as both companies are commited to innovation, focused on design, and treasure the power of effective teamwork. It’s these qualities that … are lived by our employees and partners every day as we continue to empower our growing global customer base with IFS’s leading software and solutions.”

Mint Jutras agrees that IFS has built a strong foundation, but more importantly, one which helps customers face those upcoming curves in the road caused by the looming inevitability of digital disruption. Just as you don’t want to be changing the tires (or the engine) while you are speeding down the road, IFS customers won’t want or need to switch out the engine that powers their businesses, nor will they be blindly steering into those turns.

IFS Enterprise Operational Intelligence (EOI) can put them in the cockpit and IFS IoT Business Connector can keep them connected to the data they need to make the decisions required to accelerate out of the curve.

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SYSPRO Delivers on the Practical Side of Digital Technologies

Bringing Technology, People and Processes Together In a Winning Combination

Advanced technologies and automation have been transforming manufacturing and distribution for decades now. Through these advances we have streamlined production and eliminated waste and variability. We make products better and faster. But the digital technologies of today, those that serve to connect operations, people and processes through the power of the Internet, have the potential of fundamentally changing the way we do business. Eighty-two percent (82%) of manufacturers participating in the 2016 Mint Jutras Enterprise Solution Study agree and 86% understand that embracing digital technologies is necessary for survival.

And yet few manufacturers seem to fully grasp the potential digital technologies have to truly change the game. In some ways, this is perfectly understandable. While we are constantly bombarded with examples of how digital technologies can transform our world, most of the examples fall into the category of consumer technology (social, home, shopping, fitness…). The reference to this technology in the context of the enterprise is very often at a level of abstraction that leaves down-to-earth manufacturers either scratching their collective heads or thinking it is way beyond their reach. While we might buy the latest consumer gadget just because we can, manufacturers and distributors make investment decisions with their feet planted firmly on the ground.

This is why SYSPRO is announcing six new capabilities that help manufacturers and distributors take practical advantage of advanced digital technologies. If you are one of these pragmatic individuals, you might be so busy dealing with day-to-day challenges that you let inertia keep you mired in spreadsheets and paper. If so, you’re not alone. But don’t let that stop you. SYSPRO’s new advanced capabilities might be just what you need to justify that leap into digital transformation.

Do Manufacturers and Distributors Care?

As noted above, the majority of manufacturers and distributors today have an appreciation for the significance of digital technologies. In our 2016 Mint Jutras Enterprise Solution Study we asked survey participants how much they agreed with various statements about these new, advanced technologies (Table 1).

Table 1: How strongly do you agree or disagree with the following?

syspro-table-3Source: Mint Jutras 2016 Enterprise Solution Study

Only 3% to 6% disagreed at all with any of the statements above and a relatively small percentage was neutral. The majority of those in manufacturing and distribution companies today understand that digital technologies can not only facilitate the connection between companies, people and processes, but can also automate the connection between different enterprise systems. Whether this is a continuation of your current plans for information technology (IT) and/or automation, or a brand new direction, you need to implement them in order to forge that connection. While 86% agree these technologies are necessary for basic survival, we find evidence they have not been embraced with the level of priority and urgency that will give companies a competitive advantage.

Table 2: To what extent are these activities performed/managed digitally?

syspro-table-2Source: Mint Jutras 2016 Enterprise Solution Study

Table 2 is a sad reminder of the continued prevalence of spreadsheets and paper. Of course some use of spreadsheets is simply the result of familiarity and comfort level. But that doesn’t make it any less troublesome or the data any more real-time.

Come to find out, SYSPRO USA also gathered its own intelligence on this topic through one of its SNAP surveys, sent to its own customers. From this latest poll, SYSPRO concluded, “Companies are confused or have never heard about the newest, high-impact technologies.” This conclusion was based on the question: “Have you read or heard about [insert technology]?” The technologies included were predictive analytics, the Internet of Things (IoT) and bots. In each case, less than half (about 45%) said “Yes.” The remainder said, “No, I don’t know” or, in the case of bots, “Not sure.”

While this actually could help explain this lack of urgency, Mint Jutras interprets the answers a little differently. Individuals may be confused, but more likely these responses indicate they simply are not paying attention and therefore don’t make the connection between problems and challenges faced and digital technologies. For those that follow technology trends closely, the hype over digital technologies is impossible to miss. But your typical manufacturing or distribution professionals are far less likely to follow technology just for the sake of technology. They are far too busy fighting those pesky fires on a day to day basis.

Talking about predictive analytics won’t get their attention. Talking about ways to better forecast demand or predict revenue and profits might. Connecting the dots is not only practical, but also a winning combination.

Discussing the Internet of Things is an intellectual discussion. Suggesting ways to make better use of data captured today on the shop floor (i.e. through the IoT), whether it is for the purpose of increasing throughput or quality or customer service, is not only practical, but also a winning combination.

Bots in general still seem quite futuristic and “pie in the sky” to many, in spite of the fact that all kinds of production and material handling automation is already quite prevalent in many manufacturing and distribution companies. But investment in that kind of automation has traditionally been expressly for the purpose of making and/or moving more product, better and faster, not making the business itself, or the people that run it any more productive or efficient. But think about where supervisors and managers can be the most effective – not sitting at their desks, but out on the floor. The problem in the past arose from the fact that as soon as they leave the comfort of their offices and venture out on the floor, they have been instantly disconnected from enterprise data. Demonstrating how communicating with devices in a hands-free manner can facilitate control and decision-making is not only practical, but also a winning combination.

That’s really what SYSPRO’s new capabilities are all about: practical ways of bringing technology, people and processes together in a winning combination.

SYSPRO’s New Digital Capabilities

So what are these new capabilities? They combine the power of digital technologies with analytics, cloud deployment, big data and some other cool, high-impact technologies like that used for facial recognition. But think beyond faces; think about blemishes on raw ingredients, components or fabricated products. Here’s the rundown:

SYSPRO Azure Cloud Platform

SYSPRO has teamed up with Microsoft to deliver infrastructure as a service (IaaS) now and platform as a service (PaaS) in 2017. SYSPRO’s ERP will be delivered in the Azure cloud in 2016, but will also move beyond this to deliver the SYSPRO Azure Operation Center. This is more than just a data center. It will be staffed with SYSPRO employees that will provide managed services to assist companies looking to move from on-premise to cloud deployments. Early on SYSPRO customers may want to lift and shift from existing on-premise deployment and then move more fully into a SaaS environment in order to take full advantage of software as a service (SaaS). But these SYSPRO employees will also be available for new installations and will be armed with templates and tools for rapid deployment.

Additional services offered will include backups of course, but also system monitoring, incident management, disaster recovery and high availability (think automatic rollover and scaling).

Mint Jutras research finds SaaS deployment is the most preferred option for new deployments, but the market will be in transition for the next ten years or more because there are simply so many on-premise deployments today. The inertia that keeps manufacturers and distributors from actively researching and investigating new technologies is the same inertia that keeps these solutions in place long after their glory years. SYSPRO can help make that transition smoother and more appealing.

SYSPRO Harmony

SYSPRO describes this as a “cloud-based multi-user experience platform that unites social media capabilities, internal/external collaboration, machine learning, cognitive services and data analytics into a single offering for accomplishing targeted or highly complex tasks.” That’s a mouthful. What does it really mean?

To the manufacturing or distribution professional who might think “social” is something employees should do on their own free time, think of it more as an application that lets you keep your finger on the pulse of all the “stuff” going on concerning your production, orders, operations and finances.

Many business leaders in manufacturing and distribution companies downplay the importance of “social” capabilities, equating them to social media. But when we break down the really useful capabilities, and don’t necessarily label them as “social” we get a very different response. Suddenly these concepts become useful or even “must have!”

Table 3: Would these capabilities be useful? Shhh… don’t call them “social”

syspro-table-1Source: Mint Jutras 2016 Enterprise Solution Study

If you aren’t already a fan of “social” the concept of “following” might not seem familiar to you. But chances are, you are already following someone or something either in your professional or personal life. Perhaps you follow the stock price of specific companies, or you watch a stock exchange like NASDAQ or the Nikkei. Or maybe you follow the stats of your favorite sports teams. Maybe you do that through newspapers, online or using an app on your mobile device. Perhaps newsfeeds are delivered to you through email. Regardless of the delivery method, the objective is to stay informed.

What if you could easily apply that same concept to your customers, orders or prospects? Perhaps you need to keep tabs on that big deal you hope to close by the end of the quarter. Wouldn’t it also be helpful to “follow” the trail of activity that has already occurred during the sales cycle? What if you could see the conversations or chatter between sales rep and manager? What documents have been delivered to the prospect? And what if this potential deal is with an existing customer? Wouldn’t you like to be able to scroll through the support activity over the past few months, including the calls, issues, resolutions? Has the customer experienced any quality or delivery issues? Have they been consistently paying their bills on time or is their outstanding balance over 90 days?

And what if all that activity was collected for you and presented in a single stream? The result of monitoring these types of activity streams is fewer surprises and more proactive versus reactive management. And to present this coherently you need a “consumer grade” user interface. This is what SYSPRO Harmony is all about.

SYSPRO Predictive Search

Enterprise search capabilities should be quite self-explanatory, but don’t mistake just any kind of current search capability for a true enterprise search. Of course you can look up a part by its description or a customer number by the customer’s name. ERP solutions have had this kind of search capability since the 1990’s. But can you search across your entire enterprise database for any reference to a particular customer, including contacts, conversations, sales orders, invoices, dunning notices, cash receipts? It’s not entirely clear when “Google” became a verb, but can you “Google” your customer and include the data in your ERP?

SYSPRO’s Predictive Search can be used to search like this within the confines of your ERP. It is predictive just like your consumer device or your productivity tools (think email and messaging) are predictive. You start typing and it anticipates what you are looking for. And best of all, it puts that search into a specific context of a customer or an order or any relevant business object.

SYSPRO BOTS

Sometimes you might think when you are looking for an answer to your question, “Wouldn’t it be nice if I could just ask for something in plain English?” Many smart phones today allow you to do just that, using voice activated commands. You say, “Hey Siri” and an automated bot responds. With SYSPRO Bots, you initiate a similar conversation with, “Hey chatbot.” And guess who and what is at your service? It is actually a self-service agent lurking in the background, one that never needs a coffe break or a day off.

SYSPRO Webviews (User Interface)

SYSPRO has completely rethought dashboards, making them configurable to the extent that a single individual can construct his or her own “single view” of the world. Tailorable by power users (without the assistance of a developer), the traditional “read only” view of the world becomes interactive. For example, an order can be released from a dashboard via a single click – no need to open it up, browse through and then take action.

The Age of Digital Disruption

Eighty-one percent (81%) of manufacturers and distributors agree that embracing digital technologies will give them a competitive advantage. And yet 77% to 91% still rely at least partially on spreadsheets or (even worse) manual efforts to plan and manage activities. This is a far cry from “embracing” digital. So what are they waiting for? What are you waiting for?

The Internet levels the playing field in our global economy, allowing companies of any size to establish a presence and compete on a global basis. That’s the good news. The bad news is that those same windows of opportunity you might encounter, are also open to your competitors. And those competitors come in many different shapes and sizes. So as you take your place on the world stage, be careful what you wish for. The enterprise applications that got you where you are today simply may not be able to take you where you need to go. In order to participate and become a real player, you need to embrace the cloud and take advantage of digital technologies in many different shapes and forms.

The age of digital disruption is upon us. As a result, you better be pretty flexible in terms of where you want – and need – to go. Giving examples like Uber, which disrupted the taxi industry, Airbnb, which disrupted hospitality and Netflix and iTunes, which disrupted entertainment, we asked our 2016 Mint Jutras Enterprise Solution Study participants, “How much risk do you face in your industry being disrupted?” Figure 1 shows the majority (79%) peg the risk as low to medium. But how do you think the taxi industry would have responded shortly before Uber came on the scene? These kinds of game-changing disruptions can occur right out of the blue. Are you ready? Would you survive?

Figure 1: How much risk do you face in your industry being disrupted?

syspro-fig-1Source: Mint Jutras 2016 Enterprise Solution Study

What will be the compelling events that drive this disruption? Will it come from the introduction of new products or from new ways of selling/pricing existing products, or entirely new business models? Or might it come from some combination of sources, making it even more unpredictable?

Are You Listening?

Manufacturers and distributors face difficult challenges, not only in the possibility of disruption, but just in dealing with the increasing complexities of an already complex world. You don’t have time to constantly surf the web and other information sources looking for that one new digital technology that just might change the game (and your life). So in keeping abreast of new, potentially high-impact technologies, select your source carefully. SYSPRO has the practical experience, the vision, the expertise and the platform to deliver. If you are looking to better embrace digital technologies for practical use, to connect enterprise systems directly to people and processes, to gain a competitive advantage… SYSPRO speaks your language.

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What Acumatica 6 Means to Digital Transformation

Productivity, Analytics, Technology

The Internet levels the playing field in our global economy, allowing companies of any size to establish a presence and compete on a global scale. But in order to fully participate in this global, digital economy, most companies must undergo a digital transformation. Digital technologies of today, those that serve to connect operations, people and processes through the power of the Internet, have the potential of fundamentally changing the way we do business. Eighty-four percent (84%) of companies participating in the 2016 Mint Jutras Enterprise Solution Study agree and 88% understand that embracing digital technologies is necessary for survival.

And yet we find evidence most have not embraced “digital” with the level of priority and urgency that will give them a competitive advantage. Almost half still rely on paper and/or manual processes for maintaining their operational and transactional systems of record. And 71% to 82% still rely at least partially on spreadsheets or manual processes to plan and manage key elements of their businesses. Why is that?

Oftentimes it is because the “digital” hype focuses either on consumer technology (social, home, shopping, fitness, etc.) or is discussed at such an advanced (and abstract) level that your typical business leader just can’t figure out how to get from here to there.

Acumatica is looking to change that and its latest release of its cloud ERP, Acumatica 6, provides us with some good examples of how it is going about it.acumatica6

Click here to read the full report.

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Infor Partner Network Continues to Mature

In the End, It’s All About the Customer

Back in February 2015, Mint Jutras observed that The Infor Partner Network (IPN) was coming of age. After four years it had laid a solid foundation with fair contractual terms, rules of engagement and segmentation, marketing programs, training and certification. Entering its 5th year (2015), Infor continued to strengthen those areas, but shifted its focus to help its partners with cloud business enablement, micro-vertical specialization, value engineering and solution portfolio expansion. Those efforts are paying off, as evidenced by more (and larger) deals in the pipeline, more “declared” verticals and value-add extensions to Infor’s CloudSuites. And yes, accelerated movement to the cloud.

All of these efforts are continuing in 2016, but the IPN team is not sitting back and resting on its laurels. Instead it is charging ahead vigorously with new partner enablement programs aimed at attracting more customers through delivering more value. That includes “waking up” existing customers that may be suffering from inertia. And throughout we see increased sensitivity to helping customers and prospects evaluate, select and purchase/subscribe to solutions on their own terms.

Freeing Customers from the Bondage of Legacy Systems

Prior to 2011 (which is when the current management team took the reins) Infor had grown exclusively through acquisition. This resulted in a very broad portfolio of products that includes some very old, legacy solutions. Many of these solutions have retained some very loyal customers, in spite of turmoil and transition throughout the years.

MANMAN is a classic example, originally created and sold by ASK Computer Systems (there are two versions, one vintage 1974 and the other vintage 1984), which was later acquired by Computer Associates and subsequently divested to SSA Global, which was acquired by Infor in 2006. Written in FORTRAN for the HP 3000 and DEC VAX computers, believe it or not, there are still maintenance-paying customers running their businesses on the product. Throughout the years they remained loyal to the product, irrespective of which company owned it.

MANMAN of course is an extreme example, but Infor also owns many other products based on old technology that’s not going anywhere. Throughout these years of acquisition, Infor always promised never to “sunset” a product. Although Infor provides no real innovation to them, it does continue to support these legacy products. On the surface this might seem quite noble, or perhaps simply the right thing to do. But is it? Does Infor (and its predecessors) actually do a disservice to these customers by making it easy to simply stay where they are and continue to be severely limited by this old technology? We understand the fear of disruption of ripping out an existing solution and replacing it, but in reality this fear and these older solutions are holding these customers hostage.

The Software Equivalent of the Stockhom Syndrome?

So are the customers that are refusing to replace these old solutions simply not aware of the capabilities and potential benefits newer solutions can bring? Maybe they simply don’t know how far software has come over the last couple of decades. Or are they suffering from the software equivalent of the Stockholm syndrome? Mint Jutras suspects there is a little of both at play here. Either way, the Infor partner can play a very significant role… or not. The IPN team is trying very hard to make sure it’s the former, not the latter.

The Stockholm syndrome, also called “capture-bonding,” is a phenomenon where those held captive start to identify and sympathize with and defend their captors. Older solutions prevent their users from achieving the interoperability, collaboration, visibility and transparency needed to maintain a competitive edge today, not to mention the inefficiencies that result. Older solutions (and their customers) suffer from lack of features and functions and clumsy user interfaces that are anything but intuitive and “beautiful.” And yet the users of these solutions often complain about them on the one hand, demanding more features and functions, and vigorously defend them on the other.

This phenomenon is not confined exclusively to the Infor customer base. We find evidence of this in some of the questions we place in our Mint Jutras Enterprise Solution Studies. We capture satisfaction, levels of automation and digitization, buying intentions, as well as preferences and perceptions about Software as a Service (SaaS) and cloud. SaaS and cloud provide a perfect example of how older software can take you hostage.

For years now we have been asking a hypothetical question: If you were selecting a solution today, which deployment options would you consider?

We define the different deployment options as follows:

  • Software as a Service (SaaS): Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another party’s) computer.
  • Hosted and managed by your ERP vendor: Software is licensed by you but you pay your ERP vendor to manage and maintain (host) hardware and software.
  • Hosted by an independent 3rd party: Software is licensed by you but you pay another party to manage and maintain (host) hardware and software.
  • Traditional licensed on-premise: You license the software and are responsible for managing and maintaining it on your own premises.
  • Hybrid: Parts are licensed and maintained on premise and parts (e.g. add-on modules) are cloud (SaaS or hosted).

The most popular deployment option is now SaaS and less than 30% of participants will even consider a traditional on-premise solution (Figure 1).

Figure 1: Which deployment options would you consider today?

IPN Figure 1Source: Mint Jutras Enterprise Solution Studies

* This option was added in 2015

Given the preference here, you might expect cloud solutions to dominate over the next few years, right? Wrong.

We went on to capture the percentage of all business software (not just ERP) that is now or will be SaaS over the next 10 years and beyond (Figure 2). While that percentage increases steadily over that time period, there is no hockey stick growth here.

Figure 2: What percentage of all your business software is/will be SaaS?

IPN Figure 2Source: Mint Jutras 2016 Enterprise Solution Study

The reason? There are just so many solutions already installed on-premise. Yet while less than a third would even consider an on-premise solution today, we don’t find an overwhelming percentage with immediate plans to replace those that currently exist (Figure 3). Even though many are underperforming.

Figure 3: Do you intend to purchase a new solution within 2 years?

IPN Figure 3Source: Mint Jutras 2016 Enterprise Solution Study

We offer these general observations in an attempt to understand what is going on in the Infor installed base, where there is an unusually high number of legacy solutions still in place, even after all these years. If these customers are anything like the rest of the ERP population represented by our survey sample, they could use a little push. Here’s where the Infor partners come in.

By now, most customers running these older solutions “get” the fact that the stream of innovation has slowed or, in some cases, completely stopped. So they turn to partners for consulting and customization. Those partners that continue to only sell and provide services around these older products are contributing to the problem. Of course it is good they can continue to support these long-time customers, but they should be educating customers on the advantages and benefits of moving to a newer, technology-enabled next generation solution. With over 90,000 customers, Infor relies heavily on the partners for customer intimacy. And of course, Infor wants to stack the deck in favor of that next generation solution being one its industry-specific CloudSuites.

Before that can happen, the partners also need to be convinced this is the key to continued growth and success in their own businesses. Those that simply ride this customization and consulting business into retirement will not be influencers or participants in the Infor community (or the digital economy) for the long term.

Up until recently many partners chose to stay in their own comfort zones. But that is starting to change and even die-hard Visual, Adage, Baan, PRMS (and other) partners that were inherited from acquisition are starting to come around. Infor is encouraging these partners to take on new products and even “declare a major” around one of its vertical CloudSuites, perhaps with one or more micro-verticals.

Encouragement is backed up with serious investment in helping these partners make the transition. As more partners take advantage of Infor’s investment, this is good news for their customers. It means they are committing to stay in for the long haul, and can provide continuity even as the customers modernize. And perhaps they can provide that added “push” to do so.

Infor CloudSuite Academy

Infor’s CloudSuite Academy is one such investment. It is a series of practical training courses designed to help alliance and channel partners jump-start their Infor CloudSuite businesses. The first session a partner attends concentrates on product. All of Infor’s CloudSuites are (as the name implies) suites of individual products. There is quite a variety of different industry-specific CloudSuites, as well as several “horizontal” CloudSuites that might be sold stand-alone or in conjunction with one of the industry CloudSuites.

At the core of each of the industry-specific CloudSuites is an ERP solution. Yet while there are 15 different industry CloudSuites, they are not powered by 15 different ERP solutions. For example, both CloudSuite Fashion and CloudSuite Food & Beverage are powered by M3. CloudSuite Industrial and CloudSuite Business are powered by Syteline. Lawson S3 powers CloudSuite Financial, CloudSuite Healthcare, CloudSuite Hospitality and CloudSuite Public Sector.

It’s actually a challenge to keep them all sorted out. The good news: Customers don’t have to keep them all straight. Customers just care about their industry and what is included as part of the Suite and perhaps the (optional) add-ons. In some industrial sectors for example, Enterprise Asset Management (EAM) would be part of the suite, while it would be an optional add-on for others.

This may get a little trickier for the partners, particularly those selling into more than one vertical. But in fact each partner is most likely to concentrate on a particular ERP solution and then move out from the product to perhaps include a multiple of the CloudSuites powered by that ERP. From a market perspective it really doesn’t matter what is under the covers, but it certainly does from a support and service perspective. Partners need to know their stuff in terms of both industry, as well as software solution. So the CloudSuite Academy product training extends beyond the core ERP to the other complementary solutions included in the suite.

Other CloudSuite Academy sessions follow with a comprehensive agenda for partner business owners, management and practice managers. They include sessions on the process of marketing, selling, supporting and renewing cloud business, as well as value engineering (benchmarking results). And the most recent sessions have also featured other partners sharing tips for a successful transition to the cloud.

While all the CloudSuites are available as multi-tenant SaaS solutions, they can also be purchased and deployed either as single-tenant SaaS or on-premise, allowing customers to choose their own path on their individual journeys to modernization. The end goal is to better enable the Infor partner to become an effective and knowledgeable guide in that journey.

The Prospect’s Journey

In order for an Infor partner to have a thriving business, it is not enough to just service existing customers. Partners must also be in search of new customers – new to the partner and new to Infor. That means they must also provide the same level of consultative service to prospects. Today this assistance is required even before a prospect becomes a prospect.

Percentages vary depending on the source of the data, but industry observers today agree that most prospects conduct between 60% and 70% of their evaluations before ever reaching out to a potential solution provider. This includes researching aspects of their goals and aspirations, as well as different technologies. And it all starts online. These researchers are first looking to educate themselves. Only after that education is well underway are they open to discovering a potential solution and solution provider. Marketing materials that are thinly disguised sales pitches provide little value in this research.

Which is why Infor is investing so heavily in providing educational materials authored not only by Infor employees (subject matter experts), but also by industry thought leaders. Topics include digital transformation, the factory of the future (think Internet of Things) and omni-channel, as well as more traditional topics such as improving profitability and productivity. Infor is investing in research and reporting on these topics so that you, the prospective or current customer, doesn’t have to.

The benefit to the customers is direct, providing impartial and objective materials for their research. The benefit to the partner is a bit subtler, but equally clear. A well-educated prospect is a better-qualified lead. The partner’s role will be in helping the prospect to understand how Infor solutions can help address those needs. This is where “value engineering” skills are paramount.

Infor is also providing tools and training to assist partners in this phase as well, by helping partners to help customers engineer more value from their solutions. This training introduces a methodology that supports a more strategic way of doing discovery – discovery of the potential for improvement in alignment with the goals of the customer. It includes “discovery templates” for 16 solutions and industries, which assist in benchmarking current performance and quantifying opportunities for improvement.

It also helps the customer when the partner truly understands its business. While it is quite common for solution providers (and their partners) to specialize in a general category like manufacturing or distribution, Infor, with its CloudSuites, goes a step further into industries like food & beverage, aerospace and defense, automotive, industrial machinery, etc.

But Infor then encourages partners to go even a step further. Instead of “just” specializing in an industry like food & beverage, Infor is looking for partners to specialize in micro-verticals like dairy, bakery, grains and cereals or prepared foods. It is through this more focused specialization that partners can showcase unique strengths and capabilities and Infor customers can better achieve the “last mile” of features and functions that so often eludes customers and forces them down a path of customization.

Summary and Key Take-aways

Infor’s Partner Network continues to mature. While it has already come a very long way, we don’t see the IPN team slowing down any time soon. With the strength of Infor’s portfolio of technology and applications, and the support of a dedicated IPN team, partners still have a long runway ahead of them to continue to build speed and momentum.

Yet too many Infor customers have built their own roadblocks along that runway, allowing themselves to be held hostage by their own aging solutions. It now falls to the partners to help those customers overcome the software equivalent of the Stockholm Syndrome. Even while they continue to support those customers running legacy solutions, partners must now make them understand they are indeed bound by these limitations. They must educate them on the potential benefits of newer, more modern and technology-enabled solutions and then lead them out of bondage.

Education and thought leadership is a key part of the process for not only these legacy customers, but also new prospective customers. Recognizing that the way enterprise software is bought and sold has dramatically changed over the past decade, Infor has brought resources to bear to help partners transition to this new world, giving them the skills to bring both customers and prospects alike along on that journey. Will you come along?

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Host Analytics: Where Planning and Performance Management Meet

Today we live in a new world where the Internet levels the playing field for small, mid-size and large enterprises, breaking down barriers to entering new emerging markets. And yet we also face new challenges with rapidly changing commodity prices, fluctuating exchange and interest rates and an accelerating pace of business across a global economy. Whether you are looking to grow and expand or just accelerate profits, you need a plan.

A recent Mint Jutras report posed the question: Is Planning & Performance Management a Marriage Made In Heaven? We concluded that having a comprehensive plan is the first step towards achieving any specific outcome. But to optimize growth and profits, that plan needs to be a living plan, capable of evolving as goals and business conditions change. The key to breathing life into your plan is to actively link it to enterprise performance management. While that might seem intuitively obvious, too often the plan simply goes on the shelf as you go about business as usual. To monitor, manage and predict performance against the plan, you need to marry the right solutions with the right data.

The tools available to help you succeed range from spreadsheets to suites of applications that also might range from simple, basic tools to comprehensive solutions built on modern, enabling technology. Host Analytics provides a comprehensive Enterprise Performance Management (EPM) platform that is simple and affordable enough for the small to mid-size enterprise, but comprehensive and robust enough to support a growing mid-size company as it transforms itself into a large enterprise. Delivering its solution exclusively as Software as a Service (SaaS), Host prides itself in offering an EPM solution you can’t outgrow.

The Right Mix

In our report, Is Planning & Performance Management a Marriage Made In Heaven? we found companies with World Class implementations use a more extensive set of tools to plan, monitor and manage performance (Figure 1). The tools shown in the figure below fall into four general categories: specific applications, reporting, analytics, and, of course, the ubiquitous spreadsheet. Host Analytics provides the first three as part of a comprehensive suite and also helps you control the inevitable use of spreadsheets.

Figure 1: Tools To Monitor, Plan and Predict Corporate Performance

Host Figure 1Source: Mint Jutras 2016 Enterprise Solution Study

Note that Mint defines “World Class” in terms of the performance of the implementation of enterprise software that runs the business. Survey responses are used to measure cost savings and other improvements since implementation, progress made in achieving goals and selected current performance metrics that can apply universally to any business. The top 15% in performance is categorized as “World Class” and the remaining 85% are referred to as “All Others.”

While its solution is quite comprehensive today, being a cloud-only solution allows Host Analytics to offer frequent enhancements and improvements through monthly maintenance releases and quarterly feature releases. Over the past year Host Analytics has delivered about 185 enhancements and announced some very strategic partnerships. Key investment areas include:

  • User Experience
  • Performance
  • Consolidation
  • Data integration
  • Planning
  • Modeling
  • Productivity
  • Analytics
  • Security

“We Speak Finance, not Klingon”

According to Dave Kellogg, Host Analytics’ CEO, “Our first language is finance.” Hence the applications delivered serve the office of finance. He goes on to clarify with, “We speak finance, not Klingon.” That tongue in cheek reference to the language of the alien culture encountered in the journey of the USS Enterprise (of Star Trek fame) is a subtle reference to competitors who speak only in the language of information technology (IT), which will mean little to the finance department.

As an interesting side note, the Klingons appeared in the original Star Trek series as enemies of the Starfleet Federation, but became allies in later generations of the entertainment franchise. We can only assume Mr. Kellogg is referring to Klingon in those later series because Host Analytics is actually quite IT-friendly, building on a modern technology foundation. Certainly IT is not viewed as the enemy, even if the staff does speak a different language.

However, Mr. Kellogg goes on to point out that while those in the office of finance might speak finance, they don’t care exclusively about finance. They care about the performance of all departments and disciplines across the enterprise. This is an important factor, and one covered in depth in our prior report. You need more than a financial plan. You also need an operational plan. This could potentially present a problem to a solution provider focused exclusively on the office of finance, which is why it weighs heavily in determining Host Analytics’ strategic approach to its product portfolio.

Focus, Partner and Unite

Mr. Kellogg described the company’s strategic approach at the recent Host Analytics World 2016. “We have three options to choose from. As a solution provider we could ignore the problem. But that would most likely mean the plan would be retired to a drawer and used only for executive compensation purposes. We could go a mile wide and an inch deep, attempting to build functional performance management applications for all functions. Or we could focus, partner and unite.”

Host Analytics chooses the third option, focusing on building financial apps and partnering with other companies that speak the languages of supply chain, manufacturing, services, marketing, sales, etc. Key to that decision: Host allows partners to build these apps within its Modeling Cloud. When they do, Host can bring the financial plan together with the full operational plan in a single cloud model. In doing so, Host is hoping to eliminate the need for “shadow finance” organizations that tend to spring up across the enterprise when departmental and functional needs aren’t met by a financial (only) plan.

Planning modules within the suite allow you to plan, budget, forecast and report all from one application. Modeling helps you create operational plans that align with financial plans. Multidimensional modeling helps you anticipate outcomes using financial and non-financial drivers. New dimensions can be added for granular “what if?” scenarios.

Analytics Tie It All Together: Think Quick and Qlik

Analytics are important tools in bringing the financial and operational plan together. In our prior report we noted that World Class implementations were 43% to 180% more likely to use various types of analytics.

Host Analytics has had a long-standing relationship with Qlik, who is also its customer. That relationship has now been strengthened and Qlik is embedded within the Host Analytics suite. No more exports from Host to Qlik required. Access and data is available in real time right from Host.

This partnership and integration brings data discovery and visualization tools to the Host Analytics suite. Pre-built dashboards can be easily tailored and configured by business users, adding a level of self-service and independence for the business user without over-reliance on IT. Presentation quality story boards can be created and integrated with Host’s Financial Package Publisher. The (combined) solution becomes browser agnostic (Windows and Mac), and fully supports mobile devices.

Direct integration with Host financial data comes right out of the box, but customers and partners will also be able to integrate other models and third party applications in order to mash up data from a variety of sources. Host has also expanded in-memory support and implemented incremental updates of data cubes and dashboards. Early results have yielded 50% to 90% improvements in performance across various planning and reporting scenarios.

Expanding the Circle: Workforce Planning & Analytics

While Host Analytics’ primary focus is on financials, it is not drawing a circle too tightly around finance. In fact it is expanding its boundaries to include an element of workforce management, including the delivery of workforce planning and analytics. Workforce planning is a logical extension of the financial plan since headcount determination and resulting costs are often included as part of the financial plan. The new analytics will provide improved visibility to headcount, compensation, benefits, open requisitions and other employee detail. But for more specific planning activities, such as incentive compensation planning, Host has chosen a partner that speaks that language. A partnership and integration with Xactly was also announced at Host Analytics World 2016.

How Does Host Analytics Stack Up?

We concluded our prior report with a checklist of sorts to be used in looking for a solution that effectively manages planning and performance management. So how does Host Analytics stack up?

  • Look for planning and performance management tools that complement each other. While Host positions itself as an EPM player, its planning and modeling capabilities are a good fit for many companies, particularly in the small to mid-size range. While the volumes very large enterprises must deal with might have over-taxed its solution in the past, the new in-memory capabilities might just address that.
  • Make sure you can connect your overall financial plan to your operational plan. Host Analytics focuses on the financial plan, but has recently expanded to include workforce planning. Partners are required for other operational plans, but the partnership and integration with Qlik should help bring it all together in the end, provided the necessary operational plans are available. Expect some setup work to be required if bringing together data from applications in third party applications, but those offered by certified Host partners should slide in more easily.
  • Select tools that encourage rather than prohibit collaboration. Host Analytics has embedded social collaboration with in-context discussion threads and activity streams and the ability to annotate a plan. Host has partnered with SocialCast, but also supports integration with other collaboration tools such as Slack and Yammer. In addition, new “reporting” capabilities also support export to Google Sheets and Google Drive and Host will continue to build out this integration for bi-directional updates.
  • Consider a cloud approach. Host Analytics’ solution is delivered entirely and exclusively as Software as a Service (SaaS).
  • Evaluate not only the traditional desktop/laptop user interface but also the overall user experience, including the ability to support the mobile executive, on the device(s) of choice. Ask for a demo to evaluate the overall User Experience. Host is browser agnostic and adapts well to various devices.
  • Look for solutions that play well with others. Host has designed its solution with this in mind. But don’t be afraid to ask for specifics on your own configuration of solutions.
  • Work with your information technology (IT) staff, but seek a level of independence in the planning and performance management process itself. Think of your most complex test case for planning/modeling. For example, do you need driver-based planning? Host Analytics supports it. But does Host support all the methods and/or algorithms you might need? Make sure you ask. With the embedding of Qlik, data discovery and visualization took a giant leap forward, but always ask for a test drive. It’s one thing to watch an expert make the software sing and dance. How does it look and feel and how flexible is it when you are in the driver’s seat?
  • Understand clearly what kind of reporting and analytics are available right out of the box. Same as above: look at the demo but the proof of tailor-ability is in doing. Again, ask for a test drive.
  • How much data can the solutions handle? How fast can they process it? Host now supports SQL Server 14, which provides new in-memory capabilities. In addition, Qlik dashboards preload all data needed into memory. This combined with the ability to incrementally update reporting cubes and dashboards provides good support for high speed, real-time access to data.

Conclusion

Host Analytics’ claim to be a leader in cloud-based enterprise performance management (EPM) is valid. Its platform of financial applications for modeling, planning, consolidation, reporting and analytics effectively marry the planning and performance management activities in companies from small to large. While Host “speaks finance” it has also created a platform on which partners that speak other functional languages (supply chain, sales, marketing, etc.) can add their own value. Together with those partners, along with its special partnership with Qlik, the happy couple expands to become a true blended family.

If your current financial plan sits in a drawer for the majority of the year…

If you can’t align your financial plans with your operational plans…

If you are struggling to make sense out of a collection of spreadsheets…

If you find yourself in fear of mistakes buried in those spreadsheets leading to bad decisions…

You owe it to yourself to look for a new solution that can help you plan, monitor and manage your performance. But of course, only if you want to maximize your opportunity to optimize growth and profits.

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Oracle and NetSuite: Separate Fact from Speculation

Since last week when Oracle announced it had entered into a definitive agreement to acquire NetSuite, I have been amazed at the volume of incorrect information and speculation and opinions thrown around as fact. Just this morning I read an article referencing the projected $9.3 billion transaction as the largest acquisition by Oracle since the Peoplesoft acquisition for $10.4 billion in 2014. Well… the author was only off by about a decade. Oracle announced the proposed merger in 2004 but the deal was not consummated until 2005. The article also stated that Oracle would run NetSuite as an independent company. That too is inaccurate. What Mark Hurd was quoted in the press release as saying was, “Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever. We intend to invest heavily in both products—engineering and distribution.” That is a far cry from saying the company would stay independent.

These are just a couple of examples. Many others are disclosing “the real reasons” for the acquisition as fact, when in fact these are just opinions and personal conclusions. I stayed silent because I never simply regurgitate a press release, and beyond the price of the offer and a few quotes by Oracle co-CEOs, NetSuite founder, CTO and chairman, Evan Goldberg and NetSuite CEO Zach Nelson, everything else is just speculation. NetSuite can’t talk about it and Oracle won’t. But with all the commentary, I feel compelled to remind my readers not to misinterpret opinions as fact.

I consider myself somewhat of a reluctant expert in M&A. During my 40+ year career I have survived 15 of them, sometimes as the acquirer, sometimes as the one acquired. Sometimes I was intimately involved in the details; other times I simply observed from the sidelines. Acquisitions often generate excitement, but also fear, uncertainty and doubt. Sometimes they go smoothly, but more often they are disruptive – to the companies involved, the individuals (employees) and even sometimes the market. In the end, they can be very unpredictable.

There are a few very common motivations for one company acquiring another:

  • Grab market share: Some companies would prefer to acquire new customers in blocks of hundreds or thousands, rather than closing them one by one. This can apply to grabbing more share of your existing market or entering a new one.
  • Fill a product and/or talent gap: It can be far easier to acquire functionality than to develop it yourself. This can make the company more competitive, provide cross-sell and up-sell opportunity, or both. But don’t assume there is any M&A pixie dust that will magically integrate products overnight.
  • Upgrade technology: Similar to filling a product gap, but at the foundational level. It is much easier to build a new product from scratch with newer technology (or acquire one) than to retrofit new technology into old products.
  • Eliminate a competitive threat: If you can’t beat ‘em, buy ‘em.

So… what do I think is the motivation behind this acquisition? I think it is mostly about cloud market share. Of course, this is my opinion, but Larry Ellison’s stated goal of being the first company to reach $10 billion in cloud revenue is a pretty good hint. A secondary factor may very well be the cloud DNA, so to speak, that would come with a company and solution born in the cloud.

And there is no doubt in my mind that is the direction most prospective buyers are pointed in as well. I have been asking the same hypothetical question in my enterprise solution studies for the past 10 years: If you were to select a solution today, which deployment options would you consider? While back in the 2006-2007 time period less than 10% would even consider SaaS ERP (back then I called ERP the last bastion of resistance to SaaS), those preferences have slowly shifted. Between 2011 and 2013 the percentage that would even consider a traditional on-premise deployment dropped off a cliff and today SaaS is the most widely preferred option (Figure 1). And while Oracle was late getting out of the SaaS gate, NetSuite was a pioneer.

Figure 1: Deployment Options That Would be Considered for ERP

SaaS Fig 1Source: Mint Jutras Enterprise Solution Studies

But I also believe the other 3 reasons contribute to the attractiveness of NetSuite to Oracle.

Oracle probably already has all the different pieces that NetSuite brings to the table (and more), but NetSuite brings them all together in a seamlessly integrated, end-to-end solution. When I ask my survey respondents to stack rank 10 different selection criteria for ERP, fit and functionality still takes the top spot, but is followed closely by completeness of solution. This is particularly important for small to midsize businesses that don’t have deep pockets or the IT staff to roll their own solution or even integrate different parts. While Oracle does play in the SMB space, NetSuite plays better, as evidenced by some competitive wins against Oracle (usually in the upper midmarket). And it is built on a solid architecture of advanced technology.

So there is a lot on the plus side of the equation for Oracle. What’s in it for NetSuite? If you can believe Zach Nelson’s enthusiasm (his quote: “NetSuite will benefit from Oracle’s global scale and reach to accelerate the availability of our cloud solutions in more industries and more countries. We are excited to join Oracle and accelerate our pace of innovation.”), NetSuite will be able to expand its solution footprint and its global reach faster. Only time will tell on both aspects and a lot depends on how and how well the acquisition is executed and the companies are integrated.

While it is true that NetSuite never achieved a GAAP profit, that was heavily influenced by stock-based compensation and it did not really suffer from cash flow problems. As a result, it also didn’t suffer from a lack of innovation. And there is more overlap between products than some enthusiasts would lead you to believe.

And what about global scale? NetSuite could benefit from Oracle’s global reach. But integrating sales efforts might prove tricky. So the jury is still out on that front as well.

And then there is customer sentiment. Anecdotally, you can find NetSuite customers that made a conscious decision to avoid doing business with Oracle. When the acquisition actually happens, will that cause NetSuite customers to jump ship rather than become Oracle customers? My guess is no. ERP is just too big an investment (of time and money) to make such an emotional decision. Will there be some attrition over time? Probably. But again, a lot depends on how the acquisition is managed and the net impact on support, prices and contracts. NetSuite has never been the cheapest date, so there is not likely to be any immediate sticker shock.

All told, I think there are a lot more questions than answers right now. In the meantime keep your ear to the ground, but be wary of those who think they already have all the answers.

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Unit4 Lines Up Vertically: Higher Education Setting An Example

Unit4’s specialty has long been people-centric organizations. In fact its tag line today is, “In business for people.” These people-centric organizations not only include service-oriented commercial businesses, but also non-profits, higher education, governments and other public services. While some might call this people centricity a “vertical” focus, in fact Unit4’s Enterprise Resource Planning (ERP) solution (although Unit4 prefers the term SRP for Services Resource Planning) has quite broad appeal. You might even call it more of a horizontal play across the services industries. But that is now changing.

In the past Unit4 built its strategy and its messaging around its VITA architecture’s ability to easily accommodate change. It was indeed a very broad (horizontal?) message targeting businesses living in change (BLINC). BLINC became Unit4’s mantra and in some ways, it is even more relevant today than when the acronym was first crafted. Every type of business and organization not only faces change today, but at an accelerating pace. And while change has always been hard to manage, today it can be dangerously so, especially when that change is disruptive.

After watching Uber disrupt the taxi industry, Netflix and iTunes disrupt entertainment and Airbnb disrupt hospitality, today we live in a world where nobody can predict which segment will be disrupted next. Our 2016 Mint Jutras Enterprise Solution Study asked participants to rate the risk of their industry being disrupted (Figure 1).

Figure 1: How much risk do you face in your industry being disrupted?

Unit4 fig 1Source: Mint Jutras 2016 Enterprise Solution Study

Few feel they are exempt from any risk. This disruption might come from new product introductions (26%), new ways of selling/pricing existing products (29%), entirely new business models (12%) or some combination of the above (33%).

But in spite of the continued relevance of managing change, there comes a time when old messaging has to make way for new. The next new message from Unit4 was its concept of “self-driving ERP”. Self-driving ERP is all about making ERP a productivity driver rather than a productivity killer. It’s about automating low value tasks, so that high value individuals can combine the right skills and knowledge with the right information to produce better outcomes.

This is a great goal and Unit4 is well on its way to delivering on its promises, particularly with its recently announced Digital Assistant and Business World On!. But self-driving ERP is still a rather broad, horizontal message that can be applied to a plethora of industries and circumstances. So in taking a more verticalized strategy, is Unit4 abandoning prior strategies around BLINC and self-driving ERP? Absolutely not. Think of it more as a refinement of strategy.

Service-oriented businesses and people-centric organizations have a lot in common, but there are also some very clear and distinct differences within this general category. As with any type of organization, each is a bit different, but some are more different than the rest. Over the years, in focusing attention on a service orientation (as opposed to product-centric businesses), Unit4 has been building on those similarities. Now it is time to accentuate the unique elements that distinguish higher education from non-profits, professional service organizations from public service providers (including governments), healthcare from real estate, just to name a few. Each of these people-centric organizations has its own unique requirements.

In combination with this, Unit4’s new tag line is “in business for people.” Given its focus on people-centric organizations, at first glance this doesn’t appear to be anything new. But Unit4 is adding a new dimension to the “people” part. Ordinarily ERP is for the people running the business or the organization. Take higher education as an example. Yes Unit4 is in education to help the people running the college or university (the administration). But it is also in education for the students. And it is in education for the alumni. And for the donors and benefactors. And the professors. And for all that, you need more than your typical ERP with a service orientation.

If you are in education for (all of the) people, you need a student management system. This is definitely not your typical core ERP module. It is an application that helps students enroll in the right courses for their degree programs. It’s an application that supports student recruitment and entrance applications. It helps manage tuition payments, student loans and more.

Then again, if you are in education for professors, you also need to help manage research efforts, from the feasibility study and due diligence to proposal development and financial planning to project planning, management and completion. Plus you need to manage assets and facilities on campus and probably the occasional special project. And of course you still need ERP for financials, procurement, HR and payroll.

Unit4 provides all of this, but not all in a single giant monolithic ERP solution. Let’s face it: Most other service-oriented organizations don’t need student management. You don’t want to overburden other types of customers with features and functions they will never use. So Unit4 packages up student management separately. Yes, it is integrated to ERP where appropriate. After all, tuition bills create accounts receivables and payments impact cash management, the income statement and balance sheet.

But Unit4’s student management application can also run stand-alone. This is actually more important than you might think. Providing a full verticalized solution for any industry today is a delicate balancing act for both solution providers and those consuming those solutions. Theoretically you would like a single integrated solution to meet all the needs of your organization. But the urgency of satisfying different needs varies across different functions within the organization, and so does the readiness of different departments. Maybe whatever you are using to manage your back office is “good enough”, at least for now. But you are in desperate need to better manage student services. You don’t want to have to wait until finance is ready before you provide online enrollment to courses.

This is exactly the type of requirement that has blazed the trail towards loosely coupled versus tightly integrated ERP solutions. A tightly integrated solution shares a common set of data, is developed under a common development environment and all moves forward in lock step. That is both good news and bad news for organizations. The good news is obvious: integration is inherent, no redundancy or duplication of data that needs to be synchronized, etc. But the fact that all the different parts of the organization must move forward together often slows the process and builds barriers to consuming new features.

Tightly integrated can be bad news for the solution provider as well. Development efforts across a a wide footprint needs to be tightly orchestrated and packaged together. A feature that is completed in March might not be delivered until December. And in order to satisfy a specific need (like student management), an entire integrated solution must be ripped out and replaced. When an organization is not quite ready for that, the vendor loses the deal either to no decision or because a competitor’s solution can stand alone.

The solution to this dilemma is loosely coupling the different functions so they might move forward separately, without losing the integration. By offering specialty functions like student management as (also) stand-alone solutions, the vendor is able to satisfy the urgent need without disrupting the entire organization. But the best of both worlds is to offer the add-on functionality that can stand alone, but also be fully integrated with a complete back-end ERP – now or later.

This is Unit4’s strategy. Higher Education is leading the way in execution, largely because of the acquisition a year ago of Three Rivers Systems and its Comprehensive Academic Management System (CAMS). Unit4’s current installed base of customers in higher education is a mix of those originally sold by Unit4 (prior to the acquisition) and those brought to the party by Three Rivers. In fact the latter represents the lion’s share of customers in this segment in North America. While all of the original Unit4 customers run its ERP and about 75% also run a version of student management authored by Unit4, all (100%) of the prior Three Rivers customers run student management, but run a mix of ERP solutions, including Unit4’s. In the future, the combined company will lead with student management in this segment, but expect to pull an ERP system along in about 50% of deals. In order for this to work, student management and ERP must be separate, but (optionally and seamlessly) integrated.

Looking to the future, I expect to see Unit4 replicating this strategy in other people-centric segments, starting with Professional Services organizations (watch for functionality to support contingent workforces), followed by not-for-profits (building on strengths in grants and research management) and then governments and public services. But I also see Unit4 diving deeper into what you might call sub or micro-verticals. Community colleges are a big market for Unit4 today, but the recruitment process for a private university like Harvard Law School (also a Unit4 customer) is just one aspect that is entirely different.

In order for Unit4 to successfully execute on this vertical strategy it will need to aggressively leverage all the work it has done previously. The same architectural principles that helped businesses living in change navigate through changing business conditions should help those same customers weather the potential storm of looming disruption. And if Unit4’s self-driving ERP can relieve them of some of the burden of the mundane, they stand a far better chance of deciding on the right (next) destination and how best to get there… either incrementally or all at once.

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Top 10 Quotes from NetSuite’s SuiteWorld 2016

It has been an extraordinarily busy spring conference season. I personally attended 10 events over the past eight weeks and missed a few more because of scheduling conflicts. Of all those I attended, I think NetSuite’s gets the prize for the best sound bites produced in an event. Here are my top 10 favorite quotes from SuiteWorld 2016.

“I love the smell of GL systems in the morning.”

Not. Of course this was said tongue in cheek by Zach Nelson, CEO, and was actually a veiled reference to the context of the next quote. Zach (somewhat proudly) noted that Gartner’s ranking of NetSuite’s Financial Management System (FMS) had progressed from #8 in 2014 to #6 in 2015.

“We didn’t set out to build a Financial Management System (FMS). Our goal was to build a system to run the business.”

Actually NetSuite originally started with three goals: to build an end-to-end system, deliver it only over the cloud, and include ecommerce natively. Of course, in order to deliver an end-to-end solution, it needed a back office accounting solution, but that was just one piece of the puzzle, not the end game. Through the years they were tempted to put servers on premise, especially in the early days before Software as a Service (SaaS) had come into its own. But they resisted. And they made sure even the early solution had a web store.

“We spent $1 billion so you didn’t have to.”

Continuing on the theme of including eCommerce, Zach touted the speed of Suite Commerce, giving some statistics on how it outperforms other leading sites. In a follow-on to Zach’s opening keynote, CTO Evan Goldberg (also one of the original NetSuite founders) noted they had delivered a 33% faster sales order save and 40% faster Suitecommerce advanced page load time. Obviously there is a cost associated with delivering speed and performance, but not a cost that comes directly out of NetSuite customers’ pockets.

“Security bugs? We find ‘em; we fix ‘em. The next morning, all are running with the appropriate patches.”

The reference to security bugs was in the context of a security bug, purportedly reported to and fixed by rival SAP three years ago. Yet some customers had yet to apply the patch and were therefore still vulnerable. My tweet with this quote sparked a bit of a push back from someone coming to SAP’s defense:

This was an SAP API fix that broke ISV integrations if applied, hence SAP made optional. Cloud companies have similar probs

To which I responded: would venture to say in a #SaaS environment, problems don’t linger 3+ years

His response: API fix is a little different, SAP gave customers option because fix could break ISV integrations – it was a useful defect

“Useful defect?” Is there really such a thing? And have we really become so inured to fixes of any kind “breaking” integrations? I hope not.

But the real point here is the value of a multi-tenant SaaS environment. First of all, the customer is relieved of the burden of applying patches. The SaaS vendor pushes them out in (hopefully) a timely manner. And with only a single line of code to maintain, more innovation should come along faster.

The other implied benefit is the value of a platform that allows partners and customers to customize and extend the code without fear of it breaking when fixes and enhancements are delivered.

“Customization is not a dirty word at NetSuite.”

The caveat to this is obviously… as long as you can upgrade. NetSuite customers are all running the same code, yet all are a little different. One of the unique features of NetSuite’s platform (unique for a SaaS-only solution anyway) is the ability to make even complex changes to the data model with no negative impact. This feature is becoming more and more popular among NetSuite’s customers. Within the last year, the ability to add custom fields went from the 5th most used feature to number 1. This actually comes as no surprise to me. My 2016 Enterprise Solution Study asked survey participants what type of customization they required. Fifty-seven percent (57%) selected user-defined fields. Only custom and ad hoc reporting were more widely selected (63% and 62% respectively).

In fact much of the “customization” that is typically required by NetSuite customers does not require you to muck around in code at all. Much can be done through tailoring and configuring, or personalizing screens. But let’s say you want to develop a whole new function that is either very industry-specific or helps you differentiate your individual business. NetSuite does provide development tools for this, including SuiteScript. Per NetSuite: SuiteScript is a JavaScript-based scripting solution for sophisticated coding and debugging within NetSuite that enables developers to build new applications, processes and business rules.”

In addition, a beta version of SuiteCloud Development Framework has recently been released after a multi-year effort. This framework includes all the tools for coding that you know and love, now with team development collaboration, richer code completion, version control, change and dependence management (i.e. discover what code might break if you make this change).

“SuiteScript allows you to do anything your wife wants you to do.”

This quote came from Evan Goldberg, one of the original NetSuite founders. When not performing his duties as NetSuite’s chief technologist, his alter-ego manages his wife’s ecommerce site, which she happens to run on NetSuite SuiteCommerce. The new release of the NetSuite Development Tools has had a profound impact on all developers, including Evan and his alter-ego as both took the stage. While it was quite hard to decipher everything going on (the font was way too small for my eyes, and I haven’t written code in almost 4 decades), it was clear the new code created for Mrs. Goldberg’s web storefront was a lot shorter and faster..

“Our goal is to stay out of your way [to innovate] in your business.”

While first spoken by Evan, this phrase proved to be thematic, popping up in other keynotes and sessions as well. Revamped developer tools were just the beginning. What the NetSuite development team has accomplished with the tools is equally important, if not more so. Among the new features and enhancements were many in the finance area, a new SuiteBilling module, complete with support for new revenue recognition rules for ACS 606 and IFRS 15, and “intelligent” order management. NetSuite places the dual goals of streamlining the development process and customers’ business processes on equal footing.

Disruption caused by today’s digital economy makes digital transformation compelling and the need for agility crucial. Traditionally ERP solutions were more likely to hold you back than to enable transformation. Can NetSuite be an enabler? They can certainly try. And trying is even more important than ever as business complexity increases.

“In the cloud economy everything gets more complex.”

Actually I would say it is the digital economy that makes things more complex. Perhaps in this quote, “the cloud economy” was meant to be synonymous with “the digital economy.” Indeed, it is hard to have a digital economy without the cloud. But I think there is a subtle difference. Cloud is an enabler in helping us participate in the digital economy, both as consumers as well as enterprises. On the one hand, the cloud has made our personal lives simpler. We can order dinner, entertainment, or a taxi ride online. We can shop online and have goods delivered right to our doors. But we can also still shop in a store. Or we can order online and pick up the goods in a store. This is the very definition of “omnichannel.” As we simplify our personal consumer experience, we complicate matters for the enterprise.

“Hybrid business models are the new black.”

Can one system handle all these different ways of conducting business? Certainly traditional ERP solutions made this difficult. They either catered to a retail/cash sale environment or an order-to-pay environment. But today blended environments are becoming more and more common. Many try to accomplish this with different systems. But when these systems don’t talk to each other the customer experience suffers.

But this isn’t the only example of a hybrid business model. We are rapidly entering a subscription-based economy. The software industry led the charge here. Enterprises and consumers alike used to license software and bring it on premise. While this didn’t really mean they “owned” it, as they might own a pair of shoes, in some ways they did own a copy of it. Today, these same software companies are much more likely to sell a subscription to the software.

Now even companies that sell and ship physical products are likely to sell a subscription either along with the product, or instead of it. Consider the water filter company that ships you a device that filters your water for free and then invoices you monthly based on how much water you filter. After a certain period of time, the filter needs to be changed and they charge you when they ship you a new one. Chances are you don’t own the DVR in your home. Your cable provider does. You simply pay for the cable service as a subscription.

More and more companies must invoice based a hybrid business model, invoicing for some combination of product, services or “as a service.”

“If you can sell it, we can bill it (and recognize it.)”

NetSuite’s SuiteBilling module not only supports all these different invoicing methods, but it can also combine them all on a single invoice. While this sounds simple, trust me, there are many solutions out there today that will struggle with supporting all these different billing methods at all, even without trying to combine them on a single order and then a single invoice. I applaud NetSuite for rejecting the option of trying to optimize for the intersection. Instead NetSuite chose to but have to optimize for each and make it easy to combine them.

And because many of these new ways of billing have a signed or at least implied contract, there won’t be too many companies that are not going to be impacted by the convergence of ACS 606 and IFRS 15 (Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606 and the International Accounting Standards Board (IASB) International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers.)

These converged standards for revenue recognition go into effect the beginning of 2018 for public entities, and in 2019 for privately held organizations, bringing very significant changes to financial statements and reporting for any company doing business under customer contracts. While revenue recognition, including expense and revenue amortization and allocation, has never been simple, with these changes, it is about to get harder – at least for a while.

Why? First of all, while you can prepare for the change, you can’t jump the gun. You can’t recognize revenue based on the new rules until those new rules go into effect in 2018. At that point public entities must report under the new guidance and private companies can, but they have an additional year before they are required to do so. So any public entity better be ready to flip the switch, so to speak. But flipping the switch doesn’t only mean recognizing revenue in a new way. For any contract with outstanding, unfulfilled obligations, you also have to go back and restate the revenue for prior periods under the new rules. And for some period of time, you will need to do dual reporting: old and new. In addition, when contracts change, this can potentially have an impact on revenue previously recognized, including reallocation and amortization of revenue and expenses.

NetSuite has been working on this for quite awhile, starting with the support for multiple sets of books, which is how it will accommodate the dual reporting. It is not too early to be planning for this change and using multiple sets of books, you can be looking at how the revenue will be recognized in the future. I have seen some of these before and after revenue reports and the changes are not particularly intuitive. Best to understand what is coming or your revenue predictions for 2018 are going to way out of whack.

Bonus Quotes

While those were my top 10 favorites coming out of SuiteWorld 2016, there were a couple more that you might find interesting:

“Luck should not be a business strategy”

No further explanation required. Real “luck” is a combination of careful planning and hard work.

“The Cloud is the last computing architecture, the last business architecture.”

Sorry Zach, I just can’t agree with this one. I am sure some will immediately think of the famous quote: “Everything that can be invented has been invented.” While some give credit to Charles H. Duell, the Commissioner of US patent office in 1899, others point to a more contemporary source, a book published in 1981 titled “The Book of Facts and Fallacies” by Chris Morgan and David Langford. Either way, whoever said it, was wrong. Maybe Zach is right, but personally whatever the last computing or business architecture will be, I’m pretty sure nobody has even thought of it yet.

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ACS 606 and IFRS 15 Revenue Recognition Rules Are Coming

Are You Prepared? Intacct Has You Covered.

In May 2014, FASB issued Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). At the same time the International Accounting Standards Board (IASB) also issued International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers. In doing so, these two governing bodies largely achieved convergence, with some very minor discrepancies. These converged standards for revenue recognition go into effect the beginning of 2018 for public entities, and in 2019 for privately held organizations, bringing very significant changes to financial statements and reporting for any company doing business under customer contracts. And of course with these changes come new audit challenges.

“The core principle is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”

Source: FASB ASC 606-10-5-3 and 606-10-10-2 through 10-4

As a result of these changes, revenue is no longer recognized on cash receipt, but instead on the delivery of performance obligations. In summary, there are 5 steps:

  1. Identify the contract with the customer
  2. Identify the performance obligations in the contract
  3. Determine the transaction price for the contract
  4. Allocate the transaction price to the performance obligations
  5. Recognize revenue when or as the entity satisfies the performance obligation

Sounds simple enough, right? Not really. Unless your business is dead simple and you operate on a completely cash basis, the process of billing, accounting for and forecasting revenue, in conjunction with expense and revenue amortization and allocation has never been simple. But with these changes, it is about to get harder – at least for a while.

Why? First of all, while you can prepare for the change, you can’t jump the gun. You can’t recognize revenue based on the new rules until those new rules go into effect in 2018. At that point public entities must report under the new guidance and private companies can, but they have an additional year before they are required to do so. So any public entity better be ready to flip the switch, so to speak. But flipping the switch doesn’t only mean recognizing revenue in a new way. For any contract with outstanding, unfulfilled obligations, you also have to go back and restate the revenue for prior periods under the new rules. And for a period of time, you will need to do dual reporting: old and new. In addition, when contracts change, this can potentially have an impact on revenue previously recognized, including reallocation and amortization of revenue and expenses.

If you are managing billing, accounting and/or revenue forecasting with spreadsheets today… good luck. If you are an Intacct customer, luck is on your side. Earlier this week Intacct announced a new Contract and Revenue Management module. Intacct claims it is the first solution to fully automate the new complexities created by ASC 606 and IFRS 15. They are certainly not the only company working on it. In fact QAD (which targets a completely different market: the world of manufacturing) highlighted its efforts in its own event in Chicago recently. But I have to say, Intacct seems to be right out front leading the charge in helping companies deal with what is sure to be a complex and potentially disruptive transition.

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