Growth

NetSuite Announces the End of the Beginning: Cloud is Here

At SuiteWorld 2015 NetSuite CEO Zach Nelson announced The End of the Beginning. “The question of whether cloud was going to happen is answered. Cloud is here.” Mint Jutras agrees. Attitudes towards cloud and Software as a Service (SaaS) have changed dramatically over the past few years, particularly with respect to software that runs your business. As recently as five to ten years ago, Enterprise Resource Planning (ERP) could easily have been called the last bastion of resistance to SaaS. “Cloud” had yet to become part of the business vernacular and “SaaS” was still a relatively new and poorly understood concept. While other complementary solutions were headed in that direction, entrusting the transactional system of record of your business to the cloud requires a higher level of trust than required for other applications, including those which are often referred to as “systems of engagement.”

But now – how times have changed! According to the latest Mint Jutras 2015 Enterprise Solution Study, the majority of businesses have some sort of cloud strategy and the shift to the cloud has definitely begun.

What’s Your Cloud Strategy?

To get a clear picture of how cloud strategies have developed and evolved, we turn to some specific questions in our study.

Figure 1: What Best Describes Your Cloud Strategy?

NS Fig 1Source: Mint Jutras 2015 Enterprise Solution Study

The first of these questions specifically asked about cloud strategies. This is the first year we have asked this question and the results were a little surprising – but only a little. The first surprise was that the majority (84%) has a cloud strategy, even if that strategy is to not go there (8%). In a way this is not particularly surprising given all the hype over cloud these days. This leaves the remaining 16% with no cloud strategy. But notice how we phrased this option: “We don’t have a cloud strategy. Cloud is just one of many factors we consider.” So it doesn’t mean these participants will not consider cloud.

We phrased it that way because for years we have been capturing priorities for selection criteria for ERP. Over the years we have always included some sort of reference to deployment option and it has consistently been ranked close to the bottom of the list of criteria. Since deployment option was not the overriding factor in selecting these solutions, you might also conclude that cloud was not driving strategy. And yet only 16% don’t have a cloud strategy.

So, in a way, survey participants are sending us mixed signals. But at the same time, we saw the availability of “cloud options” rise significantly in importance this year. It moved up from the very bottom of the list of criteria to the middle of the pack.

But, based on the strategies shown in Figure 1, we might conclude that cloud deployments will not dominate immediately. We actually confirmed this conclusion by capturing the percentage of all business software that is currently deployed as SaaS, along with projections over the next two, five and ten years and beyond (Figure 2).

Figure 2: Percentage of Business Software Deployed as SaaS

NS Fig 2Source: Mint Jutras 2015 Enterprise Solution Study

This steady progression is to be expected largely because of the number of existing on-premise (non-cloud) solutions that are currently installed. These will not be ripped out and replaced overnight, particularly when it comes to ERP. Implementing a solution that runs your business is not a small undertaking and most will not abandon their current solutions without a very good reason and an expected return on investment. So in that respect, it is not surprising that the most likely strategy is to leave existing systems in place but surround them with cloud-based solutions. This option leads to a hybrid environment, which delivers some of the benefits of SaaS, but will lead companies down a more circuitous route in their cloud journeys. In these cases, hybrid solutions might simply be viewed as temporary options and not necessarily the desired final destination. It will be interesting to see if interest in these hybrid solutions continues to grow or decline over time. A lot will depend on whether the hybrid solutions deliver the desired (end) results or just whet the appetite for more SaaS.

However, one in five (20%) will seek to replace existing on-premise solutions with cloud-based alternatives and another 8% are taking specific action now to do just that. If we add these two percentages together we see those taking the plunge and replacing systems with complete cloud solutions (slightly) outnumbers those that prefer a more evolutionary, hybrid approach (28% versus 25%). These are the companies most likely to be evaluating NetSuite as a replacement solution, as well as companies just starting out on their ERP journeys.

Those with a defined strategy of moving to the cloud clearly see the potential benefits. These benefits may be cost savings, more innovation, better support of remote workforces and distributed environments, or simply enabling growth.

But Remember, Not All Cloud is SaaS

However, if you recall our previous definitions, while all SaaS is cloud, not all cloud is SaaS. So we asked specifically “Which is most important to you in terms of placing any solution in the cloud?” While 12% admit to not really understanding (Don’t Know), the preference is for SaaS (Figure 3).

Figure 3: Which is most important to you in terms of cloud?

NS Fig 3Source: Mint Jutras 2015 Enterprise Solution Study

SaaS is the top choice, but as long as the solution is web-enabled, even a hosted or on-premise solution might be able to be accessed anytime, from anywhere. However, Mint Jutras would contend that without a SaaS solution, you would leave some of the potential benefits on the table. And as you can see, there is still a significant percentage that prefers a private cloud. This might be because a private cloud is considered more secure (it may or may not be), or because of current or anticipated customization. If the overriding desire is to simply move to the cloud (only), it might be easier to lift and shift existing solutions to a private cloud. Yet in doing so, you relinquish the opportunity to re-implement and remove limitations that might have been imposed by older, less functional and less technology-enabled solutions. And with the current configurability of a good SaaS solution, you would likely be able to eliminate a lot of your invasive customizations and therefore simplify your IT life, particularly as business needs change over time.

As the World Turns

And what business today is not undergoing change? Only those that are stagnating and losing any competitive advantage they might have ever had. In fact today we are living in times of unprecedented change and growth opportunity. New consumer middle classes have sprung up in countries that were hardly industrialized a short decade ago, creating opportunity even for small to medium-sized enterprises (SMEs). Innovation, advanced technology and the Internet have combined to create new business models that were never even considered a decade ago.

Those companies providing these consumer goods and even those offering industrial products that support the manufacturing and distribution of these consumer products see the most opportunity, but are also most subject to new and ever evolving business models. This is a market that NetSuite is very well suited for given its strength in eCommerce and its support for digital transformation.

NetSuite was born in the cloud long before cloud and SaaS came into the limelight. While NetSuite could not have foreseen all the new opportunities and new business models that have been created over the past few years, it did have foresight enough to build a system that could accommodate change. As Zach Nelson likes to say, “We built change into the system. We can’t predict the next business model or where it might go, but we can make the solution adaptable, regardless of the direction.”

Disruption in an Omni-channel Environment

As a result, NetSuite views “disruption” as a good thing. In prospecting, it seeks out these disruptive business models and sees its support of “omni-channels” as a key factor in supporting growth and therefore featured it prominently in its SuiteWorld message..

Omni-channel, alternatively referred to as “multi-channel,” refers to the ability to use different channels simultaneously. Consumers might purchase online, but pick up, or return merchandise at a physical store. Retailers may use retail stores as distribution hubs. As consumers make online purchases, it may be advantageous to ship from a store location where the item may be overstocked, thereby drawing down surplus inventory. Or the choice of ship from location may be made to minimize cost and lead-time. This is definitely an issue for retailers today. But more and more manufacturers and distributors find themselves also selling direct now, so it is just a matter of time before they need to deal with omni-channel supply chain issues as well.

Combining all these options requires flexibility, a level of expertise and feature functionality not typically included in your traditional ERP software suite. NetSuite has differentiated itself by doing all of the above. But more importantly, this requires an unprecedented degree of flexibility and adaptability, well suited for the cloud.

Much of this adaptability comes simply from being a multi-tenant SaaS solution. On the one hand, solution providers that maintain a multi-tenant SaaS solution have a distinct advantage to those offering traditional on-premise or even single-tenant SaaS solutions. But while they must only maintain a single line of code, it must be more configurable and flexible than a traditional solution, or it winds up appealing only to a small sector of companies.

The NetSuite ERP provides many options for configuration without invasive code changes. But it also goes one step further, offering a software development platform that allows partners and customers to add in new features without impacting the single line of code that NetSuite manages for its subscribers. The code developed using this platform can and does survive updates that are made on a quarterly basis.

Shopping for a New Solution?

In order to take full advantage of next generation solutions, enabled by advanced technologies, you may choose to replace your current solutions. The question we have been asking for years now is this: “If you were to select a solution today, which deployment options would you consider?” In the early days of this question, those that would consider SaaS were definitely in the minority and almost everyone would, of course, consider on-premise solutions. That landscape has shifted dramatically. Figure 4 shows the most recent few years.

Figure 4: Deployment Options that would be Considered TodayNS Fig 4

Source: Mint Jutras Enterprise Solution Studies

* Option added in 2015

SaaS is currently the option most likely to be considered (participants are allowed to select as many options as they want). For the past few years “SaaS” and “hosted and managed by your solution vendor” have run neck and neck. In the past, one of the reasons has been because the difference between these two options was often blurry and survey respondents didn’t necessarily understand the difference. This was substantiated by observing that a significant percentage of participants that were running solutions that are SaaS-only (including NetSuite) chose this hosted option instead of, rather than in addition to SaaS.

But we’re now starting to see evidence of a better understanding of the difference between these options. Not only are more participants actually running SaaS solutions, but also the preference for SaaS is starting to pull away from hosted solutions.

Conclusion and Recommendations

Mint Jutras would agree with Zach Nelson. Data from our 2015 Enterprise Solution Study signals that the end of the beginning is indeed here. Early pioneers, and NetSuite in particular, have been providing cloud-based SaaS solutions for more than a decade. NetSuite customers, pioneers in their own right, have led the way and are living testimony to the benefits. The shift to the cloud has begun in earnest.

Most companies today have defined a cloud strategy. If you have not, either because of lack of understanding or lack of attention, take a step back and develop one. Educate yourself on cloud and SaaS, along with the potential benefits; satisfy any lingering concerns you might have and investigate your options.

Not everyone will take the same approach. If you are currently running your business on legacy solutions that limit your connectivity and interoperability, adding some peripheral and complementary cloud solutions might selectively help you connect to trading partners and customers, but ultimately you will need to replace that old software or run the risk of being at a significant competitive disadvantage. Replacing it with a cloud-based ERP, deployed in a secure SaaS model might just be the giant step you need to move into today’s digital world and accelerate your own competitive advantage. If you’re looking for a SaaS ERP solution with some longevity in the market, you would do well to add NetSuite to your short list of vendors.

Tagged , , , , , , , , ,

The Three Dimensions of SAP Business ByDesign Set The Stage for Growth Part 3

This is the 3rd and final post of a 3-Part series on how SAP sets out to enable growth with its cloud ERP solution, SAP Business ByDesign. In Part 1 we talked about SAP Business ByDesign’s architecture and in Part 2 we discussed the user experience and configuration of the solution. If you missed either you can catch up with Part 1 and/or Part 2 or, if you prefer to skip the suspense you can read the full report now.

Organization Structure

SAP Business ByDesign allows growing companies to maintain a single organization structure that defines relationships between all legal entities both from a financial consolidation standpoint as well as an organizational (reporting) point of view. As enterprises mature and grow both of these tend to shift and change.

Legacy solutions often require these different structures to be maintained separately by business unit, embedding the enterprise structure within the general ledger account, making maintenance clumsy and any type of change difficult. Once established, changing the structure of the chart of accounts is next to impossible. In legacy systems personnel reporting structures were likely to be defined in a completely separate solution, if they were recorded at all. These two are often not aligned identically and this causes problems in managing performance while maintaining governance and control.

Take your sales organization for example. Sales is often managed as a global organization, yet salaries are paid and revenue is accrued by country and different countries mean separate legal entities. Sales representatives are part of both a legal entity and a global sales organization that spans multiple entities. Pipeline and quotas may be determined in an entirely different way, by internal, external or global sales and/or perhaps by product lines. Where can you get a full picture of performance from any or all perspectives?

SAP Business ByDesign provides the flexibility to structure all of this once, in a way that makes most sense, not in the way dictated by your ERP.

Embedded Analytics

Often companies look to reporting capabilities within their ERP solutions for managing operational performance. Yet in managing growth, you need to look beyond current operations and analyze the potential of growth opportunities. For this you need analytics. Most ERP implementations today don’t adequately deliver either because ERP has long had the reputation for being easier to get data into than decisions out of.

Standard reporting is never exactly what decision makers want and need and they often tire of waiting for the IT staff to make modifications or deliver new reports. And when making more strategic decisions about growth, they need to ask a lot of questions and the process is very iterative. Yet it is very hard to know where to start and what questions to ask.

Companies are sitting on a mountain of data, making it difficult to process through it very quickly in order to discern which key performance indicators (KPIs) will be most indicative of future performance. After all, they can’t look at every detail. So decision makers settle for aggregate summary data instead of the real detail they need. And they put the request for analytics on the back burner while they fight the operational fires. This is particularly true of mid-size companies struggling with the same kind of decisions as large enterprises, but without the deep pockets and large staffs to address them specifically.

This is why SAP Business ByDesign embeds analytics directly into the business scenarios. The analytics are browser-based and available on mobile devices, complete with alerts that can be sent in real time. SAP makes extensive use of dashboards, which business users can create or personalize for themselves. But SAP didn’t turn its back on business users’ almost universal love for spreadsheets. Offline analysis using Microsoft Excel is still possible.

Good Growth is Profitable Growth

Throughout, whether looking at subsidiaries or the corporate whole, you will need to manage cash and liquidity, payroll services, quality assurance and the financial close. For this you need visibility, delivered by SAP Business ByDesign’s embedded analytics. And you will need a consolidated view across these potentially different businesses within the business. You can’t run a sales and marketing team like a service and repair facility. And you can’t run a field service operation identically to a manufacturing operation. Yet all these have a common thread of master data (customer, products, parts, employees) and need to be consolidated at HQ.

Of course you want to satisfy the individual needs of the different types of businesses within a business, but you also don’t want to be trying to cobble together a unified view from disparate systems. This is the advantage of SAP Business ByDesign’s approach of a single, multi-purpose solution – providing it really can meet the individual needs of the different functions. During your evaluation process, look carefully at those business scenarios delivered with the standard solution. These will provide the base of operation of each facet of your business and those operations may vary and change with growth.

Summary and Key Take-aways

Cloud ERP is indeed a great enabler of growth for mid-size companies, particularly those looking to take bold steps in a rapidly changing business climate. It is clear that SAP has taken the needs of these mid-size companies seriously, particularly those that are fast growing. Keeping in line with its current mantra of “Run Simple,” SAP Business ByDesign can indeed help simplify the growth process through its three-dimensional design philosophy incorporating simplicity, flexibility and extensibility.

For mid-size companies looking to take full advantage of unprecedented growth opportunities, any old ERP is not enough. If you are in search of a cloud-based ERP solution that can help you grow and grow quickly, SAP Business ByDesign definitely deserves consideration.

Tagged , , , , , , , , ,

The Three Dimensions of SAP Business ByDesign Set The Stage for Growth Part 2

This is Part 2 of a 3-Part series on how SAP sets out to enable growth with its cloud ERP solution, SAP Business ByDesign. In Part 1 we talked about SAP Business ByDesign’s architecture. If you missed it you can back up and read it here or, if you prefer to skip the suspense you can read the full report now.

New Generation User Experience

In Cloud ERP: The Great Enabler of Growth we talked about the people challenges associated with growth. New generations of ERP, delivered through the cloud can help alleviate some of these challenges. But Mint Jutras research finds that “ease of use” means more than just a pretty face. Ease of use is first and foremost about efficiency, which not only requires a user interface that is intuitive, but also processes that align with the way business really works – business scenarios that maximize efficiency and minimize time to complete tasks.

Of course the real proof that SAP Business ByDesign delivers on these promises comes with a demonstration, but SAP’s design methodology is conducive to supporting both. When designing a business scenario, SAP designers go on site, observing the way people work and interact. Their designs are based on these observations and then validated, typically in multiple countries (China, India, Germany and the United States) before being incorporated into the product.

The result of this methodology has been an emphasis on the human engineering of the process. Each individual works from a personalized home page, which combines functions from within SAP Business ByDesign with other functions (e.g. email, calendars, maps, etc.) and a powerful enterprise search capability (think of it as a Google-like search throughout your enterprise data). Business processes are made more efficient as tasks are pushed to users. Throughout, there is a theme of simplicity and personalization.

Business Configuration

Personalization within SAP Business ByDesign is achieved through a “Business Configurator” that takes advantage of the pre-defined business scenarios discussed earlier and a rules-based catalog. Together these allow each customer to tailor the solution to specific needs by interacting in business language, not code and without invasive customization. These business scenarios map the workflow of a business process through the various functions of the solution. Selecting a pre-defined scenario automatically selects all the functions necessary during initial implementation. Customers can then selectively fine-tune the settings immediately or as business conditions change.

This type of configuration tool is particularly important as companies expand into new locations, either through organic growth or acquisition.

The combination of the SAP Business ByDesign business configurator, pre-defined business scenarios and a library of business rules enable this type of standardization. Customers need only to supply company-specific data, including assignments of tasks, to support a “push approach” within an organizational structure. By pushing tasks to an individual, processes continue uninterrupted, making the most efficient use of that person’s time. Nothing falls through the cracks.

Tagged , , , , , , ,

Cloud ERP: The Great Enabler of Growth

 Keep it Simple, Manage Risk, Maintain Control

Every company has aspirations to grow. Growth is exciting, yet it can also be challenging, especially for those companies that have already transitioned from small to mid-size. While that transition may not necessarily have been easy, all the low hanging fruit has been picked and the clear and easy paths to growth have already been traveled. Operations are more complicated now and new paths to growth are riskier. It is no longer easy to keep your business simple and the Enterprise Resource Planning (ERP) solution that got you to your current size may not be sufficient to power you through to the next level of growth.

You need to start thinking and acting like a big company long before you have the budget or the staff of a large enterprise. In order to maintain good governance and control, provide a high level of business consistency and efficiency, and speed decisions that minimize risk, you need to arm yourself with the right enterprise applications and technology. A next generation business solution running in the cloud may just be your ticket to scale your business. You need cloud ERP.

What’s Changed?

In some ways, the more things change, the more they stay the same. Growth aspirations aren’t new. Companies have always looked for opportunities to expand and grow either organically or through mergers and acquisition (M&A). And let’s face it; there are only so many different ways your company can grow. You either add new products (or product lines) or sell more of the products you already offer. That may sound simple enough, but most often it is anything but simple. While on the surface little seems to have changed, in reality a lot has changed.

Historically expansion into new territories still kept you within established economies. Today completely new markets are opening up in emerging economies. Not only does this result in increasingly remote and distributed environments, but added risk and new challenges in maintaining governance and control.

Innovation, advanced technology and the Internet have combined to open doors to opportunities all around the world. New consumer middle classes have sprung up in countries that were hardly industrialized a short decade ago, creating unprecedented growth opportunity even for small to medium-sized enterprises (SMEs). But in tapping into these opportunities, SMEs venture into uncharted territory. Not only is the demand for product and services untested, but also there is no rich pool of local talent well versed in business and technology. Mid-size companies in particular will find governance and control even more challenging. At the same time expectations are accelerated: consumers, shareholders and Wall Street all expect everything to happen more quickly.

To capitalize on this opportunity, mid-size companies will need to take some chances and be willing to fail, but fail (or succeed) rapidly in order to move on to the next opportunity. They will need to leverage technology in order to simplify, manage, control and reduce risk, but they will also need to move quickly. They will not have the deep pockets or the time needed to build out infrastructure. They can’t afford to take years to implement solutions to run the business.

Cloud ERP to the rescue. No capital expenditure required; no need to build out a data center, or even put hardware or a huge information technology (IT) staff in country. And Mint Jutras research shows that solutions delivered as software as a service (SaaS) reach their first go-live milestone 14% faster.

The access any time, from anywhere nature of a cloud solution is conducive to supporting distributed users and bringing up remote sites rapidly and easily. While cyber-security is an understandable concern to all today, SaaS solution providers not only deliver added security, but also the peace of mind of business continuity in the event of a disaster, either natural or man-made.

If you are interested in exploring the people challenge, the risk, the value proposition by persona and learning more about maintaining governance and control through the growth process, Click here to read the full report.

 

Tagged , , , , , ,

Plex Systems grows while others stall

I’ve been watching Plex Systems now for about 5 years. It is one of the bigger small ERP solution providers. Not being one of “the big guys” you might not have heard of them. But if you are a manufacturing company in search of an ERP solution, the company is one you might want to get to know – that is if you are either in active search for or are at least willing to consider SaaS ERP. Because that is all they offer. Unlike some of the new entrants into the SaaS ERP market, “as a service” is the only way Plex delivers its solution. But also unlike these new entrants, Plex has been serving up SaaS ERP for more than 10 years.
How and why they began offering a SaaS deployment model for ERP long before it was “hot” is an interesting aside. Plex’s founder didn’t go looking for SaaS. He was an advocate and a pioneer of rapid application development and he was looking for a way to deliver new enhancements at an equally rapid pace. SaaS was his answer. But SaaS presented an obstacle to selling in its early days, particularly in selling ERP. When I was at Aberdeen and first started following the SaaS ERP market I called ERP “the last bastion of resistance” to SaaS and openly questioned whether it was a chicken or egg kind of problem. Were companies unwilling to consider SaaS ERP because there weren’t many options back then or were there not many options because people weren’t willing to consider it?
That’s a moot point today because the barriers are starting to break down and there are more options to choose from. But interestingly enough, one of the reasons software vendors were unwilling to offer SaaS models was because of the subscription-based pricing that now seems so appealing to both software suppliers and consumers of software. In an era when budgets were cut and credit was tight, accounting for the purchase as an operating expense instead of a capital expense was (and still is) very appealing.
However, making a move from selling on-premise solutions to SaaS has some immediate impact on fiscal reporting. When you sell an on-premise license, you get a bunch of money up front. The on-going maintenance is of course a recurring revenue stream, but that nice chunk up front was pretty hard to give up and if the software supplier gave up too much of that too quickly, revenues would also take a hit. If you were a public company that could very well be a hit you couldn’t afford to take.
You might think that Plex System dodged that bullet by offering a SaaS solution throughout the last 10 years. But in reality, the company didn’t always price their solution as SaaS. In the early days, prospects bought Plex in spite of its being SaaS, not because of it. In order to counter this and remove one obstacle, Plex priced it just like an on-premise solution. In fact it was quite a creative answer to a problem, but it did leave money on the table. That revenue leakage was something they knew they would eventually have to plug up. And they did. Several years ago they made the switch to more traditional (for SaaS) subscription-based pricing but they were smart enough to do it while they were (and are) still a private company and didn’t have Wall Street breathing down their necks.
They not only survived and thrived through that transition, but they are now very actively growing. During a year when most ERP solution providers struggled with a downturn during the first half of the year (some started to see growth in the second half), Plex saw substantial growth. They not only added 54 new employees (they now have 175 so the percentage growth is even more impressive) but they grew revenues by 27% and software sales subscriptions by 26%.
How did they do that? While they may still be a relatively small ERP solution provider, their solution is anything BUT small. I lost count of the number of modules they offered long ago – suffice to say it is a lot and quite complete. It also dives deeper into the shop floor than the typical ERP solution and they have particular strength in automotive. Not surprising because in their early days much of their selling was done locally in and around Auburn Hills, Michigan.  But today their strength pushes well beyond automotive to food processing, medical devices, aerospace/defense, industrial and consumer products. Part of the reason for the impressive footprint is the approach to rapid application development that drove them to SaaS in the first place.
The other significant factor is their very engaged installed base of customers. Enhancement of the product is driven entirely by customer and prospect requests and innovation is delivered every day. So in one way, everything is customized. But in another way, nothing is customized, because all enhancements are added to the product in such a way that the customer opts in to turning them on.
Mark Symonds, CEO of Plex Systems sees this growth continuing through 2011, with specific opportunity arising within the food-and-beverage industry because of the new federal food safety laws. Compliance and traceability has been part of the Plex DNA from the beginning and should position the company well in this new era of requirements and regulations.
Tagged , , , , ,