manufacturing

Einstein Inspires SYSPRO USA Brain Trust

Boosting US Manufacturing In 4-Part Partner Program

In December 2013 SYSPRO USA launched a program targeting US manufacturers. The four-part program has ambitious goals, designed to be facilitated by the company’s extensive partner channel.  While SYSPRO has been committed to supporting the global small and mid-sized manufacturing and distribution community for over 30 years as a provider of Enterprise Resource Planning (ERP), this program reaches far beyond the usual objectives of an enterprise software company. Labeled as a new Brain Boost program, it consists of four “trust” initiatives focused on:

  • Product trust
  • Deployment trust
  • Micro-vertical trust and
  • Economic or community trust

While the first three components are fairly straightforward and less unique-sounding competitively, the fourth “trust” initiative extends beyond the aspirations and scope of most ERP providers. Yet SYSPRO has always emphasized its customer, hence community, focus. Unlike many other enterprise software vendors focused exclusively on increasing market share and share of the customers’ wallet, SYSPRO has always genuinely cared about making its customers both happy and successful.

Now it is stepping beyond the customer, to the manufacturing community at large. This economic trust initiative is all about creating an environment that protects intellectual property, supports job creation and keeps US-based manufacturing companies strong and profitable. Can an ERP company really have this kind of impact? Certainly not all by itself. That’s why it needs a Brain Trust.

Inspired by Einstein

SYSPRO is clearly inspired by the genius of Einstein. Over the years Einstein has influenced many of its initiatives, starting with its “Simply SMARTER” strategy (an acronym: Strategy, Methodology, Accountability, Resources, Technology, Education, Customer Rewards). SYSPRO also built out its own theory of ERP relativity: S=MC2, where M stands for material, and C2 is cost and cash management. S, of course, stands for SYSPRO. Then came the SYSPRO Quantum Architecture, followed by a “wired” Einstein on Espresso, fueling the “always on, on-the-go” mobile (wireless) customer.

The latest inspiration is based on what made the brilliant physicist so special: his brain. Einstein’s brain has long been the subject of speculation and research. At one time, many believed his genius to be a result of his brain being larger than normal, stemming from the observation that he was born with an unusually large head.

However, you might say the child soon grew into his head, which ultimately, for all outward appearances seemed a normal shape and size.  Although clearly “special” in terms of its capabilities, actual measurements proved it to actually be a bit smaller than average. For the role Einstein would play in life, it was clearly built better, not bigger. This is one of the reasons SYSPRO loves to draw these analogies. While not the biggest vendor in the ERP market, SYSPRO fancies itself and its products as “better, not bigger” for the markets it serves.

Yet not being the biggest also means it must build trust in its product and its ability to deploy easily and reliably in the markets it hopes to serve.

Product Trust

SYSPRO is one of only a few remaining ERP vendors that offers a single product suite and therefore it enjoys the luxury of a singular, focused development effort. That focus happens to be on manufacturing and distribution. In addition, SYSPRO, as a privately held company can also afford the luxury of concentrating on satisfying the customer and reseller community, as opposed to the investment community (Wall Street).

This “Product Trust” is based on SYSPRO’s latest Release 7, which represents a time-phased delivery against requirements collected from over 750 small to mid-size manufacturing companies. The SYSPRO ERP product is almost exclusively sold through channel partners. This collection process combines the power of the SYSPRO channel with the relationship SYSPRO enjoys with its customers directly through periodic “SNAP Surveys.” SNAP, short for SYSPRO Needs Answers Please, is the mechanism SYSPRO used to bring features such as enhanced user interfaces, with active tiles and touch capabilities, custom configurability and mobile access to its latest release (Release 7).

The Product Trust is formed through collaboration between its trusted partners (users and resellers) and its own development staff. Not content to rest on its laurels, SYSPRO is constantly strengthening its capabilities both from a functional and technological perspective. Yet the combination of standards-based technology from Microsoft (standards like .NET framework, XML, HTML5) and multi-tier architectures keep it affordable and suitable for a small-scale environment.

But continuous change, even when linked to continuous improvement, can be a challenge for small to mid-size manufacturers. Even though technological advances allow software vendors to bring more innovation to the market, updates and upgrades can be costly and disruptive. While ERP can generate cost savings and other improvements, many manufacturers wind up squandering those savings on the care and feeding of the systems designed to save them money.

Which is exactly why SYSPRO is delivering the innovation of Release 7 in a new way. You might call it “drip feeding” innovation, allowing customers to accept enhancements in smaller, more digestible chunks. This is just one of the ways SYSPRO is helping manufacturers become stronger and more profitable. By making product features and technology easier to consume, manufacturers are able to divert budget from the typical maintenance-related IT spend, freeing up cash and working capital to innovate their businesses. Features, functions and technology that are easier to consume can be deployed faster and more efficiently.

Deployment Trust

While today many narrowly associate “deployment options” with Software as a Service (SaaS), in this case Deployment Trust is more about rapid implementation than it is about cloud versus on-premise deployments. Yes, SYSPRO can be deployed either in a traditional on-premise environment or in the cloud, although cloud implementations are more akin to hosted models than a multi-tenant SaaS solution.

The SYSPRO Deployment Trust has been formed to battle against the bad rap ERP has gotten in general based on potentially long and difficult implementations. Failed implementations are frequently blamed on the software itself and yet often the software attributed to a failed implementation is the same software powering one that is wildly successful. Success is often less about the software, and more about the disciplines and business processes the applications are intended to model.

SYSPRO has long had its own implementation methodology suitable to small to mid-size businesses (SMBs), but it is now investing in new industry-specific business process workflows, account structures, executive dashboards with pre-defined key performance indicators (KPIs), industry roles and reporting. It recognizes the typical SMB faces many of the same pressures as its larger counterparts, but can’t afford to start from scratch and re-invent wheels. So it builds best-practices into the data and process models.

SYSPRO has worked diligently to make sure these templates, structures and process flows are not static. Not only must they be adaptable and configurable to each individual business, but also reflective of the reality that business change is inevitable. Therefore the software must continue to be agile and flexible, able to evolve and change.

Micro-vertical Trust: The Food Industry

The investment in micro-verticals is a natural by-product of the Deployment Trust initiative, since much of the content provided is indeed industry-specific. The first micro-vertical selected for this Brain Trust is the food industry, which provides a unique opportunity for SYSPRO USA. It is an industry that is not only recession-proof, but also faces a very specific and pressing set of operational challenges. The food industry across the world faces rising commodity prices, but in the US, it also faces increased pressure from large retailers like Walmart, added complexities of trade promotions and deductions and intense scrutiny from the Food and Drug Administration (FDA).

But perhaps top of mind has been the growing concern over food safety. Over the past six years the US has seen some of the biggest food recalls in history, impacting both fresh produce like lettuce, spinach and peanuts, as well as meats (beef, ground turkey, chicken and other poultry) and all sorts of processed foods from cookie dough to frozen dinners and salad dressings.

A result of these growing concerns has been the passing of the Food Safety Modernization Act (FSMA) in 2011. The goal of the new law is to better safeguard the US food supply and therefore compliance is mandatory, even for small to mid-size companies in the food industry. The law will radically change how many do business. The FSMA gives new legislative power to the FDA, including the ability to mandate a recall and close plants where there is a “reasonable probability” of potential threat. But perhaps most game changing of all, managers can be held personally liable and face the threat of criminal prosecution. The FSMA will be to manufacturing executives what Sarbanes-Oxley was to the accountants. So achieving regulatory compliance and food safety has become an absolute necessity.

Like other manufacturing segments, the food industry must deal with growing supply chain complexities, the need to improve forecasting, reduce inventory and improve customer satisfaction. In addition, it needs to comply with food safety regulations, including complete forward and backward traceability, manage recipes and formulas, replacement ingredients, co-products and by-products. And yet, throughout, it must not lose sight of efficiency, accuracy and profitability, often with razor-thin margins.

Economic Trust

So can SYSPRO build economic trust by addressing the stringent requirements of the food industry and perhaps others? Can a software company help…

  • Protect intellectual property?
  • Modernize processes that lead to profitability?
  • Free up resources wasted now on IT support that adds little value?
  • Stimulate US manufacturing innovation?
  • Facilitate creation of the best kind of US jobs, those based on creating real opportunity for business growth?

This is indeed a tall order. And perhaps software alone can’t achieve these goals. But one thing is certain. Manufacturers cannot compete and contribute to strengthening the US economy today without adequate supporting technology.  ERP has been both a boon and sometimes a burden to bottom lines. Many manufacturers have seen cost savings gained through ERP implementation eaten away by the cost and disruption of upgrades, or even worse, have left money on the table by not taking full advantage of software innovation. Today’s US manufacturing/distribution community could benefit enormously from having a partner focused on reasonably priced ERP technology, innovation that is easy to consume and operational coaching. That is why SYSPRO is committed to turning its channel partners into these dedicated resources.

As a result, SYSPRO is revisiting its Einstein Strategy and turning its Simply SMARTER acronym into the basis for a new SMARTER channel program:

Strategy: While SYSPRO has always sold almost exclusively through the channel, there is a renewed focus on recruiting, not just “life style” partners, but those not only interested in growing a significant business, but also with the knowledge and business acumen to truly add value to manufacturing operations.

Methodology: new and revised implementation methodologies for rapid deployment. This approach also extends back through the selling process, with heightened collaboration and standardized sales methodology, including special bundles and pricing.

Accountability: with program deployment incentives and the measurement of customer lifetime value.

Resources: pre- and post-sale assistance with the addition of ecosystem experts, particularly in food and safety and even assistance in factory layout.

Technology: continuous feature, function and technology innovation that is easily consumed.

Education: in strategy, marketing, sales, implementation, support and application development.

Rewards: customized partner-tailored goals, KPI measurement and management.

Thus far, SYSPRO has been able to bring 37 new partners to close. By concentrating on coaching these partners to success, SYSPRO hopes the channel will be able to “pay it forward’ and in turn coach their customers to the same level of achievement, creating an environment of growth and profits.

Summary

Most ERP software companies would be happy just to sustain or grow their own revenues. While this is important to SYSPRO USA, its executives have a long history of participating in civic, government and economic development. Being focused exclusively on manufacturing and distribution segments, this community holds a special place in SYSPRO USA’s executives’ hearts and minds, as does the desire for a stronger US manufacturing economy. Focus on product innovation and ease of deployment are important elements, particularly in support of the food industry, which feeds the country and helps fuel its growth. By also contributing executive services and educational programs, along with program incentives, SYSPRO USA stands squarely behind and in support of economic growth and job creation. A worthy goal of a Brain Trust? Yes. Genius? Perhaps not. Simply smarter? Definitely.

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xTuple: A Small Company with a Big Reach

Last week I had the opportunity to attend xTuple’s inaugural user conference. This is a small company that you might not have heard of. Or you might know it by its original name OpenMFG. Founded in 2001, it has always lived at the intersection of Enterprise Resource Planning (ERP) and open source software.  The premise behind open source is that it, or at least some version of it, is free. The source code is openly shared and the community is encouraged to contribute to it. Offering a free version necessarily affects the monetization of the software, and this can have a big impact in a space like ERP. There are many players, some very substantial, with deep pockets to fund R&D efforts. Also, ERP isn’t just a “nice-to-have.” It runs your business and therefore must evolve as you evolve. So the real question is this: Can an open source ERP vendor effectively compete in this competitive environment?

There is no single, universal answer to this question. The answer depends largely on two elements: the underlying technology and the community that embraces the solution. The xTuple community has strengthened over the past couple of years thanks to some very specific customer engagement initiatives that maximize the network effect realized by having ever-growing numbers of qualified ERP professionals getting involved with the software. And the latest xTuple version 4 (aka xTuple Mobile Web) puts the company in a much better position to compete. So in terms of competing, xTuple is in a very promising position.

Open Source: An Introduction to xTuple

If you are not familiar with xTuple, then you might also not be aware of the premise behind open source. The first and often most important concept is that it is free. Wikipedia actually has a succinct description: “Free and open-source software (FOSS) is software that can be classified as both free software and open source software.[1][2] That is, anyone is freely licensed to use, copy, study, and change the software in any way, and the source code is openly shared so that people are encouraged to voluntarily improve the design of the software.[3] This is in contrast to proprietary software, where the software is under restrictive copyright and the source code is hidden from the users, so that the rights holders (the software publishers) can sell binary executables.”

So if the software is free, how does a company (like xTuple) that offers open source software stay in business? How do they make money? Simple: not everything is free.

First of all, users pay for training and implementation services. They can also pay for a premium level of support that goes far beyond the ability to download bug fixes.

xTuple provides a version (the product is called PostBooks), which is completely free for download, but there are also ways to extend the solution that require purchase. Many companies running the free version outgrew something like Peachtree accounting software or QuickBooks, hence the name PostBooks. But there is also a commercial version of PostBooks that is available with an annual or perpetual license. And there are other different “editions” – Standard, Manufacturing and Enterprise – with increasing levels of additional functionality for larger and/or more complex companies. And xTuple announced a new version for wholesale distribution at last week’s event. In addition, there are some “add-on’s” like xT Connect (Email, EDI), xT OpenRPT Report Writer and xT Web Portal (B2B, B2C, Support) which require a license fee.

Open Source ERP: Not Exactly a Crowded Field

While there are numerous open source products on the market today, open source tools and technology (think Apache, Ruby, Java, PostgreSQL, MySQL) far outnumber open source applications. Open source ERP solutions are quite rare.  Indeed xTuple’s tag line reads “The World’s #1 Open Source ERP.”

While that is xTuple’s self-assessment, it is hard to argue against it. I don’t know of any other open source ERP that has achieved any kind of global brand awareness and survived and thrived on its own. Compiere is probably second to xTuple in terms of brand awareness, but it hasn’t been all that visible since Aptean acquired it in 2010. Yes, there are others. I even found a list of about 20 on Wikipedia, most of which I had never heard of. Compare that to the list of over 110 proprietary ERP solutions at the same url, although I would argue that some of those listed aren’t really complete ERP solutions. But then, perhaps some of those other open source solutions are really something less than full ERP.

Perhaps the reason I have not heard of most of those solutions is because my focus is on enterprise applications (with ERP at the core). Open source is simply the approach to development and delivery. If the order of business for a solution provider is open source first and ERP second, it would be easy for me to miss. xTuple reverses the order, focusing on delivering an out-of-the-box product, as opposed to what it calls more ‘toolkit’ efforts of other open source projects.  It is quite vocal in emphasizing that it is an ERP company first, and that open source is the ‘how,’ rather than the ‘what,’ of its solution.

Potential buyers should definitely look closely at both the depth and breadth of any of these offerings. Mint Jutras defines ERP as an integrated suite of modules that provides the full transactional system of record of your business. So make sure you are looking at a full solution, not just an accounting application or perhaps accounting plus human capital management. Consider how much more than that you might need. This will depend a lot on the kind of business you run. While we define ERP as the system of record, be aware that most real ERP solutions today do much more.

Competing on a Larger Playing Field

For xTuple, this means it isn’t competing against other open source ERP solutions as much as it is competing against ERP solutions in general. Open source ERP is not a particularly hot topic in ERP circles. So xTuple won’t win simply because it is open source, unless perhaps because open source makes it more affordable, a factor which is particularly important for small companies that have outgrown solutions like QuickBooks. While that is a target market for xTuple, it isn’t its only market. As CEO Ned Lilly puts it, “Our customers range from two guys in a garage to U-Haul.” That means it must compete on the same playing field as all ERP contenders, where selection criteria are quite broad.

While fit and functionality topped the list in terms of ERP selection criteria for years, Mint Jutras research finds “ease of use” has pushed features and functions into a very close second position.

Table 1: Relative Importance of Selection Criteria in Choosing ERP

Selection table

Source: Mint Jutras 2013 ERP Solution Study

Table 1 is the aggregate prioritization of all 2013 ERP Solution Study participants who rated the various selection criteria on a scale of 0 (not a consideration) to 4 (must have/most important).

Influenced largely by the consumerization of IT, users of enterprise applications today demand the same kind of intuitive navigation and visually appealing screens they have become accustomed to in consumer applications. But ease of use means more in terms of ERP. First and foremost is the element of efficiency: minimizing time to complete tasks. This means streamlining business processes as well as supporting a “natural” way of working.

Other selection criteria range from cost issues to support to ability to tailor the software, and many other factors. Selecting an ERP solution has never been a simple process.

But fit and functionality is still a close second, and the footprint of ERP solutions continues to grow, which puts more pressure on xTuple to innovate.  As noted above, xTuple’s ability to keep up with the big guys is dependent on the underlying technology and the community.

The xTuple Community: Crowd-Sourcing Innovation

One premise of sharing source code is to encourage the community to improve the code. In fact one of xTuple’s senior developers went so far as to open his presentation at the user conference by saying, “Open source ERP is all about customization and extension.” But leaving development entirely in the hands of the end users and partners is risky business. Yet xTuple doesn’t have the deep pockets of some of the ERP industry giants, so to better direct its own development efforts, it turned to crowd-sourcing.

Last August it introduced a program called xTuple Feature Mob 2. This is the second of these community initiatives. The first was a couple years back resulting in the integration of email into the xTuple Connect product. That was Feature Mob 1.  Feature Mob 2 is a social platform that enables micro-sponsorships of features, with levels of investment ranging from $100 (T shirt included) to $10,000, which comes with a 5-user perpetual license to xTuple Enterprise.

All feedback from Feature Mob 2 was entered into the xTuple CRM Issue Tracker, rationalized with existing feature requests and the top 30 most-requested xTuple features were identified. CEO Ned Lilly says, “This is a lot of work – a lot of development, testing, documentation. But, with [our community’s] help, we can incorporate all 30 of these features into the next three major releases of the xTuple software. And we only need a little under 250 individual sponsors to make it happen.

“So, there are some big, exciting features in here, including:

  • Integrating xTuple with leading open source business intelligence solutions, payroll solutions;
  • Expanded localization of VAT reporting and electronic payments, both issues that are very much top-of-mind for our users in Europe;
  • Importing and reconciling electronic banking transactions;
  • Better support for credit card purchasing, and
  • A supercharged search engine, which we’re calling a Regular Expression Wizard, to unlock the power of xTuple for maybe the less technical among us.”

As a result, xTuple’s development efforts are both directed and funded, allowing the company to compete at a more aggressive level.

Feature Mobs (1 and 2) aren’t the only way xTuple engages with the community however. In 2008 it released its first collection of “greatest hits” followed by volume 2 in 2013. All the features highlighted in the Greatest Hits Volume 1 and Greatest Hits Volume 2 were from individual customers – some of whom paid xTuple or a partner to develop the feature, others of whom contributed the code back directly. The open source concept encourages users (who may or may not be customers; thousands run the free version) and partners to develop their own extensions and customizations, often contributing back to the community.

A good example of a partner-developed extension that was featured at the conference is ShipIt for xTuple, a software extension that streamlines the process of delivering products with leading commercial shipping companies (UPS, FedEx and USPS (Stamps.com) in the United States.) ShipIt was developed by AKA Consulting, an xTuple partner. The extension, along with others, can be found on xChange, the xTuple Marketplace.

All the code that is contributed for embedding is reviewed by xTuple and may be incorporated into the core. The result is a product that continues to grow and evolve at a much faster pace than would be possible with the relatively small number of xTuple employees.

But the pace of innovation is also dependent on the architecture of the solution and the latest version of the product introduced some technology that should make a big impact on xTuple’s future.

xTuple’s Next Generation: Mobile Web

John Rogelstad, xTuple’s VP of Software Development, opened his “xTuple Updates” session with a question asking the audience to guess what he was most excited about in the latest version, xTuple 4 (also referred to as xTuple Mobile Web). The answer: object oriented programming. A clue as to why he finds this so exciting lies in the full title of the session: Mobile Web and the Technology Stack that Legacy Vendors Only Dream About.

As you might have noticed, I have been writing a lot lately about what I call “Next Generation ERP.” In this four part series I acknowledge that the footprint of ERP has been rapidly expanding, but it is not the features and functions of ERP that make it next generation, but the underlying architecture. It is the architecture that supports new and better ways of engaging with ERP. It is the architecture that allows you to configure and tailor ERP without invasive customization. It is the architecture that allows vendors to deliver more innovation, faster and to make it easier to integrate with other applications and also other businesses.

Object oriented programming is a big factor in the architecture that supports next generation ERP.  As John Rogelstad explained to his audience, “We needed to switch to object oriented programming at the data level – without it could we simply not deliver certain things. Had we switched earlier, the result would have been slow and clunky. But recent advances (including HTML5), had finally reached a point where we could build a web client that can compete with the [existing] desktop client. We wanted a unified experience whether using web, desktop or device. We also didn’t want to maintain different code for different devices.”

Although this latest version is called the “Mobile Web” it is not a mobile-only solution. It is a 100% JavaScript, HTML5-based application, which works on any modern tablet, smartphone or desktop Web browser. Version 4.0 implements the entire xTuple Customer Relationship Management (CRM) module in the mobile framework, including contacts, opportunities and pipeline management, to-do lists, projects and incidents/trouble tickets. Version 4.1 adds the Sales module, and integrates with open source business intelligence tools (Pentaho Open BI Suite). Over the course of the 4.x product releases, xTuple will make the entirety of its CRM and ERP solutions available in the Mobile Web client.

Summary

This new architecture is a huge step forward for xTuple. However it is actually a series of smaller steps on the journey to the final frontier of next generation ERP. But as a result of this architecture, a strong partner and user community, and a small, dedicated staff, xTuple is able to continue on its mission to “help companies of all sizes successfully implement powerful and easy-to-use open source ERP software to grow their business profitably.” While xTuple may not be going where no one has gone before, it is certainly leading the way into the final frontier of open source ERP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About the author:  Cindy Jutras is a widely recognized expert in analyzing the impact of enterprise applications on business performance. Utilizing over 35 years of corporate experience and specific expertise in manufacturing, supply chain, customer service and business performance management, Cindy has spent the past 7+ years benchmarking the performance of software solutions in the context of the business benefits of technology. In 2011 Cindy founded Mint Jutras LLC (www.mintjutras.com), specializing in analyzing and communicating the business value enterprise applications bring to the enterprise.

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Acumatica is “All In” with Partners. Bringing Home Next Generation ERP

It’s partner summit season in the world of enterprise applications. These events, combined with a Mint Jutras research project on channel strategies (still underway), have led me to dozens of conversations with software vendors and their partners over the past few weeks. Acumatica held its Partner Summit last week, providing me even more opportunity to dive deep into the partner relationships that are fueling business for this cloud ERP vendor. My impressions can be summed up in two words: All in.

“All in” was a phrase repeated several times on stage by Stijn Hendrikse, Acumatica’s chief sales and marketing officer. Stijn used it in the context of growth, products, partners and the cloud.

All In on Growth

Being a relatively young company (founded in 2007), you might expect double-digit growth from Acumatica. After all, it is much easier to increase millions of dollars of sales by 10%, 20% or even 50%, than it is to apply those percentages to billions. But triple digit growth? Yes. According to CEO Yury Larichev,  “Acumatica is on track to meet its growth target for 2013, which means we’ve grown more than 300% again in revenue, just like we did in 2011 to 2012. We think we may hit 350% this year.”

But Yuri’s goal is to achieve $1 billion in annual revenue within 10 years. He’s going to need a lot of partners to achieve this, because Acumatica is also “all in” on partners.

All In on Partners

One hundred percent (100%) of Acumatica’s business is indirect.  In fact management went as far as to say on stage, “No way are we going to sell direct or sell out to someone with a different strategy.” One on one, Stijn said to me, “I’m excited to be excited again. I don’t have to balance priorities between direct sales and the channel. Instead we have a high appetite to reduce channel friction and shorten the sales cycle.”

As a result of an intense recruiting effort, the company added 50 partners to its channel this year, including more than 40 in the last four months. Even attendance at its partner summit more than doubled, from 135 attendees last year (its inaugural event) to 282 this year. Those attendees came from 12 countries and 98 partners. Its global network currently includes 221 partner organizations.

But Acumatica knows that in order to grow its channel, it needs to demonstrate its commitment. While of course one way is through its product roadmap and platform innovation, another is to insure the company is easy to do business with. And I believe it has made a sincere effort to do just that. Acumatica is extending its CRM to its partners and providing strong incentives for the partners to manage their own businesses with the Acumatica business solution. Acumatica University has been a recent addition for training and education. These are becoming table stakes for a world-class partner program. But Acumatica has taken a few steps further.

Its latest software release includes a new licensing engine that facilitates license key distribution for every product module and automates renewals, a feature that is obviously easier to deliver operating in the cloud. It has also introduced a new partner portal, which will include leads, opportunities, invoices, product keys, support cases, guidance on up-sell and cross-sell opportunities and a tool to manage accounts. Partners will be able to see license keys and renewals as they are issued.

All in on Product

Product roadmap and platform innovation is key, but this 100% commitment to the channel puts an interesting spin on Acumatica’s product and channel strategy. Acumatica believes that in order to grow a successful channel, it must leave room for the partners to add value.  It is not unusual to rely on partners to take a solution into new verticals, sub-verticals or micro-verticals. In fact other vendors also encourage this in order to expand their addressable markets without diluting their own efforts.

Acumatica has three different kinds of partners: Value Added Resellers (VARs), Independent Software Vendors (ISVs) and OEMs. How does it define the difference?

Think of a VAR as a typical reseller of the Acumatica software. The “value add” might simply be the implementation and consulting services provided along with the purchase of the software. Or it might include some customization, or add-on functionality developed by the VAR. In providing this value add, the VAR might also be providing specific knowledge or expertise of a certain software, industry or country requirements.

The value added by an ISV is more specific. An ISV adds value through extensions to the product. Some ISVs you might have heard of include: Avalara (for sales and use tax management), Adaptive Planning (for financial planning, budgeting and forecasting) and ADP for payroll. Others might expand the addressable market for Acumatica beyond its standard financial, distribution, project accounting and CRM. For example, JAAS Systems adds advanced manufacturing features to Acumatica’s solution. ISVs (like JAAS) might also be VARs and other VARs may also resell solutions from ISVs. Indeed any partner that sells to manufacturers today must also partner with JAAS for a complete solution.

OEMs are a little different. These companies will use Acumatica technology to build their own solutions, sold under their own brands. So Acumatica will be “under the covers” so to speak. The two most notable of these relationships are Visma, a provider of business software solutions to SMBs in Northern Europe and MYOB, an Australia and New Zealand-based company that enjoys market shares as high as 70% to 80% within its operating markets.  The deal with MYOB, just announced (August 19, 2013) enables MYOB to localize and distribute Acumatica’s ERP solution.  Visma offers Visma.net, a complete business solution including a white-labeled version of Acumatica’s ERP as a key component.

So does this philosophy of leaving room for partners to add value mean Acumatica isn’t “all in” on their own product? My answer is: I seriously doubt it. If “leaving room” had become a convenient excuse for the Acumatica development team to deliver less innovation, I might think otherwise. So far this does not seem to be the case at all. In fact just the opposite seems to be true. The upcoming 4.1 release was intended to be a minor release, but has become a major one and plans are already underway for version 5.0.

And these new innovations seem to be closely aligned with the characteristics of what Mint Jutras calls “next generation ERP” including improved user experience, more innovation and better integration. And of course the ability to operate effectively in the cloud is also becoming table stakes for competing in the enterprise applications market today.

If “leaving room” means Acumatica relies on partners for specific functionality for a particular market niche, that’s a good approach. Inserting too much niche functionality into the base product serves only to clutter it up with added complexity. Better to have that supplied by a partner thoroughly familiar with the niche requirements and made available only to those that require it.

The question is: how opportunistic or purposeful are these efforts? One Acumatica partner developed a solution to manage auto loans at a car dealership. Something tells me Acumatica didn’t have a burning desire to get into that niche, so that was an example of opportunistic expansion. But if it desires to expand into process manufacturing for example (JAAS targets discrete), Acumatica will have to launch a directed effort to recruit a very specific type of partner, or convince an ISV like JAAS to expand its solution and market. It is still too early in the game to fully understand how much of these efforts will be strategically planned and how much will result from a VAR and/or ISV seeing a need and jumping on an opportunity, and therefore it is hard to predict exactly where Acumatica is headed. But wherever that is will be under the umbrella of the cloud.

All In the Cloud

Acumatica is definitely all in when it comes to the cloud. A “cloud only” solution has its pros and cons. On the plus side, the Acumatica solution was born in a browser and therefore has always had a zero footprint on the client, making it accessible any time, from anywhere. No legacy issues here. It is built from the ground up with cloud technologies: SOAP, web services, HTML5, Azure, Amazon, etc.

The downside of being “all in the cloud” ordinarily means less choice. Typically a cloud-based solution is only available as software as a service (SaaS). Not so with Acumatica. Lots of choices here: multi-tenant SaaS, single tenant SaaS (more like a hosted model), or even traditional on-premise deployments. You can purchase a perpetual license or pay a subscription. It is designed to be a multi-tenant cloud solution, but that doesn’t prevent Acumatica from offering it in a variety of different environments and Acumatica is quite unique in this regard.

Some industry observers, including those that have their own specific definition of what constitutes “true SaaS,” might argue against this approach. While Mint Jutras is seeing a major shift in acceptance of SaaS solutions, our research also proves that there is still a lack of understanding and even misunderstanding of cloud, hosted and SaaS offerings. While pundits argue about multi versus single tenancy and architectural nuances, our Understanding SaaS survey (data collected from 300 respondents about one year ago) showed the vast majority of survey participants don’t know or care about these aspects. They are simply looking to unburden themselves from the care and feeding of enterprise apps like ERP. They are attracted by lower costs, easier upgrades, less hardware and IT staff and are less worried about a single prescription of how cloud solutions are delivered. They are looking for business partners they can trust and having more choices in how they address these needs can be very attractive.

Are Customers All In?

One final note: Acumatica wants its customers to be “all in” as well. John Howell, one of Acumatica’s founders, is also still actively involved in the company’s product and corporate strategy. In his keynote address he talked about different market drivers, including Metcalfe’s law. If you aren’t familiar with it, here is Wikipedia’s definition: “Metcalfe’s law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system.” John’s interpretation is: involve everyone. The value of ERP is equal to the square of the number of users. This makes terms like “ease of use,” “usability,” “the customer experience” all that much more relevant.  All of these factors were addressed on the main stage throughout Acumatica’s Partner Summit.

John may well be onto something here. A cloud solution can go a long way in making ERP more convenient and accessible. According to our Mint Jutras 2013 ERP Solution Study, on average, 65% of employees in companies with SaaS ERP actively use ERP, compared to 45% in those companies with more traditional on-premises implementations. This represents a 44.5% differential and does not include those casual users that are limited to access to specific self-service functions (e.g., paid time off requests, purchase requisition requests, etc.). Actively engaging more of these knowledge workers also keeps all on the same page, making decisions that are data-driven, rather than based on gut feel.

This also reaches into the higher echelons of decision-making in the organization. Executives where SaaS ERP is deployed are 24.4% more likely to have access to and regularly use ERP, with 84% having some direct access (limited or regular use).

The challenge for Acumatica’s partners will be to make this the reality with each of their own customers. Are they up to this challenge? Is Acumatica willing and able to help them reach more broadly and deeply into their addressable market? The desire is definitely there; the goals are aggressive. Acumatica, its partners and its customers all need to be “all in.”

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NetSuite Takes Omni-Channel Commerce to the Great Outdoors

What do camping gear, nutrition bars, portable ultraviolet water purification systems and surfboards have in common?

  1. All are consumer products, consumed by outdoor enthusiasts
  2. All are sold by national retailers like REI, Bass Pro Shops and Eastern Mountain sports
  3. All are also sold online
  4. All are manufactured by companies that once ran QuickBooks but today use NetSuite to manage their businesses

These companies were among 33 exhibitors at the Outdoor Retailer Summer Market 2013 show in Salt Lake City, Utah that run NetSuite cloud-based solutions. NetSuite of course capitalized on this event to highlight its recent wins in the outdoor industry. Featured prominently in NetSuite’s press release was the concept of omni-channel commerce. Omni-channel is all the rage amongst retailers, but if you don’t follow retail closely, you might be asking, “what’s that?” In short, omni-channel retailing “is a seamless approach to the consumer experience through all available shopping channels.” And what are these different channels? Stores you visit in person, catalogues you get in the mail, 800 numbers you call after seeing an advertisement on television, websites you visit from your computer or your mobile device.

Have you ever bought something online and wanted to expedite delivery by picking it up at a nearby store? Or maybe when it arrived it didn’t fit and you wanted to save the shipping cost and just bring it back to the store? How about when you go to the store to make a purchase and the item is out of stock? Maybe you’d like it shipped directly to you from a regional warehouse or directly from the manufacturer. As a consumer, these all sound like logical alternatives and perhaps you get annoyed when you can’t “mix and match” your channels. If you can’t, then it is probably because manufacturing, distribution and each of those retail outlets are all running separate systems that don’t (or can’t) “talk” to each other.

So if you think omni-channel commerce is just a retail issue, think again. It also impacts wholesale distribution and even manufacturing. While many struggle with this even today, others have made the leap to fully integrated solutions that support the omni-channel experience.

NEMO Equipment, for example, is a designer of innovative tents, sleeping bags and pads and other camping gear. Its products are sold both online through its own custom-built web storefront, as well as through about 300 retailers including REI and Eastern Mountain Sports in North America, and internationally in Europe and Asia. Up until recently (January 2013) it was trying to piece all this together with QuickBooks, but today uses NetSuite for financials, inventory and order management, CRM and PCI-compliant credit-card processing. Consolidated inventory management allows NEMO to also compartmentalize inventory, virtually segmenting direct-to-consumer, B2B and US military sales channels while cutting pick, pack and ship time in half.

Liberty Bottleworks is another example. The company prides itself in making the only metal bottle on the market that is entirely made in America. Therefore it can’t rely on off-shoring or other low-cost country means of reducing costs. It relies instead on operational efficiencies to create a strong bottom line. It uses NetSuite financials, manufacturing, inventory, order management, CRM and eCommerce, with a direct-to-consumer website powered by NetSuite SuiteCommerce to manage its business end-to-end while also expanding its retail network to about 1,400 including REI, Whole Foods and L.L. Bean. But its omni-channel commerce has a bit of a unique twist.

In addition to its B2C online sale of standard metal bottles and its distribution through regular retail outlets, Liberty Bottleworks also offers custom bottles. Want your logo and company name on a bottle? No problem. Liberty Bottleworks can do that for you. In fact it does just that for corporate customers like Coca-Cola, the Seattle Seahawks and even NetSuite itself. While the company expected this to be about 10% of sales, this part of the business has recently exploded, which has added a level of complexity that would be unmanageable without an integrated solution to support it. NetSuite supports Liberty Bottleworks in managing up to one million components (who would have thought?), including recycled materials.

These are just a couple examples of companies manufacturing consumer products that face a level of complexity added to a business that once might have been relatively simple. As consumers expect and demand more choice, merchants, distributors and manufacturers require an added level of seamless integration that is impossible to achieve with spreadsheets and desktop-bound solutions.  In order to manage the relationships between consumers, retailers, distributors and manufacturers, you need seamless integration of financials, ERP, CRM and eCommerce. Yes, it’s a tall order, but consumers demand it. And with the right solutions, the opportunity for companies like Liberty Bottleworks and NEMO Equipment is as big as the great outdoors.

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What’s Different About Plex Systems?

 

Reflections From PowerPlex 2013

I’ve just returned from Plex Systems’ 12th Annual PowerPlex Conference. While in beautiful downtown Columbus, Ohio, I spoke with Plex execs and staff, customers and other industry analysts. At the conference, Plex introduced its new CEO, and made several announcements including:

  • New analytics capabilities that add real-time visibility into profitability
  • A brand new website to support “The Plex Community,” a virtual, collaborative ecosystem that allows Plex employees, partners and customers to contribute to addressing issues, solving problems and sharing best practices
  • The rollout of a new education services program that includes classroom training and live online instruction and Plex TV, which will offer courses so customers can learn at their own pace
  • Introduction of the next generation Plex Manufacturing Cloud user interface, which features an intuitive look and feel for an optimized customer experience

This is all great stuff, but throughout the event, first and foremost I was struck by how different this company is. I’ve been in this business almost 40 years and while others might share some of the characteristics, I have yet to find another quite like it. So what’s different? In short, it is its culture of engagement and sharing. The conference theme was “Get Connected,” which was appropriate but nothing new at Plex.

This culture of sharing has deep roots that reach back to when and why Plex first became a “SaaS only” company in 2001. It wasn’t because SaaS and cloud were the hottest topics back then. It wasn’t because the company wanted to be on the bleeding edge of new deployment options. It was because the founders had developed technology and processes to rapidly develop applications and SaaS was the only way they could deliver software as fast as they could develop it. They wanted to share new functionality and new technology as it was developed, not 12 to 18 months later, when the next release was scheduled. As a result, early on, customers didn’t buy the Plex Cloud because it was SaaS. They bought it because of the broad and deep functionality, in spite of the fact that it was deployed and delivered through the cloud.

So the frequency of updates is obviously one way Plex is unique. The company could be updating the software as often as every day. Does that mean the system appears to the user to be in a constant state of flux? Of course not. Most users don’t see anything different from day to day. All innovation is delivered in what Plex likes to call “opt-in” enhancements. You have to make a conscious decision to turn them on.

This spirit of sharing also created very close relationships between Plex and its customers. Of course back in 2001, ERP systems were not as full-featured as today and this naturally led to gaps. When you have a development team excited about new rapid application development tools and anxious to please customers, those gaps get filled quickly. Unlike most providers of multi-tenant SaaS solutions, Plex willingly “customized” the software. But the enhanced software wasn’t custom for long (if at all). Plex always incorporated these enhancements into the product. Remember, because the Plex Cloud is a multi-tenant SaaS solution, every single customer runs the exact same software. It just might not look or behave identically from customer to customer because of those “opt-in” enhancements.

As a result, the lion’s share of innovation came from customer-driven enhancements. In the world of the Plex Cloud, customer-driven also means customer funded. So a customer would pay Plex Systems to enhance the product and other customers would benefit. In other cultures this does not happen, at least not consistently. The typical way of thinking is, “I paid for it and it’s mine and only mine.” In the land of Plex, customers simply view this as making a contribution to the community. And they expect others to do the same. Each gives a little, and everyone gets a lot. When everyone is running the same software, literally, not figuratively, it creates a unique sense of community, one of being “all in” together.

In other ERP “cultures,” particularly those that grew up around traditional on-premise solutions, if an enhancement is put in the standard product, customers expect to get it for free, figuring they are already paying for it with their maintenance dollars. The mindset of a Plex customer is different. The customer has already chosen the Plex Cloud as the system of choice, which means that customer is willing to fork over the cash to subscribe to the software. But it is also willing to pay to make it just that much closer a fit. Of course having to pay also keeps customers from asking for something that doesn’t really add value. So there are built in checks and balances.

This is part of the “cloud DNA” that other companies that are new to SaaS are seeking, largely through acquisition. SAP admitted openly that the acquisition of SuccessFactors was more about acquiring the company’s “cloud DNA” than it was about expanding its human capital management (HCM) offering. I suspect Oracle was attracted to Taleo for much the same reason, although it failed to embrace that DNA and Taleo customer satisfaction was rumored to have plummeted.

Of course there is more to cloud DNA than customer community. There is also the struggle to get employees, particularly sales people, to buy in. When a sales person is accustomed to getting that big commission up front from initial software licenses associated with on-premises solutions, it is hard to get them to make the shift. Cloud DNA requires a new way of thinking. But that’s the natural way of thinking at Plex.

At Plex, nobody takes a customer for granted. They can’t afford to. All contracts are signed for one year. Admittedly, it isn’t easy for a customer to walk away from an ERP system, but if a contract has to be renegotiated every year, the smart service provider will do whatever it can during the year to make sure the renewal goes smoothly. Pricing, combined with this “year at a time” approach is also unique at Plex Systems.

Most ERP vendors price their software on a per user basis. Plex negotiates a fixed price for the enterprise, each year. Of course this is based on usage, which is closely related to number of users, but even if usage expands more than predicted during the course of the year, the price remains fixed until renewal time. When paying strictly on a per user basis, as usage grows with the adoption of a new module or the addition of new employees, companies are tempted to pull back so as not to incur additional cost, limiting usage and (in turn) limiting value.

Plex operates on the assumption that the more the ERP is used, the more value will be derived. Therefore it encourages companies to continue to grow and expand. Of course if usage has simply been allowed to expand with no added value, the customer has a chance to reconsider and scale back as part of the renewal process. This seems to be working. Our 2013 Mint Jutras ERP Solution study finds about 50% of employees at manufacturing companies use the ERP system, but that percentage grows to 73% at companies using the Plex Cloud. And I heard more than one conversation between customers indicating PowerPlex had energized them to do even more with the system.

Those Plex customers also help to make the company different. At conferences like PowerPlex, if you listen carefully in sessions or over lunch, you often detect an undercurrent of dissatisfaction. Customers come primarily to “network” with other customers and sometimes “networking” means hanging out, venting and complaining. Not only did I not hear this kind of muttering, I didn’t even see a lot of “hanging out.” When sessions were underway the hallways were empty except for a few Plex employees guarding the doors of those rooms that were already stuffed to capacity with eager and engaged Plex customers.

Many of these differentiators can be attributed to Plex being run as a small company. Yet with the infusion of capital from new investors (Francisco Partners and Accel Partners), a new CEO, to be followed by a new CMO and VP of Sales, I don’t expect Plex to stay small much longer. While it has grown quite steadily over the past decade, I also expect future growth to be both accelerated and more focused and planned. Growth means change. Can the company preserve this culture of sharing and engagement as it grows in this way?

Letting customers guide product direction has many benefits, including an engaged installed base, and a more robust solution to meet the needs of its target market. But significant growth will likely require Plex to expand its target markets. In the beginning, Michigan-based Plex focused exclusively on the automotive market. It then saw similarities in the requirements of automotive to those of aerospace and defense, and then food and beverage (think traceability). It leveraged its strengths and used customer-driven enhancements to push deeper into those markets. But to really grow significantly, Plex will have to take the reins and determine for itself where it needs to take the product. That means less customer-directed enhancements and more Plex-directed (and funded) innovation. Will that change the culture?

Although only time will tell, I don’t believe that it will. But that doesn’t mean there won’t be some change. First of all, I expect to see less customization required. Plex will likely be more selective than it has in the past in taking on major customization efforts. This is partly because of the maturity of the product. There are just that many fewer gaps in functionality today. Significant gaps means the product isn’t a good fit for the prospect and Plex seems willing to walk away from that business. Furthermore, the ability to custom-configure the product without programming has advanced significantly, particularly with its VisionPlex (for customizing look and feel) and IntelliPlex (business intelligence) products.

To help make this transition, Plex has assured customers that customer-driven enhancements are not going away entirely. It has empowered both customers and partners with an SDK (software development kit) and made it easier for both to create their own enhancements. How does this work in a multi-tenant environment? Think of it as developing the enhancement in a separate compartment and registering the change with Plex.

But more importantly, it is also publishing its own road map, which shows active and planned projects, as well as those that are under consideration. Industry veteran Jim Shepherd, VP of Product Strategy, and his team own these roadmaps and will be updating them periodically and sharing them through the new Plex Community portal (also announced at the conference). This will allow customers to keep tabs on what other customers are requesting and is an important element in keeping the customers engaged while Plex holds a tighter rein on directing the product’s future.

The other announcements made at the conference, beyond this new community portal, are all important in helping Plex Systems scale its business without losing sight of trends in the market such as mobilization, the consumerization of IT, the demand for more and better data for decision-making and increased executive engagement with ERP.  But most importantly, they help Plex Systems to preserve its differentiation and its culture of engagement and sharing through this transition of high growth. It’s really about Plex being Plex.

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NetSuite and Autodesk Partner for Complete End-to-End Product Life Cycle Management

Earlier this week NetSuite announced its latest strategic partnership with Autodesk to provide seamless integration between its ERP solution for manufacturing and Autodesk PLM 360. As NetSuite dives deeper into manufacturing, it is a logical move since the link between design engineering and manufacturing is a necessary one, although often a contentious one.

While MRP and its successor ERP have been regarded as necessary tools for manufacturing for decades, the truth is, early MRP and ERP solutions didn’t support the needs of the engineers very well. That set the stage for engineers to go off and do their own thing, often and very successfully avoiding any connection to other applications. If there was a connection, it was arm’s length. Engineers sent paper drawings and electronic bills of material (BOMs) over to manufacturing where they tended to take on a life of their own.

That might work well enough from a pure product design point of view. Yet in reality there is much more to a product life cycle than just design and manufacture… as well there should be. For example:

  • Do you co-develop with customers or partners?
  • Does marketing coordinate and collaborate with engineering on new product introductions?
  • What about the list of suppliers of raw materials and/or components?
  • What about the cost and impact of engineering change orders?
  • Do changes made in manufacturing ever make their way back to the engineering design?
  • Do you service and repair your products?
  • Does customer feedback influence product innovation and design?
  • How about feedback from service technicians or sales?

Of course it will take some discipline on the part of the NetSuite/Autodesk customers, but tight integration between ERP and PLM will remove many of the reasons engineers have struck out on their own to purchase and implement solutions. With this integration, product concept, design and engineering data are developed in Autodesk. Once released, bills of material (BOMs) are fed to ERP.  Engineering can also suggest vendors from which to source component parts. But these need to be approved by purchasing within the ERP and confirmed back to PLM with a handshake.

Engineering change orders (ECOs) can also be managed with the same level of automation and control and gives the engineers added visibility to the impact on cost and profitability as well as capacity.

But probably more important in terms of change control is the bi-directional aspect of the integration. How often does manufacturing feel the need to tweak a design for manufacturing? Do those “tweaks” ever get communicated back to engineering?  If not, the next change order from the engineers could be a nightmare. Integration ensures that changes are properly documented, propagated and managed in both PLM and downstream manufacturing.

The bi-directional integration can also have an impact on both quality and innovation. Without that closed loop from manufacturing back to engineering, there is an increased the risk the engineers can operate from an ivory tower. Quality issues are hidden without feedback from manufacturing operations and including suppliers in this feedback loop makes it that much more effective.

But NetSuite is also proposing the seamless integration will enable a cycle of innovation. In many industries, most notably in (but not limited to) consumer electronics, the expected life spans of products are shrinking. It’s not enough just to close the loop between manufacturing and engineering. It is equally important to capture feedback from customers and partners to understand customer acceptance. NetSuite is positioned to capture that feedback from CRM, service and PSA modules.

This is strictly a marketing agreement. NetSuite and Autodesk do not sell each other’s products. They will however work together on a deal. Expect them to work cooperatively and collaboratively.

And of course, it wouldn’t be an announcement from NetSuite without a reference to cloud. This partnership is unique in that both solutions were born in the cloud, designed specifically to be multi-tenant solutions deployed as Software as a Service (SaaS). So while it might be stretching it to say this was a marriage made in heaven, at least it is up there in the clouds.

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NetSuite Acquires OrderMotion: Bringing Omni-Channel Products and Expertise

Earlier this week NetSuite announced its latest acquisition: OrderMotion, Inc., a provider of cloud-based Direct-to-Consumer (D2C) order management solutions. The acquired company is located in Burlington, MA. NetSuite’s go-to-market strategy is to take a suite-based approach, providing an end-to-end solution, which addresses the full quote-to-cash life cycle. The customer order is at the very core of this process and therefore the SaaS ERP company has always carefully guarded any function that touches the order. No alliances or marketing partners here. When it comes to customer orders, NetSuite wants to own the functionality.  In this regard, an acquisition makes perfect sense. But given OrderMotion is not embedded in the suite and NetSuite already fancies itself as having an industry-leading order management system, what value does it hope to gain from this addition?

NetSuite is buying OrderMotion for its expertise as well as its products. OrderMotion’s products are typically sold stand-alone and that will continue. The target is not current NetSuite customers. So this is more a market share play than it is one that goes after an increased share of the customer’s wallet. NetSuite intends to continue selling the OrderMotion product but it also hopes to apply some very specific expertise to further strengthen its own current order management capabilities. The OrderMotion engineering team will continue to innovate the acquired product but NetSuite also hopes to have them contribute to the order management modules of its ERP suite.

NetSuite already has a strong order management solution with capabilities that include distributed order management, fulfillment from multiple locations and return merchandise authorization (RMA) as well as strong back-office integration with billing and cash collection. It provides standard integration to major carriers like United Parcel Service (UPS), Federal Expres (FedEx) and the United States Postal Service (USPS). It can deal with multiple currencies and multiple sales and use tax structures. OrderMotion will add more depth of functionality in orders “direct” from the consumer and trends in the industry towards omni-channel commerce.

Omni-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. Combining all these options requires a level of expertise and feature functionality not typically included in your traditional ERP software suite.

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.

In continuing to sell OrderMotion stand-alone, I would expect the acquisition to be accretive. But behind the scenes I would also expect to see the OrderMotion team lending a hand to further extend distributed order management and omni-channel supply chain capabilities in NetSuite’s ERP suite. Both solutions have a strong technical architecture that supports multi-tenant SaaS, so business models are consistent. But they are different architectures. While I don’t expect them to be sharing code, I would expect them to share designs.

NetSuite ERP will benefit from the expertise of a team dedicated exclusively to order management, one that has specific omni-channel expertise. OrderMotion engineers should also benefit from having to blend this functionality into an integrated suite, something they have only done at arm’s length previously.

Overall NetSuite winds up with a new product and a better way to attack the retail market that is already forced to deal with this omni-channel phenomenon. And it has the opportunity to further strengthen its existing product as the omni-channel commerce begins to invade the world of manufacturing and distribution.

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NetSuite 2013 for Manufacturing: At an Evolutionary Crossroad

NetSuite is taking an important step in its evolution. Founded in 1998, with an exclusively SaaS-based offering, it has long been a contender in the ERP market for service providers and distributors. In its early days it primarily served small companies, but as SaaS became more well-accepted and as its solution footprint broadened and deepened, the average customer has grown in size. But compared to some other ERP solution providers, those that evolved from the world of more traditional MRP, it is a relative newcomer to manufacturing. Can NetSuite “catch up” or even pull ahead in the game?

When NetSuite began its foray into manufacturing, it started out by describing its target market as “light manufacturing.” To those steeped in manufacturing tradition, this implied a simplistic assembly process. But over time, NetSuite refined its target to be “contract manufacturing,” defined as “you design, others manufacture.” As more and more actual manufacturing became outsourced and moved off-shore, this class of manufacturers became more common. Many manufacturers turned to low-cost country sourcing for not only components and subassemblies, but for the entire manufacturing process.

This transition removed some of the complexities that first MRP and then ERP needed to contend with. Manufacturing can be a delicate and complicated juggling act: having the right amount of inventory (enough but not too much) at the right time, effectively utilizing labor and machine resources while scheduling potentially long and complex processes. If a contract manufacturer didn’t actually manage the production, much of the complexity of managing this delicate balance is removed, eliminating the need for some of the feature functions at the very core of traditional MRP solutions. However, the trade-off was to introduce more supply chain complexity as multiple companies, often with conflicting goals, needed to effectively interoperate to optimize the process from raw materials to finished product.

The need for this elevated level of interoperability is something I have been writing about since before NetSuite was even in business. Back in the mid-90’s I talked about the concept of virtually vertical manufacturing (VVM): Multiple companies working cooperatively and collaboratively to produce and distribute a product as if it were a single, vertically integrated enterprise. But back in the 90’s the concept of virtual integration was still ahead of its time. The Internet was still relatively “new.” While folks could appreciate collaboration, interoperability between companies still required more traditional buy/sell instruments like purchase orders, sales orders, shipment notices and payments. Paper documents were being replaced by electronic documents, but very, very slowly and often at an arm’s length.

Today the need for technology-enabled integrated business networks is something that any progressive manufacturer understands. But many are still running older legacy solutions without the technological infrastructure to support this level of interoperability. Hence they are not well equipped to participate effectively.

This puts NetSuite at an interesting juncture. As many manufacturers are re-evaluating their previous outsourcing and off-shoring decisions, NetSuite in its latest release is now adding functionality that older manufacturing solutions have supported for decades: features like effectivity dates on bills of materials, component where-used visibility, detailed operational routings and capacity requirements planning. But those older solutions were developed on legacy architectures that limit the solutions’ ability to support the level of interoperability, collaboration and coordination required today… interoperability that is built into NetSuite. So while many of those solutions are busy “modernizing” for secure web-based access and adding functionality such as integration with CRM and sales forecasts, building web-based store-fronts, those features are already supported through NetSuite’s native core.

Meanwhile NetSuite is playing “catch-up,” adding these as fully integrated, technology-enabled features and has the potential of leap-frogging the established solutions. At the same time NetSuite, is extending the Suite, adding many complementary capabilities such as payment gateways, support for electronic tax preparation and electronic filing in eight new countries, and adding even more features for collaboration and visibility that many today refer to as “social.” And it is continuing to develop the underlying platform and development environment, which helps it grow its ecosystem. It is through this ecosystem that it is able to extend the footprint of its solution much faster than if it were to rely exclusively on its own development efforts… think manufacturing execution systems (MES), quality, product lifecycle management (PLM) and asset maintenance.

This is an opportune time for NetSuite to be at this crossroad, not only in order to expand its addressable market, but also because we are seeing new dynamics in terms of globalization. While for several decades we have seen manufacturing moving off-shore, with the instability of oil prices, currency fluctuations, and the rising cost of transportation, rising costs in previously low-cost source countries and continued concern over quality and compliance from emerging markets, we are now seeing an increasing trend back to near-shoring or even on-shoring. This could easily cause those contract manufacturers to bring some of that manufacturing complexity back in house. If so, they will require more of these traditional features. But it is unlikely their supply chains and global operations will be simplified.

This puts NetSuite in a competitive position because it is far easier to build new features and functions on a technology-enabled infrastructure than to try to modernize outdated technology. In answer to our initial question, it is looking more and more likely NetSuite can indeed catch up and maybe even pull ahead of those “mature” solutions for manufacturing.

 

 

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Plex Systems gets a new CEO

I had a chance to talk to Jason Blessing, Plex System’s new CEO yesterday. I’ve worked with Plex and its former CEO Mark Symonds now for almost seven years, and have always enjoyed my interaction. Plex has come a long way through that stretch. Back in 2006, Mark was almost a one-man show. Not only did he drive product and company strategy, sales and development, but he was their chief evangelist as well. Today there is far more depth to the organization and it is also backed by two investors: Francisco Partners and Accel Partners. It is quite a tribute to Mark that he hands over a company that is poised for what could very well be explosive growth.

Jason comes to Plex after a short stint at Oracle, where he was senior vice president of application development after the acquisition of Taleo where he held a variety of executive roles. For those not familiar with Taleo, it has been a pioneer in cloud-based talent management solutions. So he certainly has the cloud credentials. But someone like me, who has grown up (professionally) in the world of ERP and manufacturing, but has also been involved with human capital management  (HCM) applications, including talent management, knows full well the difference in scope between ERP and HCM, particularly when it is ERP for manufacturing.

While those specializing only in HCM hate it when I say it, HCM is pretty intuitive. Everyone that has ever managed people understands the requirements for talent and workforce management. Anyone that has recruited talent knows what recruiting is about. We’re all human “resources” so we know about human resource data, benefits and compensation. But manufacturing is anything but intuitive. And the scope of ERP (and its role in managing the business) dwarfs that of HCM. And Plex isn’t the first ERP vendor to bring a former HCM executive in and put him in charge of something much bigger than HCM.

So Jason might have felt a little like he was on the hot seat yesterday when we spoke. And he will probably be a bit relieved to hear that what I heard yesterday was encouraging. While a lot of his background has been in HCM, including both Taleo and previously Peoplesoft, I learned he also worked as a management consultant for Price Waterhouse. And I also heard him acknowledge what he didn’t know about ERP and manufacturing, but that he was confident because the original founder of the company was still involved and he also had some great depth of expertise in the company, including Jim Shepherd, his VP of Strategy. Shep and I go back almost 30 years when we both worked for ASK Computer Systems, and our paths would cross more recently when he was an analyst with AMR, which was later acquired by Gartner. It was reassuring to hear that Jason understands the value of having someone with Shep’s depth of knowledge and vision for manufacturing.

Plex has enjoyed consistent growth over the past few years and even before the investment by Francisco partners had been self-sustaining. This is an incredible achievement in the world of SaaS solution providers, when many others far larger than Plex are still struggling to show a profit. It has one of the most active and engaged installed bases of customers in the industry. This is partly because of the close relationship between its customers and its product direction. For many years, the development organization was primarily driven by specific customer requested enhancements. Plex’s adoption of rapid application development methodologies allowed them to respond quickly and efficiently and deliver against these requests even with a multi-tenant solution.

But in order for Plex to take that next jump and grow globally into new markets, it will have to mix that strategy with more traditional product strategies to take it someplace where its existing customers won’t. Jason seems to understand this. His limited expertise in ERP and manufacturing won’t be what takes them there, but listening to his staff and using invested capital wisely very well could.

Its competitors have always underestimated Plex Systems. A word of caution to those competitors… watch out!

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Accel Partners Invests $30 Million in Plex Systems

Earlier this week Plex Systems announced global venture capital and growth equity firm Accel Partners has made a $30 million strategic investment in the company. As part of the financing, Accel Partners will gain a seat on its board of directors, where Francisco Partners, which acquired Plex Systems earlier this year, already holds three seats.  Accel Partners has invested in some pretty high profile companies, including Facebook, Kayak, Qlik Technologies, Dropbox, Walmart.com and Cloudera. According to Sameer Gandhi, a partner with Accel Partners and newly appointed Plex Systems board member,  “Accel’s investment philosophy is to invest in companies that have the greatest potential for success due to their market position, disruptive technology and prospects for future growth. Plex Systems represents an opportunity to help move a highly complex and diverse industry – manufacturing – to the next computing platform, based in the cloud.  We believe the manufacturing ERP market represents at least a $5 billion opportunity, and that less than 10 percent of the market has transitioned to SaaS so far.”

While I don’t get involved in market sizing, the $5 billion opportunity sounds reasonable and my research indicates the percentage of manufacturers that have transitioned to SaaS ERP in particular is somewhere around 6%.  However that doesn’t mean manufacturers haven’t made any investment in SaaS solutions, or that they won’t in the future. Based on a recent survey of 300 companies, 50% of which were manufacturers, only 21% of manufacturers have no business applications deployed as SaaS. Obviously that means 79% do. While many think manufacturers lag behind in terms of embracing SaaS, my survey found them more knowledgeable and more willing to move solutions to SaaS than those in other industries.

Why is that? Because manufacturers are generally pragmatic. Walk around a typical manufacturing facility today and you see plenty of automation. Sometimes you see more automated equipment than people. But manufacturers would much prefer to spend their technology budgets on equipment and technology that will produce more products. Business applications might make them more efficient but they don’t produce parts and product.  Manufacturers’ core competencies are in design and production, not business applications and the hardware and software needed to run them. Therefore many are quite content to let someone else worry about the care and feeding of those applications.

Does that mean most or even many manufacturers are going to run right out and switch to SaaS? No. My survey results indicated it will take 5 to 10 years before almost half (45%) of business applications will be deployed in a SaaS environment.  There are simply too many existing solutions out there and the vast majority of companies are not rushing to replace them. Although the number of replacements has been increasing recently and that still represents an enormous opportunity in general and for Plex in particular. It has a growing installed base of very loyal and engaged customers and a broad portfolio that dips deeply into the shop floor.

Indeed, this implies a lot of opportunity for companies like Plex Systems and Accel Partners’ investment is a further validation of the company’s viability in the market. Unlike other new entrants to SaaS ERP, Plex has been delivering it for more than eleven years. It made the move to pure SaaS long before it was fashionable or even widely accepted. In its early years, it was successful in spite of being SaaS, not because of it. As a private company now owned by Franciscan Partners it doesn’t disclose financials, but I do know that it was self-funded for many years, only tapping into another round of venture capital to accelerate growth. “Self funding” equates to profitable, something many other larger pure SaaS providers still cannot claim.

Many of its competitors make the mistake of underestimating the competitiveness of the company and the product. In addition, Plex has made some strategic and smart additions to staff recently, starting with the hiring of Jim Shepherd as Vice President of Strategy. I know Jim well and he and I worked together at ASK back in the 1980’s, but he has spent the better part of the last 20+ years building a strong reputation as an industry analyst, first with AMR and then Gartner. Plex has also brought on some other industry veterans lately and continues to hire.

An Infusion of Capital to Fuel Growth

Plex has always been very responsive to customers. It uses rapid application development methodologies to respond quickly to specific customer requests, including customizations that most SaaS-only solution providers would never touch. In fact those customer requests were what drove the majority of product decisions and development. I am sure that was a big factor in making them profitable. After all, they seldom built features, functions and products on speculation. While this is admirable in making the company customer-centric, and also mitigates risk, it also limited its ability to expand into new segments of the manufacturing market. This additional strategic funding should help them expand without having to sacrifice that customer responsiveness.

I’ll be watching very closely (and you should too) to see what directions this new infusion of capital takes Plex Systems.

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