On Demand

Rumors of the Death of SAP Business ByDesign Greatly Exaggerated

I have been hearing rumors about the death of SAP Business ByDesign for several months now. Most of them come to me from SAP competitors, although a few have come through ex-employees. Note the emphasis on “ex.” No employee of SAP has ever confirmed or even hinted at this. However I have to admit the messaging around Business ByDesign has not always been crystal clear, which has allowed for these rumors to spread.

Prior to the SuccessFactors acquisition Business ByDesign was positioned as the platform of choice for development of all cloud offerings. But with the acquisition and the accompanying infusion of “cloud DNA” that story changed. All of a sudden the Business ByDesign platform wasn’t important. The powers that be at the time (SapphireNow May 2012) said,  “Customers don’t care about platforms. They only care about beautiful applications.” We heard less about By Design and more about the benefits of loosely coupled applications over tightly integrated ones. The market interpreted that to mean that Business ByDesign would be broken apart into different bits and pieces and might not survive as an integrated suite. SAP didn’t go out of its way to squash that rumor, so it too spread.

Then came Sapphire Madrid (November 2012) and there was a new platform in town. The HANA cloud platform started showing up on slides with little or no fanfare, and less explanation. The more SAP talked about its cloud strategy, the less we heard about Business ByDesign. Hence more confusion.

Until now

Earlier this week SAP presented a Business ByDesign strategy update to several industry analysts, including yours truly. Most importantly, it positioned Business ByDesign relative to other products in its portfolio. While I often find SAP graphics confusing in that they are too technical and attempt to say too much, I found the graphic shown refreshingly effective.

BBD

But it does assume you know something about SAP products, so let me explain. Business ByDesign is essentially a midmarket product, targeting companies that are smaller than the very large enterprises where the Business Suite is sold, and companies that are bigger than the SMBs which is the intended market for Business One. Business ByDesign shares this space with Business All in One, which sits a little higher. Remember, Business All in One (BAiO) is essentially the same underlying ERP that is a big part of the Business Suite. But BAiO bundles ERP with industry-specific content and best practices to make it a better fit and an easier implementation for those midmarket companies in (many) supported industries – midmarket companies that don’t have quite the deep pockets of the large enterprise.

You’ll notice BAiO also dips down into the Business ByDesign space. Business ByDesign is SaaS; BAiO is not, although SAP does offer some cloud alternatives for the Business Suite and BAiO, which have traditionally been deployed on-premise. But these cloud options are more like a hosting environment than SaaS. This overlap might result because of deployment preference or it might result because industry-specific requirements are not be satisfied with the Business ByDesign suite.

But you will also notice the Business ByDesign block extends upward into the top of the midmarket and also encroaches on the large enterprise space as well. Business ByDesign will be offered as two different packages, under two different names, but with one single code base. Business ByDesign is the complete suite, while SAP Cloud for Financials is a subset, including the finance and accounting piece of ByDesign. Even though it will share a code base, the code base was tweaked so that SAP Cloud for Financials could stand alone, without the other non-accounting “legs” of the solution.

The reasoning behind this split into two packages is to address two different buying patterns. SAP Business ByDesign is intended for “Mid market companies and subsidiaries [that] expect an out-of-the-box ready-to-use suite with open interfaces.” SAP Cloud for Financials (the subset) is for “Large Enterprises [that] expect an open ERP backbone to be complemented with SAP and non-SAP Line of Business applications.” While the Business ByDesign buying pattern is pretty clear, the SAP Cloud for Financials might require a bit more explanation.

Conceptually, these two different approaches aren’t all that different. Few large enterprises today are huge monolithic organizations. Instead they are comprised of operating units, divisions and/or business units. While these units might have some operational autonomy, financials will have to be consolidated at a corporate level. Where these units operate as a separate legal entity, a full ERP solution is most likely needed. While in the past these units may have been left to on their own to select and implement ERP, today, standards are more the norm. The 2013 Mint Jutras ERP Solution Study found 94% of companies (with multiple operating locations) have defined standards for ERP today. What better way to enforce these standards than through a cloud-based SaaS environment?

Where does Business ByDesign fit in this scenario? It fits as an integrated suite at the subsidiary level. A lot of different ERP vendors talk about this two-tier kind of approach. Some even advertise they can integrate with SAP at the corporate level, simply because of SAP’s dominance here. A cloud solution at the subsidiary level has a lot of appeal here because it helps the enterprise assert a level of control while also providing some flexibility and autonomy at the subsidiary level.

But how about if we pull a switch here? What if we start to think that maybe the corporate financials might be due for an update or even a major overhaul? With the siren call of the cloud becoming more and more compelling, why not consider replacing that legacy accounting solution at corporate with a modern, technology-enabled, cloud-based solution? You might not think the financial modules of an ERP designed for a midmarket company have the accounting chops necessary to support a large enterprise. But then most accounting applications designed for the midmarket aren’t built by SAP. In fact, SAP can and has used the same design team for Business ByDesign (and therefore SAP Cloud for Financials) that architected the Business Suite. And at that level SAP has dominated for years.

All told, this one simple graphic speaks volumes about the relative positioning of the SAP products. Is there room in SAP’s strategy for three different products (four if you count BAiO, with its separate go-to-market strategy)? I am not only tempted to say yes, I am tempted to say, “Hell, yes.” Think about it. SAP is the 800 pound gorilla and even 100 pound gorillas can handle a diverse portfolio.

Addressing Concerns

So what about some of the accusations and assumptions that have been floating around the rumor mill? Let’s counter a few of them.

“SAP is pushing Business One in the cloud instead of Business ByDesign.”

ByDesign has two characteristics that define it: it is a midmarket suite and a cloud solution that is deployed exclusively as software as a service (SaaS). It was never intended to replace SAP Business One at the low end of the market, but when a small company wanted SaaS ERP, it was the only product SAP had to sell. Now that a “cloud” option exists for Business One, that is no longer the case. This is a clear segmentation of the market by company size. Also, Business One has momentum. With over 40,000 customers and a large and mature channel in place, now that a cloud option is available it is only logical it is starting to gain its own fair share.

“SAP is no longer developing the product.”

SAP has been continuing to develop Business ByDesign, but these efforts might not have been particularly visible over the past couple of years. While SAP Cloud for Financials and Business ByDesign share a common set of code, some effort was involved in order to allow SAP Cloud for Financials to stand alone and yet be easily “coupled” to other solutions. This tends to be “under the covers” work.

And then there is HANA. Business ByDesign pre-dates HANA.  It was built in the NetWeaver era and used MAX DB (database) and TREX (search and classification). In order to take advantage of its advanced technological capabilities, Business ByDesign also had to transition to HANA, resulting in more “behind the scenes” work.

SAP assured those of us on the recent call that it was continuing to invest in the product and the platform. That said, it is also (better) defining the current target market. SAP will focus on developing the ERP backbone and specific capabilities for service industries, while also adding (open) integration capabilities. It will continue the transition to HANA for scale and extensibility. And it will also transition to HTML5 and benefit from the work done on the Fiori applications for a responsive, mobile-first user interface.

“Business ByDesign is a technological dead end. It is based on Microsoft Silverlight.”

See answer above.

“SAP themselves view it as a failure; otherwise it would be available world wide. Instead it is only available in a few countries.”

Twenty four percent (24%) of Business ByDesign business has been in the US and 32% in Germany. But it is available in 15 different countries. Is it concentrating its attention on all 15? No, but then not all 15 of them have really strong economies today. The SAP installed base is a prime market for Business ByDesign so SAP is going where it has the most customers and can make the biggest bang for its buck. That only makes good business sense.

Three more countries are planned for 2013 (New Zealand, Japan and South Africa) and an additional 3 are planned in 2014 (Brazil, Belgium and Singapore).  In addition customers are running customer-specific localizations in another 31 countries.  How many countries does it need to be in?

Summary

The supposed death of Business ByDesign seems to just wishful thinking on the part of some competitors. Although I also observe other SaaS ERP companies welcoming SAP onto their turf, as much for validation as for healthy competition. Let’s face it, all other ERP companies love to single out those competitive deals where they have beaten SAP.

Instead of a death knell, I am seeing renewed focus and commitment across SAP at the board, and executive level, as well as in the field. This represents a commitment to the cloud strategy in general and Business ByDesign specifically. Now, more than ever, SAP is clear about its target for the product:

  • The SAP installed base and upper mid-market are key for the Business ByDesign suite. Customers with higher revenue and user count threshold are prime targets as well as subsidiaries of large enterprises.
  • Large enterprises will be the target for packages such as SAP Cloud for Financials and other line of business cloud solutions like SAP Cloud for Customers and SAP Cloud for Sales. SAP will stress integration capabilities with SAP and non-SAP cloud / on premise systems.
  • Its primary industry focus will be professional services, public services and distribution.
  • While the product is available in other countries, SAP will focus its sales efforts where it has its largest installed base and where economic indicators signal a strong market. As a result, go to market efforts will focus on the US, Germany, the UK, Netherlands, Canada and Australia.
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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 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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Is SAP’s Cloud Strategy Like the Blind Men and the Elephant?

As I watched a Twitter conversation recently discussing SAP’s cloud strategy, I was reminded of the old story of the blind men and the elephant. While there are different versions, the upshot of the story is that each blind man “sees” something different because each is only touching one part of the elephant. Without sharing their experiences and collaborating nobody gets the full picture.

Doug Henschen, executive editor of InformationWeek, sparked the discussion with his article SAP Clings To A Dated Cloud Apps Strategy. Doug writes, “As cloud vendors Salesforce.com, NetSuite and Workday look toward larger companies, SAP courts small and midsize firms.” Doug was at the same event I attended last week, SAP’s SME Summit. So yes, the message being delivered by SAP at this event was one targeting SMEs (small to mid-size enterprises). His article mentions both SAP Business One which is available through on-premise and Software as a Service (SaaS) deployment models and SAP Business ByDesign, an exclusively SaaS offering.

However, two weeks prior to that, I also attended SapphireNow in Madrid. In a cloud strategy session there, I heard SAP Financials OnDemand, which is a derivative of SAP Business ByDesign and therefore an important element of SAP’s cloud strategy, was targeting medium to large enterprises. Does this mean the folks at SAP are not collaborating and instead are giving different and conflicting messages? I don’t think so. I think it means the same product can serve different markets and can be presented differently to different audiences.

Second question: Does this mean the target for SAP is different than the target for the likes of Workday, Salesforce.com and NetSuite? Not necessarily. Some will argue that the “large enterprise” play for Financials OnDemand is limited to subsidiaries of large enterprises.  First of all, this a similar message conveyed by many solution providers citing “2 tier ERP strategies.” But often that is the very definition of a large enterprise: a collection of smaller business units or subsidiaries. Not only do these subsidiaries roll up to corporate financials, they often must deal with the same complexities as their corporate parents.  Some deal with those issues better than others.

So in many ways, all these solution providers are attacking the same market. SAP is just coming at it from a different direction. While the solution providers noted (all of which started out as SaaS vendors targeting small and/or midsize enterprises) have been coming up-market, SAP has been moving in the opposite direction.  SAP is best known for its presence in the largest of large enterprises and nobody would argue that market is quite saturated. Real growth potential lies in the small to midmarket space. Whether one direction is any easier or more difficult than the other, the challenges are definitely different.

In coming up market, these pure SaaS vendors need to add features and functions required by large multi-national enterprises. In coming down market, SAP needs to eliminate a combination of real and perceived complexity. Indeed back in 2007 SAP admitted it started by building Business ByDesign from scratch primarily to reduce that complexity.  And yet as smaller and smaller companies began operating globally, the complexities associated with multiple currencies, multiple languages, multiple legal entities, increased regulatory compliance requirements and global trade needed to be addressed even in smaller companies. The upstarts had the advantage of simpler solutions to build upon and SAP had the advantage of design teams that had been routinely addressing those needs for many years, particularly in terms of finance and accounting.

In his article, Doug even mentions that, “…CEO Aneel Bhusri said Workday’s Human Capital Management apps are already capable of handling the largest companies in the world, like Hewlett-Packard and DuPont, both of which recently signed enterprisewide deals with the company. Workday’s financial apps are currently suitable for use by midsized companies, Bhusri said, but by the end of next year — after investments in cloud capacity and app resiliency to sustain high-scale transaction processing — they’ll be ready for Fortune 1,000- or even Fortune 500-sized companies.“

That’s the market where SAP made its name and asserted its dominance.

But in determining strategy, here’s the big question: What will move to the cloud and what will remain on-premise (and is SAP’s strategy well aligned to that)? Many seem to think everything will steadily progress towards cloud-based and SaaS solutions, eventually replacing all on-premise solutions. I think it will take a very long time to get there. My latest survey on “Understanding SaaS” indicates that about 17% of business applications used today are SaaS-based and in 5 to 10 years that percentage will (just about) double, with 33% projected to be operating in a SaaS deployment model.

Is that because there is reluctance to accepting the SaaS model? No. It is because there are so many on-premise solutions that would have to be replaced. ERP and accounting solutions running large enterprises today might in fact be the least likely of these to be replaced, simply because of the cost and effort expended in initially getting them implemented. While that cost and effort has steadily decreased over the past 10 years, that doesn’t change the fact that these large enterprises spent a whole lot of time and money getting them up and running and the prospect of going through that again is not too appealing.

Yet installing a new cloud-based solution for a business unit or a subsidiary that is not currently fully supported by the corporate solution may indeed be very appealing. For a large enterprise with an existing SAP solution, Financials OnDemand or even the entire Business ByDesign solution may be a very good option for a subsidiary, business unit or remote operating location. Once a large enterprise has done this one or more times and the cloud-based solutions are feeding the corporate solution, perhaps it will pave the way for a transition to a 100% cloud solution in the future. If so, which cloud based solution do you think might make the transition the easiest? Do you think SAP might have thought of this too?

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SAP Launches Financials OnDemand

On November 14, 2012, in conjunction with the co-located SapphireNow and SAPTechEd events in Madrid, Spain, SAP announced the general availability of SAP® Financials OnDemand. The new offering is a stand-alone financial management solution, a derivative of its SAP Business ByDesign suite, now powered by HANA for speed and power. It targets medium to large enterprises and represents SAP’s desire to compete for mind share (and deals) in specific lines of business – in this case the business executives who manage the money within an enterprise. Based entirely in the cloud and offered exclusively as Software as a Service (SaaS) it makes two important assumptions: these enterprises are willing to entrust their financial transactions to the cloud and a good portion of them want to “mix and match” applications rather than run a single tightly integrated business suite.

What is it?

SAP describes SAP® Financials OnDemand as “a real-time, insight-driven financial management solution designed for the cloud.” However in spite of the fact that SAP describes this application as one that manages money (versus people, customers or suppliers), the breadth of the solution extends beyond strictly accounting. Unlike other stand-alone accounting applications that capture those all-important financial transactions, but nothing more, Financials OnDemand expands to also include sales orders and purchase orders. This is important in that it means it can support end-to-end processes like order-to-cash and procure-to-pay and provide a system of record for all business transactions.

Mint Jutras defines Enterprise Resource Planning (ERP) as an integrated suite of modules that provides the operational and transactional system of record of the business. So in providing this system of record, is SAP Financials OnDemand really ERP in disguise? The answer to that: Not really.

Although at its core, ERP provides a system of record, in fact the functional footprint of ERP has grown steadily over the years, becoming far more complex. In manufacturing organizations it supports the planning and scheduling of production, the movement and storage of inventory, engineering and product definition and perhaps the servicing of products. It might also extend to managing the engagement with prospects and customers. It might support employees with human resource functionality. This list could go on and on. As a result, it is becoming more and more difficult to tell where ERP ends and other applications begin and it is this complexity that often presents a barrier to adoption.

The scope of SAP Financials OnDemand is more constrained, thereby reducing the complexity. But the solution also represents a different approach to enterprise applications. While ERP is tightly integrated, SAP Financials OnDemand takes a more modular approach (often referred to as “Best of Breed”) with cloud-based financials as a foundation. Using this approach, it is engineered either to stand alone or to play nicely (integrate) with other applications.

In the past, the trade-off between the two approaches was between functionality and ease of integration. Over the years the pendulum has swung between preferences for the two approaches, and as ERP has become more robust, the pendulum has tended to swing in favor of the integrated suite. But as integration technologies have matured, these trade-offs are no longer as easy to evaluate as they once were and perhaps the pendulum is starting to swing again. And while the preference for a single integrated suite has been most prevalent in smaller enterprises (with limited Information Technology (IT) resources), SAP sees the target market for Financials OnDemand as medium to large enterprises, particularly those operating across a global, distributed environment. But then, very few medium to large enterprises are not global and distributed today.

SAP has long been a powerhouse in terms of providing financial management applications for large multi-national enterprises. So it has the expertise and experience necessary to provide a robust financial application that will support a global enterprise. And the company is also smart enough not to reinvent the wheel, but instead base the solution on one that already exists. With the goal of providing a cloud-based solution, SAP Business ByDesign was the logical choice.

SAP Business ByDesign is most often referred to as a “business suite”, but it fits the Mint Jutras definition of ERP, as a tightly integrated suite of modules that provides an operational and transactional system of record, which of course, includes financials. It is also SAP’s newest ERP solution, designed for the cloud and offered exclusively as a multi-tenant Software as a Service (SaaS) solution.

Because it was designed and developed as a tightly integrated suite, accounting modules within Business ByDesign assumed other Business ByDesign modules to be the source of transactions that are ultimately recorded in the general ledger. So part of the process of bringing Financials OnDemand to market was to decouple the financial processes from that tight integration, creating a more “loosely coupled” and “pluggable” architecture. To integrate with Financials OnDemand, other applications simply need to map to its model of financial objects. For the layman, those financial objects might be customers, suppliers, orders, accounts, etc.

So we see that SAP Financials OnDemand is indeed a cloud-based financial management system, capable of standing on its own legs or fairly easily integrate with other applications. But what about the claim that it is “real-time” and “insight-driven?”

 

SAP Turns to HANA for Real-time Insights

To meet this goal, SAP turned to HANA. HANA represents some game-changing new technology. It has been described in the past as a database and also an in-memory computing engine and a platform for development. But to the business executive making a decision about a financial management solution, the underlying technology is only of interest in terms of the value it brings. The value of HANA is primarily speed and speed supports real-time data and decisions.

But there are several aspects of speed. One is the sheer computing speed. Volumes of data have increased exponentially over recent years. At the same time companies need to deal with a finer granularity of detail. For example, it is no longer sufficient for many companies to plan, forecast and manage at aggregate levels. Revenue and cost forecasts previously identified at a business unit or a regional level, must now dive down to the individual product or customer level, or perhaps even by customer and product. Think about how this inflates the volume of data and the granularity of the forecast and the speed at which the basis for decision-making changes. With traditional methods of storing and analyzing data we often measured elapsed time in hours and days. HANA has the potential of reducing that to minutes and even seconds.

But how does speed provide insight and support insight-driven financial management? If you can effectively deal with vast volumes of data, you can analyze performance that much more quickly and also more iteratively. First pass analyses often produce the need to dive deeper and possibly slice and dice the data a different way. When those iterations take days, decisions are made with the analysis at hand. There simply isn’t time for another cut, another way of looking at the detail. Insight is limited.

In the past the only way this type of analysis could be done in the proper timeframe was to anticipate how it would need to be summarized – by business unit, region, product line, etc. That meant more files and file structures. But what happens when that changes? How do you cope when the organization is restructured, the market changes, you introduce new products, or you experience a merger or acquisition?

If you have the technical power and speed to calculate what you need on the fly (ad hoc) then you don’t have to anticipate the levels of summarization, the different ways you might want to analyze the data. If all you have to do is capture the raw transaction and decide later how to summarize, slice and dice, then it makes it reduces the complexity of the setup, (no need to build in hierarchies that are hard to change later) and the file structures.

Admittedly, the elimination of the files is more value to the developers. But by making the developers more efficient, you can ultimately deliver more value to the consumer of the technology. And if you take it one step further and make it truly self-service for an astute business analyst, you remove an entire layer of delay and disruption in meeting new and changing needs of the business. This is what financial management solutions powered by HANA can deliver.

Are companies ready to put this in the cloud?

The willingness to consider SaaS and cloud based solutions has lagged the hype cycle that industry observers have created. Front office applications such as sales force automation (SFA) and customer relationship management (CRM) solutions led the way. These “engagement systems” lent themselves easily to a shared environment where instant access and collaboration are the keys to success. Yet accounting and other back office “transaction systems” seemed to be the antithesis, where control, privacy and security are paramount. But the resistance to putting transactional system of records in the cloud is disappearing and interest is not limited to small companies.

In a 2011 Mint Jutras enterprise solution study, the willingness to consider a Software as a Service (SaaS) deployment option for transaction-based systems of record increased steadily from 42% in small companies (those with annual revenues under $25 million) to 59% in large enterprises (revenue over $1 billion). The 2013 study results are now coming in and it looks like the interest in SaaS based solutions continues to grow.

Why is it that these companies are now more likely than small companies to consider a cloud-based solution? Chances are these companies are not single, monolithic organizational structures. Instead they are multi-divisional and multi-dimensional. What better way than a cloud deployment to get them all on the same financial page? While divisions or business units might have been left to their own devices in the past, today medium and large enterprises are defining standards and holding operating locations to these standards.

But will “Mix and Match” Work?

In taking this modular approach, SAP has made the assumption that customers will want to “mix and match” and pick cloud solutions that best fit their specific business problems. The further assumption is that customers will increasingly call for a cloud-based, modern financials “engine” to tie all these cloud solutions into a loosely-coupled suite with a common financial core. This approach won’t be for everyone. There will still be those that prefer the tightly integrated business suite approach. Those that find the financial management functionality of Financials OnDemand appealing but are looking for a single, tightly integrated suite might prefer the full Business ByDesign suite.

This approach is most likely to be viewed favorably in enterprises that have already ventured into the world of cloud-based solutions but not for all their needs. Perhaps they are running a cloud-based solution like Salesforce.com as a result of the sales organization feeling the enterprise solutions did not address their (sales force automation) needs. So they circumvented the IT department all on their own. Or perhaps it was with the blessing of IT. Either way, they already have experienced the (typically) lower costs, easier upgrades and better support for remote work forces that a SaaS solution can provide.

Now might be the time to offer them an alternative to existing legacy solutions or predominantly on-premise based solutions. In this case a cloud-based solution, particularly one that is loosely-coupled, might fit well into their existing environment without causing a complete rip and replace of all existing solutions. Add to that the speed and power of HANA for real-time insights and you might just have a perfect storm that results in a significant step forward for the progressive business.

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PLEX SYSTEMS: A VETERAN SAAS ERP PLAYER IN MANUFACTURING

Over the past several years resistance to Enterprise Resource Planning (ERP) delivered as Software as a Service (SaaS) has been slowly giving way to acceptance. Today, for manufacturers with top performing ERP implementations the pendulum has definitely swung. The Mint Jutras ERP Solution Study found those with World Class implementations are a stunning 63% more willing to consider SaaS than traditional on-premise deployment. In considering The Pros and Cons of SaaS ERP, the advantages appear to outweigh the disadvantages. As noted in that report, the depth and breadth of choice between solutions and deployment options have never been greater.

While many of the SaaS ERP solutions for manufacturers are fairly new to SaaS or just now venturing into the world of manufacturing, Plex Systems and its solution, Plex Online, stands out as a true veteran of both manufacturing and SaaS. How does this fast-growing ERP vendor deliver the advantages of SaaS and how does it address fears that remain in moving ERP to the cloud?

A Long History of SaaS and Manufacturing

Plex Systems, originally established as Plexus Systems in 1995, has offered its solution exclusively through a SaaS deployment model since 2000. How it came to offer an early SaaS solution, long before SaaS ERP was well-accepted is an interesting story. It had little to do with pioneering SaaS and a lot to do with pioneering rapid application development (RAD). As the founders steadily perfected what is today popularized as agile development methodologies, they were looking for a way to deliver innovation as quickly as they could develop it. Knowing traditional upgrade processes could be costly, time-consuming and disruptive, what better way than to relieve their customers of the burden of the upgrade process?

Given the slow acceptance of SaaS ERP until fairly recently, Plex’s early success was in spite of its SaaS delivery model, not because of it. In fact, until recently, if you asked Plex customers if they would consider SaaS ERP, there was still a fairly good chance they would say no (even though that is in fact what they were running). But they would consider ERP hosted by their ERP vendor. They knew the solution wasn’t on their premises but how it was purchased and delivered was of lesser consequence. Most bought because of the solution itself.

From the very beginning Plex’s solution was offered as a multi-tenant SaaS solution where multiple companies use the same instance of software. Yet Plex’s rapid development methods allowed them to customize the delivered solution to the point where customers never needed to care whether the solution was single or multi-tenant. As far as they were concerned the solution was customized to their particular needs. And Plex’s unique approach to opt-in enhancements meant they were not distracted or disrupted by fellow customers’ modifications.

In addition to a long history of SaaS deployment, Plex also has deep roots in manufacturing. Headquartered in Troy, Michigan, in Detroit’s back yard, the earliest Plex customers were squarely in the automotive industry. But in recent years Plex has also steadily expanded functionality to other industries. Think of it more as a gradual expansion of the boundaries of existing vertical functionality than any revolutionary or speculative leap into a new sector.  For example, unique traceability requirements for automotive as well as some early customers that mixed rubber to coat steel coils made it easy to transition to recipe management and traceability for processed foods.

Support for Lean methodologies and particular attention to quality management were baked into the solution from the beginning.

So while Plex Systems is not one of the titans of the ERP world, it has an impressive tenure in SaaS and strong roots in manufacturing from which to deliver the advantages of SaaS ERP explained in depth in The Pros and Cons of SaaS ERP. Some of these perceived benefits such as the ability to treat ERP as an operating expense (OpEx) versus a capital expense (CapEx) and the avoidance of Information Technology (IT) resource costs (including hardware and staff) are delivered by many SaaS solutions. But when it comes to delivering the benefits of lower costs and more upgrades, both high in priority, it is important to understand what each solution provider offers.

For a full analysis of where and how Plex fits in as a SaaS ERP provider for manufacturers, please visit the following site: http://erp.plex.com/erp-veteran-mint-jutras (registration required)

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NetSuite eCommerce: To Suite or Not to Suite: That is the question

Earlier in the year at SuiteWorld 2012, NetSuite announced “Commerce as a Service” (CaaS), the latest in the growing number of “as a Service” acronyms. At the very core of this new offering is NetSuite SuiteCommerce, which combines an eCommerce platform with a customer experience management system that is uniform regardless of customer touchpoint. Unlike bolt-on eCommerce systems, the integration with back office fulfillment, billing and support services is seamless and transparent, because all are built and designed as an integrated suite. Yet even though built and delivered as a fully integrated suite, the eCommerce capabilities can also stand on their own merit. NetSuite customers have the choice of implementing a full end-to-end solution, or just the pieces they need.

When is a Suite not a Suite?

eCommerce is not new for NetSuite. With its roots buried deeply in the cloud, it has always been about delivering Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and eCommerce as a single platform. While developed as an integrated end-to-end solution, the suite can be implemented all at once or modularly and incrementally. NetSuite reports that 98% of its 12,000 customers take the full suite approach (although many implement in a modular fashion) while only 2% go the route of what it calls CRM+. The “+” refers to order management capabilities added to traditional CRM.

NetSuite views the customer order as the heart and soul of a business. While it provides an application development platform and encourages its channel partners to develop incremental solutions around its data model, NetSuite takes ownership of any piece of the suite that directly manages the customer order.

From ERP to Commerce Engine

So how does Commerce as a Service impact this suite approach? NetSuite’s Commerce as a Service essentially transforms its business management application into a commerce-aware platform that can flexibly, yet uniformly manage the interaction with any and all customers regardless of channel, whether through traditional transactions, a website, a smart phone, social media site or in a store. NetSuite’s business management application essentially combines ERP with CRM, therefore addressing and integrating both front office and back office needs. Yet commerce is the engine that drives business, and customer orders provide the fuel that powers the engine. Hence NetSuite’s insistence on “owning” the part of the application that directly manages customer interaction and orders.

While many industry observers today talk about moving from transactional systems of record to systems of engagement, “from” and “to” is the wrong way of looking at this. You need both. You need to manage and maintain all the transactions that power your business, and at the same time you need to better manage interaction (engagement) with your customer. This used to be relatively simple because business-to-business (B2B) was managed through business documents (often paper-based) reflected as purchase orders and sales orders while business-to-consumer (B2C) transactions happened in stores.

Over the past two decades, this rather simplistic approach slowly evolved to the diversity we see today. Along the way came first generation eCommerce solutions that were largely bolted on to existing business management applications. After all, the customers and products were already stored in these enterprise applications, along with the transactions that formed the system of record of the business. So either these bolt-on applications needed to be integrated into the existing business applications, or (just as likely) they stood apart with their own customer and product masters. Integration, if it existed at all, was usually characterized as an arm’s length interface.  This interface was often manual and resulted in redundancy of data. NetSuite took a different and rather unique approach in building eCommerce right into the business management system.

Taking a suite approach to design and development to address these new modes of commerce insures that both front and back offices are in sync and are not introducing a new layer of data redundancy, requiring off-line synchronization. Taking a modular approach to installation and implementation allows customers to implement new features as needs evolve.

What’s new in the Platform?

The platform consists of three new technologies:

  • SuiteCommerce Experience: the underlying tool that allows NetSuite to deliver rich user interfaces quickly regardless of touchpoint (website, smart phone, social media site, etc.)
  • SuiteCommerce Services: these new services expose NetSuite’s back-end commerce functionality and data as services to the SuiteCommerce Experience and any other commerce front-end application. For the businessperson, this enables customers to apply business logic across multiple touch points. For example, promotions (and also credit limits) can be managed across on-line, telephone and in-store transactions. Think about a customer that orders product across a variety of different channels. Does the system recognize the same customer and apply logic universally?
  • NetSuite Commerce Platform: The commerce platform provides all the business processing capabilities including order management, inventory management and payment processing, as well as personalized promotions, merchandising, account management and support. This combines traditional business processes (transactions) with built-in sales and marketing tools (engagement).

Key Takeaways

NetSuite views commerce, and therefore the customer orders, as the very lifeblood of a business. As a result it closely guards the development of applications that directly manage those customer orders. But it also recognizes the diversity of sources of customer orders. Long gone are the days when only traditional paper-based purchase orders were converted to sales orders and long gone are the days when consumer purchases were only transacted in a physical store. The world of commerce today is much more diverse.

And yet the key to handling this diversity is in simplifying both the customer experience as well as the back end business processes. Instead of merging different pieces together in the hope they will one day all fit together, it has taken the approach of designing an integrated end-to-end process that recognizes diversity but introduces a level of uniformity.

Recognizing that many companies can’t handle a big-bang approach to changing their business and some are intimidated by the breadth and scope of an end-to-end ERP solution, NetSuite is toning down its “suite message.” However it continues to develop an end-to-end integrated solution that supports both front office and back office enterprise activity, along with the commerce that fuels the business. Whether you implement all of it or pieces, all at once or in modular stages, NetSuite has taken on the challenge of making sure it all works together seamlessly.

 

To read more please visit:

https://forms.netsuite.com/app/site/crm/externalleadpage.nl?compid=NLCORP&formid=2425&h=f4ab4d3ed91a39e870ee  (registration required)

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Shedding More Light on SAP’s Cloud Strategy

Last week I visited SAP’s US headquarters in Newtown Square, PA for an analyst event. During that event Sven Denecken delivered an update on SAP’s cloud strategy. Sven is SVP of Cloud Strategy and Head of Co-Innovation. While he reports to Lars Dalgaard, former SuccessFactors CEO and now SAP Executive Board Member in charge of all that is “cloud” at SAP today, Sven comes from SAP proper (i.e. not from SuccessFactors) and knows the ERP game quite well. As you might recall from my previous post from May, I walked away from SapphireNow with questions and concerns about SAP’s cloud strategy and feared that perhaps SAP had sacrificed its ERP DNA for cloud DNA. After speaking with Sven, I feel better, even though the story hasn’t really changed all that much.

To summarize Sven’s presentation, cloud is not only hype, but a reality at SAP. The goal is to bring the next generation of cloud applications to market. Next gen means a consumer-like user experience, with “mobile first” development, rapid innovation cycles and customer co-innovation to support greater business flexibility and agility. Social collaboration is not viewed as a separate pillar but as an embedded, integral part of the product design. And for added measure, toss in real-time data and content, B2B exchanges and analytics.

In keeping with the Lars party line, Sven also talked about “loosely coupled” solutions. Yet somehow when Sven, an ERP veteran, talked about “loosely coupled” it came across less like breaking ERP apart and more like a portfolio of applications, including ERP, which could be consumed at an individual company’s own pace. This is familiar territory since growing ERP footprints have made it increasingly difficult to determine where ERP ends and other applications begin. These solutions would be connected through open, cloud-based integration. Integration would be tight (perhaps seamless?) for SAP applications but also available to connect to 3rd party cloud solutions as well as existing on-premise solutions.

Perhaps because in the days before Lars, SAP Business By Design had been declared the go-forward platform for cloud development, and the SuccessFactors solutions were obviously not developed on it, the question of platform was raised at SapphireNow. But Lars downplayed it, saying customers don’t care about the platform; they care only about the user experience. And he was setting out to make beautiful products more beautiful. But beauty has to be more than just skin deep and let’s face it: Products developed on different platforms are harder to integrate than those sharing a common platform. And while in a pure cloud environment the customer is shielded from worrying about such things as platforms, it makes the supported environment inherently more complicated.

So while SAP will not be in the business of Infrastructure as a Service (IaaS), and it already clearly plays in the Software as a Service (SaaS) game, it intends to offer a Platform as a Service (PaaS). While now it has multiple platforms, ultimately SAP will have one standard PaaS offering and it will be based on NetWeaver. Admittedly this will take time and acquisitions will continue to make this a challenge over time.  The platform needs to be open since customers have already invested in applications and these need to keep running. This has the potential of adding a huge degree of complexity for SAP, but it wants to “own” these connections in order to offer its customers one hand to shake for applications and platform, with end-to-end security, high availability and disaster recovery.

SAP intends to offer standard integration connecting cloud applications to the Business Suite (on premise), and also offer cloud-based (SaaS) fully integrated suites (ERP) for mid-market customers (with Business ByDesign and Business One).

A couple other points made that might be worth noting… Remember Sven referred to “mobile first“ development, meaning any new development must be able to run on a mobile device right from the get-go. This represents a big change for the development teams. If you initially limit the size of the screen, it forces the design team to simplify and think first about essentials. They can then add the complexities later, if at all.

The other point is hinted at with Sven’s somewhat unusual title. Not only is he SVP of Cloud Strategy, he is also the head of “co-innovation.” Co-innovation refers to the close relationship SAP has developed with its customers, along with the adoption of agile development methodologies. SAP’s promise of rapid innovation cycles and customer co-innovation translates to four releases per year, delivered through true multi-tenancy. That means customers all run on a single, shared instance of the software, and the solution provider decides when it will be upgraded. While some customers balk at this concept, preferring instead to control their own upgrades, in fact if innovation is delivered as optional features, there is little down-side to the forced march forward of a multi-tenant environment and a lot of upside. While the customer may not be entirely ready to adopt new features, the vendor bears most of the burden of the upgrade and innovation is there waiting when the customer is ready.

There are certainly many other facets to SAP’s cloud strategy, but this update was at least enough to lend more clarity to a cloudy solution.

 

 

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UNIT4 Agresso Sparks a Debate Over Multi-tenant SaaS

 

Looking Beyond The Label to The Real Value Add

On June 28, 2012, UNIT4, a global enterprise software provider, sparked a debate by announcing that its Agresso Business World ERP has been accredited by Technology Evaluation Centers (TEC) as “reinventing cloud multi-tenancy.” UNIT4 has broken free from the traditional multi-tenant model of housing all clients’ data in a shared database, partitioned for privacy and security. While all clients share a single instance of the software, each has its own database. The debate? Is this non-traditional approach really multi-tenant? In the world of enterprise applications labels have become important because unless you can check the right boxes, you don’t get invited to the party. But a word of caution: Look beyond the label to the real value delivered.

Understanding the Labels

There is still much confusion over cloud and Software as a Service (SaaS) delivery models and much of this confusion is regarding the issue and definition of multi-tenancy. Some industry observers make it a prerequisite for “true SaaS.” Others put further restrictions on it and create their own brand of SaaS.

Cloud versus SaaS

Many use the terms “cloud” and “SaaS” interchangeably, but there are some important differences. The National Institute of Standards and Technology (NIST) is often quoted as an authority on such definitions. NIST defines cloud computing as:

“…a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources—for example, networks, servers, storage, applications and services—that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

It goes on to describe five essential characteristics, three service models, and four deployment models. SaaS is one of the service models (the deployment models are private, community, public and hybrid.) NIST’s Cloud Computing Synopsis and Recommendations goes on (for 81 pages) to describe many different facets of cloud, but it is clear that cloud and SaaS are not synonymous or interchangeable.

For our purposes here, let’s simplify the distinction between cloud and SaaS in the context of enterprise applications:

  • Cloud refers to access to computing, software, storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public or any flavor in between.
  • SaaS is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It is accessed over the Internet and is generally paid for on a subscription basis. It does not reside on your computers at all.

All SaaS is cloud computing, but not all cloud computing is SaaS.

Multi-tenancy

Some industry observers would have you believe that enterprise applications must be multi-tenant in order to qualify as SaaS or even cloud computing. Some refer to NIST to support that belief. Indeed one of NIST’s five essential characteristics of cloud computing is resource pooling.

The provider’s computing resources are pooled to serve multiple consumers using a multi-tenant model, with different physical and virtual resources dynamically assigned and reassigned according to consumer demand.”

Those insisting on multi-tenancy make the assumption that the application and the database must be among those pooled resources. But NIST doesn’t even list the application in its examples of pooled resources. NIST does list as examples: storage, processing, memory, and network bandwidth. Storage of course could be interpreted as the database, but it also could be interpreted to be the storage devices housing the database(s). So NIST doesn’t insist on the application (or the database) being shared among multiple tenants in order to be considered either cloud computing or SaaS.  But in order to be multi-tenant, there does need to be some resource pooling.

While definitions might vary, Mint Jutras has always distinguished between multi-tenant and single-tenant (also referred to as multi-instance) as follows:

  • Multi-tenant SaaS: Multiple companies use the same instance of hosted software; configuration settings, company and role-based access personalize business processes and protect data security.
  • Single-tenant (or Multi-instance) SaaS: Each company is given its own instance of the (hosted) software, but may share common services, such as an integration platform, and security.

The Debate

Indeed the debate over multi-tenancy seems to be fueled entirely by industry observers and the solution providers. In fact some vendors keep the debate going by accusing other vendors of offering “false cloud” solutions. Their definition of a “false cloud” seems to be any cloud offering that is delivered differently than their own. As with other technology-based debates, end users (those actually subscribing to SaaS solutions), especially line of business executives, often don’t understand the difference between multi- and single-tenancy and don’t seem to care. But they do care about the value delivered by the different options.

Up until now UNIT4 has not actively engaged in this debate, preferring instead to focus entirely on what it feels is the model that delivers the most value to its customers. However, with this announcement, it finds itself squarely in the middle of it whether it wants to be or not.

The Value of Multi-tenancy

So what is the added value delivered through multi-tenancy? The value to the solution provider is clear. It is far easier and more cost-effective to manage one version of the software, rather than a separate instance for each customer. Presumably the added efficiency allows the solution provider to focus more resources on improving the technology and developing more features and functions, which directly benefits its customers. That translates to more frequent and more robust updates, hopefully as “opt-in” enhancements. After all, the customer may not be ready to consume the new features on the same timetable as they are delivered.

Of course simply because the solution provider offers a multi-tenant solution doesn’t guarantee updates will be either more frequent or more robust. Those offering both SaaS and on-premise solutions (and this includes UNIT4) also need to be cognizant of the clients that manage their own upgrade process.

Is there a perceived downside to multi-tenancy? Yes, there can be. The Mint Jutras 2011 Enterprise Resource Planning (ERP) Solution Study explored both the appeal of SaaS ERP as well as concerns over this deployment option.

While the upgrade process is viewed by many on the plus side of the SaaS equation (48% see reduced cost and effort of upgrades and 39% value more leading edge technology through more frequent updates), some actually view it negatively. Twenty-six percent (26%) of respondents expressed the concern that they were losing control. Indeed in a multi-tenant environment, the customer typically has little control over the timing of the upgrades. However is there really a negative impact? If the solution provider bears the burden of the effort associated with upgrading and innovation is delivered in such a way that the customer may optionally choose to take advantage of an enhancement – or not – then there is no down-side and a lot of up-side.

In many cases “We want to control our own upgrade process” actually translates to “We don’t have time” or “We don’t want the disruption of an upgrade.” And yet by not keeping current on the latest release of the software you are essentially letting your maintenance dollars go to waste.

Of course in a SaaS environment, those would be your subscription dollars. Even though upgrades at first might feel like a forced march, that forced march is actually good for you. All bug fixes and regulatory requirements are in place. When you are ready to turn on the new functionality, it will be there. So the combination of frequent updates and this “opt in” capability is an important characteristic by which you should evaluate potential solutions.

The perception of the need for customization may also cause companies to shy away from a multi-tenant environment. In fact 25% of our survey respondents indicated the requirement for heavy customization would prevent them from considering SaaS altogether. Yet there are many different ways of “customizing” a solution today and not all of them involve source code changes or present barriers to a multi-tenant SaaS solution.

This is where Agresso Business World’s Vita architecture comes in. UNIT4 specifically targets what it calls Businesses Living IN Change (BLINC) by designing its solution to enable those organizations to embrace change simply, quickly and cost-effectively. This means adapting the solution without the kind of source code changes that can be troublesome in a multi-tenant environment. The Vita architecture dynamically couples data, business processes and the delivery methodology to move forward in lockstep even if the very structure of the organization changes resulting from merger and acquisition, restructuring, new or changed business processes, compliance requirements or financial management driven change.

But what about the database?

Notice the Mint Jutras definition of multi-tenant does not reference the database at all, even though traditionally most solution providers offering multi-tenant solutions co-mingle multiple clients’ data in a single, partitioned database. But the real value of this is not in the co-mingling of the data but in having a single definition of the structure of the data. In this way, the single instance of the software can always find the data it is looking for in the same way.

Think about it like floors in a hotel. The layout is and configuration of rooms is the same from floor to floor. The bathrooms are always located in the same spot and laid out the same way so that the plumbing can run in a straight line through the various floors. The same is true for the heating and air conditioning. This makes for easier maintenance as well. But each room is separate and secured from all the other rooms, not just with a partition, but also with a locked door.

Each Agresso Business World SaaS client has its own database, separate and secure, but all share the same definition and structure. This creates the benefit of portability and security without compromising the multi-tenant advantage of a single instance of the software. The issue of portability becomes important in the event a client decides to move from a SaaS deployment to on-premise.

But security is an issue all by itself. The Mint Jutras ERP Solution Study confirmed that security is still the top concern in considering a SaaS deployment option. Mint Jutras would agree that every company implementing any enterprise application, and especially those including the financial system of record for the business, should be concerned about security. But everyone should be concerned over security, regardless of deployment option.

Many assume an on-premise solution is inherently more secure than a cloud-based SaaS solution. But is it? Unless your data center is completely contained with no possibility of access from outside the four walls of your building you could be vulnerable to unauthorized access. That means no VPN access. It means no external consultant or guest ever connects his or her laptop to your network. It means no laptop ever leaves the building to be potentially connected to any other network, then brought back and connected to yours. There aren’t too many installations, if any, like this in the world today.

So would you rather secure your own data, or have a company whose livelihood and very existence depends on security, one that has passed a SAS 70II audit, secure it?

Furthermore, recent news suggesting that more than 236,000 LinkedIn passwords may have been compromised reminds us that even the most highly visible and tightly secured cloud based data can be vulnerable. A report from the Privacy Rights Clearinghouse (PRC) notes 535 breaches during 2011, involving 30.4 million sensitive records. Records leaked may have contained information such as Social Security numbers, financial account numbers, driver’s license numbers and medical information.

So if these kinds of security breaches are possible, which is a safer environment? One in which a thief needs only hack into a single partitioned database to have access to the data of potentially thousands companies? Or one in which a thief would have to hack into thousands of individual databases?

Conclusions and Key Takeaways

The debate over true SaaS and multi-tenancy is likely to continue as long as solution providers offer different flavors and various industry observers form different opinions. If you simplify the definitions of cloud and SaaS, as well as those of multi-tenancy and single-tenancy you find many of the arguments about what is “true” SaaS disappear.

However there are some real benefits to a multi-tenant environment, benefits UNIT4’s approach with Agresso Business World takes advantage of. The rewards of multi-tenancy are in the ability to manage shared resources in an efficient and cost effective manner, particularly when these efficiencies result in more frequent and robust enhancements. These advantages are not compromised by allowing each SaaS client its own database, providing the definition and structure remains consistent. And in doing so, portability and security is enhanced.

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