On Demand

SAP’s Cloud Strategy: Striving For Clarity

Sometimes procrastination pays off. Whenever I attend an event like SapphireNow, I always write something about it. In the case of Sapphire in particular, I usually have several things I want to “say.” But it has been over a week since I headed out from the event (a bit early this year) and yet this is my first attempt to write anything. Why? First of all, I was on the road, but that usually doesn’t stop me. The bigger reason… I had been really looking forward to hearing about (and writing about) SAP’s cloud strategy.  With the acquisition of SuccessFactors and the reorganization of the teams, I had a lot of questions. Unfortunately the presentations (to groups both large and small) this year created more new questions than they answered and I struggled with how I could publicly voice my lingering questions and concerns constructively.

But before I resolved that dilemma, the picture changed.

Yesterday (May 22, 2012) SAP announced it would expand its cloud presence through the acquisition of Ariba. While I know Ariba quite well, I haven’t followed the company closely over the past several years. The SAP announcement said, “Ariba is the second largest cloud vendor and runs the largest global trading network, driving more than $319 billion in commerce transactions among more than 730,000 companies.” The acquisition will make SAP a clear leader in cloud Supplier Relationship Management (SRM) and also has a direct impact on some of my concerns.

My Questions

To put this in context, let me explain some of the questions I had after I heard Lars Dalgaard, former SuccessFactor CEO and now SAP Executive Board Member, speak about the company’s cloud strategy. During his keynote, and also in a press release launched during the show, cloud solutions were announced for four lines of business to manage people, money, customers and suppliers. That statement alone raised no red flags with me. Every company deals with those four elements in some form or another. But the comment Lars made next did cause concern. He added something along the lines of, “That covers everything any company would need.” With my own roots extending deeply in the manufacturing space, my first thought was, “Did I hear that right?” Those four elements are indeed critical to every manufacturer, but there’s also more to manage, like inventory, planning and scheduling, engineering and production. I Tweeted:

Didn’t hear @LarsLuv talk about #Manufacturing processes in #cloud #sapphirenow

So just to be sure, in the press conference that followed, I asked if this had been an oversight or had SAP specifically decided against competing in this market. The answer I got (from Lars himself) was that SAP thought the interest and demand for other solutions far outweighed the interest and demand for manufacturing solutions. This included solutions that surround ERP with functions such as CRM and HCM. History bears this out. Adoption rates for cloud solutions for these extensions far exceeds cloud-based ERP. But that’s more about what’s running in the cloud, not what kind of company is running it. So that implied (but didn’t specifically state) that other applications were a higher priority for the cloud than ERP.

OK, that’s a business decision and SAP appeared to be going where the easiest sell and the most opportunity was. I followed up with another Tweet saying it didn’t look like SAP was going after the same market as Plex Systems, a SaaS only ERP solution provider that markets and sells exclusively to manufacturers. Response in the Twitter stream went like this:

Hide conversation

 

William_Newman: RT @ERP_cindyjutras: Didn’t hear @LarsLuv talk about #Manufacturing processes in #cloud #sapphirenow > can already happen w/ @sapbydesign 11:46am, May 15 from Twitter for iPhone

 

LarsLuv: @William_Newman @erp_cindyjutras @sapbydesign that’s right, and we’re excited about this 2:23pm, May 15 from Twitter for iPhone

Now of course, having followed Business ByDesign since its very first coming out party in New York City in September 2007, I knew it had manufacturing functionality and I have spoken with more than a few manufacturers that use it today. That was partly why I asked the original question. But these exchanges left me more confused. I don’t expect the guy at the top to get mired in the details, but is SAP going after manufacturing with cloud solutions or not? I know it has a strong solution in on-premise solutions (the Business Suite and Business All-in-One plus complementary manufacturing and supply chain planning and execution applications), and I know partners strengthen the Business One offering for manufacturers. But I’m left thinking ByDesign will compete better against NetSuite’s solution for light manufacturing than it will against Plex Systems’ Plex Online or other mature ERP solutions for manufacturers now offered in various flavors of SaaS or hosting.

So what about ERP in general?

The second sentence of the cloud strategy press release continued, referring to the four lines of business, “These are planned to be offered in a consistent way and seamlessly integrated into enterprise resource planning (ERP) business software.” Now we already heard that SAP was responding to demand for other applications that extend and surround ERP (like HCM and CRM), and this statement implies these other applications will be fully integrated with ERP. Indeed Lars talked both about “loosely coupled end-to-end integration” and the press release states, “SAP plans to deliver its multitenant cloud solutions as a loosely-coupled suite of best-of-breed applications.”  But nowhere in the press release did it specifically talk about delivering ERP as part of the cloud strategy. Yet if Business ByDesign isn’t ERP then I wouldn’t know what else to call it today. And it is only available as a multi-tenant SaaS solution (i.e. via the cloud). Does this mean ByDesign will be transformed from ERP into a loosely-coupled suite of best-of-breed applications? Is there a difference?

Loosely Coupled versus Tightly Integrated

The difference lies under the covers. There is work to be done in order to make this transformation. SAP will be pulling different components out of ByDesign so they can stand alone. Finance will be first and in fact will be the solution to satisfy the “money” line of business referenced previously. This allows SAP to bundle different elements together like finance (money) and human capital management (employees). Other functions will be prioritized and extracted in the future, but finance is the logical place to start as it is probably the most marketable as a separate “best of breed” application.

Everyone needs general ledger, accounts payable and accounts receivable and many smaller companies are intimidated by the thought of implementing a full blown integrated ERP. And in offering these loosely coupled applications it provides the customers with more choice to keep other non-SAP solutions or even to buy new non-SAP solutions. While this provides more choice, it also encourages complexity and makes less business sense from a cross-sell and up-sell perspective.

The advantage of a tightly integrated ERP is the ability to eliminate redundant data and reduce complexity. There used to be an intrinsic functional advantage of “best of breed” applications over those included in ERP. The disadvantage (trade-off) of course was lack of integration. But those functional differences have shrunk over the years as ERP solutions offer more robust features and functions even in some non-core modules. And there is no integration required between the modules of ERP – it is all built in.

In terms of redundancy of data, with integrated ERP there is only one customer master shared by order management, accounts receivable and any other function that deals with customers. There is only one supplier master file shared by purchasing and accounts payable and perhaps manufacturing planning. This is one of the reasons most ERP vendors have moved away from selling individual modules in favor of a bundled set of core modules and charging on a per user basis. A customer using fewer modules will have fewer users and pay less. As they expand into new areas, they add more users (and pay more), but there is no additional license or installation to worry about.

SAP appears to be bucking this trend and moving in the opposite direction, moving from fully integrated ERP to loosely coupled best of breed applications. So in pulling out the finance function, SAP will need to bring the customer and supplier master files along with them. OK, that’s just a packaging issue. But those same customer and supplier files will also have to be bundled with best of breed order management and purchasing solutions. Then if a customer buys finance, order management and purchasing, will they have two copies of a customer master and two copies of a supplier master? Probably not. There are other ways to handle this – most likely by defining these masters as meta data. And it makes it easier to deal with multi-vendor solutions. Good for the customer, not as good (business-wise) for SAP. This isn’t especially difficult, but it will mean that developers will be working on this instead of working on innovation.

How does Ariba change the game?

Today all cloud offerings across these four lines of business: customers, money, employees and suppliers are managed in a single business unit run by Lars Dalgaard. When (and of course if) the acquisition is completed, Ariba will run as a separate SAP company. SAP has done this twice before rather successfully – first with Business Objects and then with Sybase. Eventually both were quietly merged into the SAP fold.  But in the meantime, there will be two business entities within the SAP corporate structure that together provide all the cloud offerings. When that happens the supplier area will land in the house of Ariba, as it should.

I actually think this will be a very good thing. Lars has great experience with Human Capital Management. He has a proven track record for delivering on a go-to-market strategy (something that has been lacking with Business ByDesign) and he has the necessary cloud DNA. He’s already brought energy and focus to SAP’s cloud strategy. But a global trading network and experience with supply chains and supplier networks is something that fits much more naturally into a manufacturing (and also a distribution) environment and Bob Calderoni (current CEO of Ariba) clearly has more experience on that front. Will Business ByDesign be divided up and shared or will it stay with Lars? I suspect had Bob been at Sapphire I might have gotten different answers to my questions about manufacturing and maybe even those about Business ByDesign.

Bottom line though… even as Bob and Lars manage different segments of SAP’s cloud strategy it is imperative that they work together as a single cloud team. The SAP co-CEOs said as much. And eventually SAP will quietly merge Ariba into SAP proper. At that point there may only be room for one of these powerful leaders at the top. Will this fact influence the journey up until that happens? Time will tell.

 

 

 

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Infor’s Innovation Team Helps the Company Go Faster

After a 4-year hiatus, Inforum2012 made a big splash in Denver this week. I attended the last live Inforum back in 2008. There was also a “virtual event” in 2009. But, in my opinion, a virtual event just doesn’t have nearly the same impact as a live one. The Lawson customers in attendance haven’t had to wait so long. The last Lawson CUE was held just about a year ago in Boston. But this week, with no less than 21 different press releases talking about everything from the reinvention of the company under its new leadership to numerous technology and product announcements, Infor did a lot of catching up.

So given all these different announcements, what was the most important message I heard? I think it all boils down to the theme of the conference – Go Faster. And at the center of that theme is a fairly new group within Infor, the innovation team led by James Willey. What is this team all about? I think one of James’ team members summed it up pretty well.  “We have cool ideas and we’re going to build cool stuff. Then we throw it out to the different teams for them to pick it up.”

The reference to “different teams” has resulted from a long history of growth by acquisition. So there are different product teams, but with a renewed industry focus last year, it also means different industry teams. And there is not a simple one-to-one relationship between the two. It’s more like many-to-many relationships. A single industry is likely to be broken down into micro-verticals. The example Charles Phillips used on stage was in food and beverage. Dairies, meat processors, brewers and bakers (all target markets for Infor) share the common category of food and beverage, but are also each unique. On the other side of the equation, Infor has at least a couple of products that target food and beverage, including both Lawson M3 and Adage. So mapping solutions and teams is a bit more complicated than it appears on the surface.

This “cool stuff” includes

  • Intelligent Open Network (ION): lightweight middleware, providing common reporting and analysis, workflow, and business monitoring in one, consistent event-driven architecture (EDA)
  • Infor10 ION Workspace: a “consumer grade” user interface
  • Infor10 Motion: both mobile apps as well as a platform to develop them on
  • Local.ly (newly announced): a platform to deliver localized statutory reporting, accounting and tax content by country in a loosely coupled architecture

Through this “cool stuff” the innovation team powers a lot of the possible innovation in the industry-specific suites introduced with Infor10 about mid-year 2011.  And ION is at the core of a lot of the innovation. ION is based on much the same premise as Infor’s prior Open SOA (Service Oriented Architecture) was in the 2006 to 2009 timeframe in that it is meant to provide an environment that enables new functionality to be developed once and shared by multiple products in the Infor portfolio. However, unlike Infor’s Open SOA, which became very heavy and took years to develop, the new team has kept it lightweight and simple. It comes on 3 CD’s and can install in less than ten minutes.

But in keeping it lightweight, this forces some of the work back on the individual application development teams. And because Infor is in the applications business, not the middleware business, this means James’ innovation team doesn’t necessarily bring the innovation to directly to the market. The innovation team makes it available to the product and industry teams, who take it the final mile.

In order to take advantage of all that ION has to offer, the application has be what Infor calls ION enabled. I prefer to think of it as being IONized.

The individual application needs to provide a translation, sort of a mapping, to the Business Vault. Think of the Business Vault in ION as sort of a Rosetta Stone for applications. Infor still uses OAGIS (Open Application Group’s Integration Specification) as the standard template, along with its definitions of Business Object Documents (BODs). These BODs are really a combination of standard business objects (sales orders, purchase order, invoices, etc.) and processes (acknowledge a sales order, receive a purchase order, pay an invoice, etc.)

Infor’s strategic, go-forward products, which of course are based on newer technology, were the first to be IONized. But there are also a lot of customers on older legacy products. So the innovation team also built tools in ION to help IONize the older apps (e.g. MANMAN, older versions of BAAN, etc.). These tools essentially pre-process these business objects and then import them to ION, much the same way objects from non-Infor (3rd party) applications would be handled.

So there is work that must be done in order to take advantage of the innovation team’s efforts, but once that is done, the application teams get a lot of stuff for free. And that’s the real beauty of it – once the data in the application is exposed to ION, there’s lots that can be done with it, including complex event processing (CEP), making even older solutions exception driven. As data moves across, you can apply rules to it. If the cost changes by more than x%, notify certain roles or individuals. If the price change is too high, put an order on hold until it is approved. If the master data changes 5 times, you have 5 XML documents recording the changes and this can be tracked and reported.

If you recall, earlier I referred to the team as “fairly new.” In fact James (with his team) has been around and doing his “innovation” thing for a few years, ever since the decision was made to abandon the heavyweight Open SOA approach and stick to the Infor knitting, which was and is enterprise applications. But when Charles Phillips arrived at Infor James had a team of 8. Today it numbers around 110, a recognition of the power of a rapid application development mentality, coupled with a “develop once, re-use multiple times” approach and a willingness to invest in it.

The innovation team has a finger in all the hot topics today: cloud, mobility, social, the consumerization of IT, big data and embedded analytics. I say kudos to James and his team and encourage all the product and industry teams to bring the innovation that last mile, so Infor customers can finally keep pace with the fast-moving world of technology enablement.

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Exact America: Emerging from Stealth, Repackaged

Last week I had the opportunity to spend some time with the Exact America team. Exact has been pretty quiet the last couple of years, so in case you aren’t familiar with the company, here’s a quick summary:

Exact America provides business solutions (think extended ERP) for Manufacturing/Distribution small to midsize businesses (SMBs). Its parent, Exact is a Dutch company that has been around since 1984 when it was started by a few students in a garage. As a result Exact has always related to and served entrepreneurial businesses, and these often start out very small. In fact the Americas team targets SMBs with 2 to 250 employees. They do that with 4 different product lines:

  • Exact Globe is an ERP for project-based manufacturers, distributors and service providers. It includes Integrated Financials/Business management software, as well as Web-based field project management, integrated with project accounting. Also sold by Exact worldwide, it includes support for multiple legislations, language and multicurrency for international sites.
  • Exact Macola comes in two flavors: Exact Manufacturing Pro (for manufacturers requiring full shop floor control) and Distribution Pro (for light manufacturers, distributors and service providers). Both versions offer eCommerce, payroll and warehouse management as well.
  • Exact JobBOSS is packaged as management software for job shops, make-to-order and contract manufacturers. It provides these small “to order” shops with the ability to quote jobs, track labor and material, and control shipping, invoicing and job-costing processes.
  • Exact MAX reaches down into the small business sector as a Material Requirements Planning (MRP) add-on, to be run in conjunction with Microsoft Dynamics GP and QuickBooks or QuickBooks Enterprise Solution.  Exact MAX targets regulated discrete manufacturing companies in segments such as medical devices and aerospace, with its serial and lot tracing capabilities.

But there is also another very “horizontal” Exact product offering, known as Synergy. It had been quite awhile since I had last gotten a briefing from Exact and in fact, at the time (maybe 2007-2008 perhaps?) Synergy was the center point of discussion. Even back then Synergy was kind of hard to categorize. I remember walking out of the briefing thinking I wish I had it as a tool to manage my research projects. But it managed projects without being a project management application. It could also do customer relationship management, but it wasn’t CRM.  When asked what Synergy did, Exact would likely respond with, “What do you want it to do?”

That made it very flexible, but I suspect it also made it very hard to market. And something that is hard to market is also usually hard to sell. In reality, Synergy was being sold as a tool. And SMBs tend not to buy tools. They prefer to buy business applications that solve specific problems.

So now Exact is taking a different approach. In fact I would characterize this and much of what they have been doing the last couple of years as “re-packaging.” For example, a Total Quality Management offering was recently released as part of a JobBOSS update, and a CRM template is available for Macola users.  Expect some big announcements in the near future regarding this with the outcome being the transformation of Synergy from a tool into an application. Other re-packaging efforts include the two Macola products noted above: Macola Manufacturing Pro and Distribution Pr. Macola used to be sold as individual modules, with configurations tailored for each prospect or customer and priced accordingly. Now those same modules are available as two different “bundles” and the pricing complexity has been shrunk down to an all-inclusive per user price. Ultimately this makes the pricing and selling much simpler. Exact has also added a Quick Start program to make installation and implementation easier. And Macola is available “on demand” in a hosted environment, allowing customers who don’t want the burden of infrastructure on site to take advantage of a cloud deployment.

These changes were all made with customer satisfaction in mind. Exact is not setting out to position itself as the best bleeding-edge technological solution, but rather as the most trusted solution provider. Recognizing that a satisfied customer is not enough to guarantee customer references or retention, Exact’s goal is to create “extremely satisfied” customers and to become the customer’s trusted advisor. With a very long track record in the markets they serve, and a good stable of long-time, customers, loyalty and referrals are the ultimate goal.

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Infor’s Inforce Everywhere Completes Salesforce’s 360 Degree View of the Customer

 

Today (March 12, 2012) Infor announced general availability of Inforce Everywhere. Built natively on Force.com and ‘ION-ized’ with Infor’s lightweight middleware platform, Inforce Everywhere brings the back office data from selected Infor Enterprise Resource Planning (ERP) solutions safely and securely onto the screens of Salesforce.

While Customer Relationship Management (CRM) solution providers have been touting a 360o view of the customer for over a decade, this complete view is actually impossible just using CRM. Shipments, invoices, accounts receivable and returns are the domain of ERP, not CRM. Many companies today would like to turn sales reps into true account managers, but allowing a sales representative full access to ERP is enough to cause any Chief Financial Officer (CF)O) heartburn. By making this type of data accessible directly, selectively and securely through CRM, Infor helps sales reps really manage accounts without purchasing additional ERP seats and without opening the floodgate to ERP.

Infor’s Reseller Agreement

Fast facts:

Infor will provide support to customers that license Salesforce via Infor

Products that Infor will resell include:

  • Sales Cloud, Enterprise Edition
  • Service Cloud, Enterprise Edition
  • Salesforce Sales/Service Cloud related products such as Mobile, Portal, Sandbox, API calls, etc.

The INFOR:SALESFORCE Partnership

The partnership between Infor and Salesforce was originally announced at Dreamforce on September 1, 2011. The intent to build and deliver Inforce Everywhere was part of a three-way announcement including:

  • Three new Inforce applications including Inforce Everywhere, Inforce Ordering and Inforce Marketing
  • A reseller agreement which also extends to Infor’s partners
  • Salesforce investment in Infor

In a way, this partnership is just one of many Salesforce.com is striking these days in expanding beyond the boundaries of CRM and evangelizing its vision of the Social Enterprise. But the deal with Infor stands out in a couple of ways.

First of all the reseller agreement is very unique.  Infor has the ability to resell Salesforce Sales and Service cloud licenses as well as the native applications they develop on Force.com.  Salesforce.com has a very robust ISV ecosystem of partners developing and selling solutions that include Force.com, but only a select few have the right to position and sell Sales and Service cloud as well. This means Infor takes the order, delivers the product (as a service) and provides front line support. This reseller agreement also extends to the Infor channel, which is being actively developed and expanded. Partners can resell the portfolio but will only be allowed to provide implementation services if certified to do so.

Salesforce.com’s investment in Infor is not unique and signals the company’s interest in expanding Force.com solutions and its influence beyond the realm of the front office. FinancialForce.com (accounting applications) and Box.net (content management and storage) are two other examples, but this is the first and only major ERP company that Salesforce has invested in.

But the products being developed are perhaps most important to both Salesforce’s and Infor’s existing customers. In the world of enterprise applications, partnerships can be very easy to form but often never move far beyond the original fanfare of the announcement. Very often these partnerships are just referral-based. They are easy to form, but just as easy to walk away from. A reseller agreement further cements the relationship, but the bond truly forms when solutions are developed and integrated. The two most important factors are moving quickly and adding real value.

Inforce Everywhere has been developed and is being delivered in just over six months from formalization of the agreement and new releases are already planned for Q3 2012 and Q2 2013. It effectively marries the front and back office, exposing data from ERP to the Sales and Service Cloud. The other two Inforce products are planned for release in Q4 2012 (Inforce Ordering) and Q1 2013 (Inforce Marketing).

Infor is also introducing Salesforce.com’s vision of the social enterprise to the ERP world with Chatter in a way that makes sense to its ERP customers. By exposing data in ERP to users of Salesforce, Inforce Everywhere is encouraging a dialogue between the front office and the back office and Chatter will enable it.

How Does this Add Value for Customers?

Many companies today talk about the need for a 360o view of their customers. But getting that complete view is hard and allowing a sales rep access to this level of visibility is even harder. Yet in those businesses that thrive on developing close relationships with their customers, the role of the sales rep must be transformed into that of an account manager. By managing an account, you provide better service, generating customer satisfaction and loyalty, which in turn generates more sales and revenue.

To truly manage an account you need visibility to customer history, outstanding orders, shipments, open accounts receivable, payment history, and service performance. While account management and customer service are engagement-based, this history is transaction-based. Transactions don’t exist in a system of engagement (CRM); they exist in a system of record (ERP). Yet how many companies do you know that are willing to purchase an ERP seat for every sales rep? How many CFO’s do you know that are willing to allow sales reps open access to areas like accounts receivable?

Access to accounts receivable in ERP usually means access to all accounts receivable. While this is not always the case and role and context-based security is more common in ERP solutions today, the implementation of this level of security is not yet pervasive. At the same time, access to customers, orders and quotes through a CRM system generally is restricted to those customers “owned by” the sales reps. So doesn’t it make sense to offer this level of visibility through the existing structure of a CRM?

That’s what Inforce Everywhere does. It exposes that detail that already exists in ERP about customers, shipments, returns, invoices and open balances and makes it visible through secure inquiries within CRM. But the sales rep/account manager is confined to his or her own customers/accounts and doesn’t need to consume an ERP user license. There is no need to purchase seats in ERP to gain access to this data. Infor customers need only subscribe to Inforce Everywhere, which is priced at $30 per user per month.

Some of the data shared between ERP and CRM is shared bi-directionally, while some is single direction. For example, data about sales territories, accounts and contacts is shared bi-directionally. Products, system codes, quotes, orders, shipments, invoices, accounts receivables, return material authorizations are single direction – data in ERP is shared with CRM.

Added value is also derived from Inforce Everywhere in a multi-company scenario. While business units or divisions that cross international boundaries must be established as different legal entities in ERP for financial reporting and compliance purposes, often CRM must have a view across these entities from a corporate, global perspective. Global accounts may be managed across legal entities and international boundaries, so it is important to have visibility worldwide. While this seems simple enough on the surface, delivering this is not so simple. Inforce Everywhere can serve as the link, establishing an optional one-to-many relationship between CRM and ERP. This multi-company scenario will be supported in Q3 2012.

Which ERP Solutions and How?

Inforce Everywhere is currently available for Infor10 ERP Enterprise (LN), Infor10 Distribution iBusiness (A+) and Infor10 Distribution Business (SX.e). XA, Syteline and Visual are planned for release next quarter, followed by S21, Sun Systems, LX, (Lawson) M3 and Adage before the end of the year. Additional Infor ERP applications are planned to be rolled out later.

How is Infor able to produce this steady cadence of releases? Infor10 ION, Infor’s lightweight, middleware platform, is the key to connectivity between ERP, CRM and any other ION-enabled application, eliminating the need for individual point-to-point integration. Think of it as a layer of meta data that can connect Salesforce to potentially any or all of the Infor ERP back office solutions. Each solution need only to expose data to the meta data layer to make the connection, so any ION-ized Infor solution is easily connected.

Key Takeaways

Salesforce has slowly been infiltrating the customer bases of many of the ERP solution providers, especially those that have targeted the mid-market. While ERP solutions have continued to broaden, touching more and more functional areas within an enterprise, they have largely been viewed as back-office solutions. Satisfying the needs of the sales department has often been an afterthought or largely ignored in ERP implementations. As a result, sales departments have sought out their own solutions, sometimes with the blessing of the Information Technology (IT) department and sometimes doing an end run around IT. A cloud-based solution like Salesforce has provided a very viable alternative.

While it is not clear exactly how much overlap there is today between the Infor and Salesforce customers, one would have to assume it would be substantial. That overlap will be target number one for Inforce Everywhere and should be an easy sell.

Where there is no overlap, putting Salesforce Sales and Service cloud portfolio in the hands of the direct and indirect sales force provides them with more to offer the customer. Sure they could buy CRM directly from Salesforce, but the introduction of Inforce Everywhere keeps the sales department happy, but implicitly keeps them in the fold in terms of sharing data and added visibility.

 

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SAP Business One Heads Into the Cloud

Many have their heads in the cloud today. This goes for both individuals, as well as companies. The interest in Software as a Service (SaaS) has been steadily increasing over the past several years, led by enterprise applications such as Customer Relationship Management (CRM) and elements of Human Capital Management (HCM) such as recruitment, talent management and benefits administration. Yet broader applications such as Enterprise Resource Planning (ERP), which provide the transactional system of record on which a business is based, have been slower to warm to the idea. Today that is changing and as many weigh the pros and cons of SaaS ERP, the advantages appear to be winning.

On March 6, 2012, SAP announced that SAP Business One, characterized as its ‘most affordable ERP solution for small and growing businesses’, is now available “on-demand.” Previously only available as a licensed on-premise or hosted solution, this added deployment option launches Business One as a multi-tenant SaaS solution. The On-Demand version is available now in 18 countries (more to be added later) through selected partners. Subscriptions are competitively priced and offered on a monthly, named-user basis.

Responding to Market Opportunity

The fact that ERP has lagged behind other enterprise software with respect to SaaS deployment has led to conjecture. Has lack of acceptance of SaaS ERP resulted from few options being available? Or were few options made available because of lack of interest? While that may have been a valid debate in years gone by, the resistance to SaaS ERP appears to be breaking down while interest in traditional on-premise solutions seems to be waning.

The Mint Jutras 2011 ERP Solution Study, with over 900 qualified responses, found SaaS deployment is now more likely to be considered than traditional hosting options. Yet even more stunning is the decline in the willingness to consider on-premise deployments. A few years back the percentage willing to consider traditional deployments would have been in the 90’s while recent research pegs it at 56%. And the comparison is even more dramatic when we compare “World Class” ERP implementations where we see SaaS heavily favored over licensed options:

  • SaaS/On-Demand: 62%
  • Hosted by ERP vendor: 44%
  • Hosted by an independent 3rd party: 35%
  • Traditional licensed on-premise: 38%

Mint Jutras defines “World Class” ERP implementations as the top 15% in terms of results measured, progress achieved against company-specific goals and current performance. These are the implementations that have delivered the most business benefit to the enterprise, whether it is large or small. Installing ERP is a means to an end, and not the end itself.

So demand is definitely on the rise, and so is supply. With the launch of SAP Business One On-Demand, SAP is now one of several major ERP vendors taking to the cloud applications that are already well established as on-premise solutions. However, in evaluating these transitions, it is important to understand all the options as well as the limitations.

Often these transformations resemble hosted solutions more closely than they do software as a service. Some industry observers insist that a cloud offering be multi-tenant (along with other qualifications) before they will regard it as “true SaaS” and even go so far as to accuse vendors who offer single-tenant solutions (also known as multi-instance) of “cloud washing.” With its multi-tenancy for Business One, SAP avoids this label. But not all companies seeking a cloud-based solution want the same thing. It is important to look beyond these labels, understand your requirements and make sure they are met.

Not SAP’s Only Cloud Story

Often meeting customer requirements takes experience and practice. Note that this is not SAP’s first or only foray into the cloud. In fact, its cloud heritage dates back to 2007 when it officially launched its first SaaS solution, SAP Business ByDesign. Like Business One, ByDesign is part of SAP’s small to midsize enterprise (SME) product portfolio. Unlike SAP Business One, ByDesign is and has always been a SaaS only solution. Originally SAP segmented its SME portfolio only by company size, either by annual revenues or by number of employees.  Today SAP uses a slightly different positioning scheme. Business One is still viewed as the most affordable and recommended for small and growing businesses whether these companies are seeking an on-premise or on-demand solution. Business ByDesign, offered exclusively in a SaaS environment, is positioned as the best solution for mid-size companies looking for SaaS ERP. SAP Business All-in-One, which shares the same ERP as the Business Suite, is a scalable solution for mid-size companies looking to stay on premise. However, the earlier positioning by company size, combined with the assumption that SaaS was largely for small companies, often led to speculation by industry observers that ByDesign would cannibalize sales of Business One.

This never proved to be the case, in part because ByDesign was still a very “young” product and in part because SAP delayed unleashing its considerable selling and marketing engines to power sales. You see, unlike SAP Business One On-Demand, ByDesign was not originally released as a multi-tenant solution. While this did not adversely affect the value proposition, it did negatively impact the economics for SAP. It was not until Feature Pack 2.5 was released in mid-2010 that multi-tenancy was introduced, allowing SAP to reduce its internal cost by a factor of 20.

In the meantime, SAP had also announced other “on-demand” offerings, including what it refers to as “Line of Business” applications, as well as Business Intelligence (BI) On-Demand. While not originally the case, through evolution and performance improvements, ByDesign was announced as “the” platform of development for these on-demand solutions as well. SAP was getting more and more serious about its cloud offerings.

In December 2011, SAP went one step further and announced its acquisition of SuccessFactors, a SaaS-only HCM solution. However, it was quite clear, even at the outset, that this announcement was more about cloud than it was about HCM.  Amid the hoopla of the $3.4 billion acquisition, there was also speculation that ByDesign was dead. That prediction appears to be far from true. No, the latest cloud offering, Business One On-Demand, does not use the ByDesign platform but given the breadth of the entire SAP product portfolio, there appears to be room for multiple offerings and more than one platform.

So what does all this history have to do with Business One On-Demand? It’s really about the culture. Amidst all the merger and acquisition fanfare, there has been repeated reference to the ‘cloud DNA’ of SuccessFactors and the appointment of its CEO Lars Dalgaard, to take responsibility for all SAP cloud offerings. When an enterprise application has traditionally only been sold with an up-front license, like Business One has, shifting to a subscription based selling is a tough transition for the sales team (and sometimes Wall Street) to make. SAP management appears to “get this” and is proactively taking steps to address this. The first step last year was a conscious shift to sell all SME business through channels.  The acquisition of SuccessFactors and the appointment of Mr. Dalgaard to oversee cloud offerings is a second and important one.

Proposed Value Proposition

So what is the value proposition offered by SAP Business One On-Demand? In many respects, it is the same value proposition of any SaaS ERP offering. Survey participants in the Mint Jutras ERP Solution Study cited a wide variety of benefits to SaaS deployment, but three primary themes emerged: lower costs, more upgrades and the ability to support remote employees and locations.

Costs

Survey respondents anticipate lower total cost of ownership (TCO), smaller start-up costs and fewer Information Technology (IT) resources required in a SaaS environment. In order to deliver these benefits, SAP simply needs to price Business One On-Demand competitively. While SAP is not announcing the price publicly, (remember it intends to sell through its channel so prices are suggested) targets shared privately appear to be competitively priced and will necessarily fluctuate somewhat depending on geography.

There are still some that feel the cost of SaaS ERP is really not that much more inexpensive than on-premise, particularly over the longer term. Of course, this does not take into consideration avoiding the cost of hardware or internal IT resources to manage the installation. But even if you ignore the hardware factor, there is one advantage of purchasing SaaS ERP from a vendor that offers both SaaS and on-premise. That solution provider should be able to draw an apples-to-apples price comparison between the two deployment options.

SAP and its partners should be able to assist in helping the prospective customer in determining the break-even point purely from a software, services and maintenance stand-point. But don’t forget hardware, infrastructure costs and remember, often the larger costs from a TCO perspective are the soft costs of internal resources.

One cost concern expressed by 47% of survey respondents was that of escalating costs. What’s to prevent a software company from exorbitantly raising prices at the end of the term of the initial contract? Because SAP does not sell Business One On-Demand directly, it cannot guarantee, with absolute certainty that the price will not increase beyond reasonable expectations, but is relying on the competitive nature of its channel to keep escalating costs in check.

Upgrades

While lower TCO was the most frequently cited benefit of SaaS ERP, a close second was the reduced cost and effort of upgrades (48% of survey respondents). The availability of more leading edge technology through more frequent updates was also a significant factor for 39%. The frequency and method of upgrades do vary from vendor to vendor. Those with SaaS-only solutions, developed exclusively for an on-demand environment might have a bit of an advantage here in that they are not tied to a prescribed release cycle. Those which offer the same solution on-premise and on-demand may not be as fluid in the delivery of innovation. Existing customers of on-premise solutions often prefer a longer release cycle since the upgrade process can be disruptive. This disruption is minimized in a SaaS environment because much of the burden of the upgrade process is assumed by the SaaS solution provider.

SAP does not expect to accelerate the upgrade release cycle of Business One simply to compete on this front, but also points to the maturity of the product relative to newer products developed for SaaS only. With over 34,000 installations, the product is indeed mature. However, even mature products must continue to evolve to meet new business challenges, so SAP isn’t entirely off the hook for keeping pace with innovation. SAP intends to continue to deliver upcoming innovations including enhanced support and application management via its Remote Support Platform (RSP), enhanced mobile integration and complete partner initiated lifecycle management.

Indeed SAP is beginning to see the convergence of the three pillars of innovation it has been touting for the past two years: cloud, mobility and in-memory.  Many of the new mobile apps developed both by SAP and its partners, now (or soon to be) available through an “apps store” will have as much relevance for SMEs as for large enterprises. And in February 2012 SAP announced through “new analytics powered by SAP HANA for the SAP® Business One application and SAP HANA, Edge edition, SMEs will be able to leverage powerful in-memory technology from SAP.” The goal is to enable decision-making, dramatically increasing the speed of existing processes and speeding up access to potentially large amounts of data.

Remote Access

And finally, the third overall theme in terms of the appeal of SaaS ERP is in the support of distributed environments. There are several factors at play here. First of all, operating from multiple locations is no longer an issue only for large enterprises. The Mint Jutras ERP Solution Study found the average number of operating locations supported by ERP in small companies (annual revenues less than $25 million) was 2.5. This average grew to 5.5 as annual revenues grew to the $25 to $250 million range.

Secondly, large enterprises are often comprised of a network of small to mid-size divisions or subsidiaries. SAP has long referred to this scenario as an integrated business network. A very common scenario is to have a two-tier ERP strategy where one ERP is used at corporate (often called administrative ERP) and a second standard (often referred to as operating ERP) is used for units/divisions/locations. Because of its dominance in large enterprises, SAP is often the administrative ERP. While many other ERP vendors will make a concerted effort to interface to SAP at this level, nobody is better positioned to do this than SAP itself with one of its SME products.

Ninety percent (90%) of companies surveyed (and 97% of World Class ERP implementations) have defined standards for ERP implementations. What better way to control the standardization of solutions and processes than through SaaS deployment? In fact 36% of survey respondents cited the ease of remote access for a distributed workforce as a key advantage of SaaS and 27% noted the ease of bringing up remote sites.

Handling the Perception of a Down-Side

While SaaS ERP is gaining in acceptance, there is still a significant segment of the population who will not consider this deployment option and even those that will consider it still have some lingering concerns. Only 10% of the Mint Jutras ERP Solution Study indicated they had no concerns whatsoever in considering SaaS ERP.

In addition to the concern over the possibility of escalating costs, 46% expressed fear of down-time risk and unpredictable performance. Although a viable concern, due diligence can significantly reduce risk here. Prospective customers should ask for historical performance and they should also ask for guarantees of up-time, although appropriate caveats for natural or even man-made disasters may be negotiated in. Glenn Rhodes, IT Manager, DRIFIRE, a manufacturer of flame resistant clothing stated, ““Before we moved Business One into the cloud, I was concerned about performance impact but the impact has been minimal. Often you don’t see a difference at all.”

But the top concern, even with so much business being transacted over the World Wide Web, is still one of security, with 58% of survey participants expressing this concern. Mint Jutras would agree everyone should be concerned over security. But you should be concerned regardless of deployment option. And if you are a small company, without a dedicated IT security expert on board, chances are you assume more risk than you would in a SaaS environment, particularly one that has successfully completed an annual SAS 70 Type II audit. The SAS 70 certification was developed by the American Institute of Certified Public Accountants (AICPA) to annually audit the effectiveness of operations, controls  and safeguards to host and process data. Indeed another 29% of respondents admitted that part of the appeal of SaaS was the comfort of leaving security and other IT issues to the experts.

Which brings us to the final and very important factor in considering consuming Business One as a service: Who is the partner that will actually be delivering the service? What is the partner’s track record? Fully assess its ability to deliver services.

A New Kind of Partner

With the introduction of Business One On-Demand, SAP is also introducing a new kind of partner. In the past, a typical Business One partner would be an ERP specialist, a company engaged in selling and servicing an ERP solution. Some also might have provided a hosting option. This is the type of partner that will be most likely to see an opportunity to expand their offerings into the cloud. Some (not all) existing partners may seek certification by SAP to deliver the cloud option. Often these partners specialize in extending the Business One solution. In these cases, SAP will insure that existing on-premise add-ons will run in the cloud without disruption.

In addition to these existing partners, new strategic partners will include telecom service providers. These types of companies are experts in hosting, cloud infrastructure, billing and support. Generally speaking they are not experts in ERP. Some may decide to invest in building an ERP practice, others may not. Those that do not will most likely be partnering with one or more of the existing Business One partners who are experts in ERP and Business One, but have no experience or desire to provide this cloud infrastructure and support.

Key Takeaways

SAP sees the introduction of SAP Business One On-Demand more as a bid for new-named business, although it will be possible for existing Business One customers to make the transition to the cloud. SAP’s Business One business has been steadily growing and the market for ERP in small companies is far from saturated.

On balance the advantages of a SaaS environment for ERP seem to outweigh the disadvantages. Cost savings, including TCO, startup costs and cost of IT staff can be substantial. Even if the subscription cost equals the cost of software and maintenance over time, there are still the savings achieved by eliminating the purchase or continued maintenance of hardware.  If you have no IT staff today, there is no need to hire any. If you have good IT staff on board, let them engage in more strategic, value-add activities than routine maintenance without sacrificing the ability to take advantage of upgrades and innovation.

If you operate in a distributed environment, the advantages of a SaaS environment can be considerable in bringing standardization across the enterprise, providing access to remote employees and in bringing remote sites up quickly.

As with any selection of ERP, fit and functionality should be foremost in the decision-making process, along with ease of use and TCO which will directly impact the return on investment (ROI). So it is still important to put Business One and the partners selling it through their paces during the evaluation process. Make a careful choice that is right for your business.

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The Kenandy Manufacturing Cloud: A Blast from the Past with a Look to the Future

I just finished watching a webcast presentation and demonstration of the Kenandy Manufacturing Cloud. In case you are unfamiliar with the name, this is Sandy Kurtzig’s new company. Anyone who has been in this business as long as I have knows who Sandy is, but for those from the younger set, Sandy was the founder of ASK Computer Systems back in 1974. As I listened and watched I was struck by two opposing thoughts:

1. How much things have changed since I worked for ASK from 1984 to 1994. It used to be me giving those presentations and demos.

2. How much some things stay the same

In the 1980’s, as the market was making the shift from mainframes to minicomputers, there were two camps – the IBM camp and the non-IBM camp. ASK, with its MANMAN product running first on the HP3000 and then (also) on DEC VAX (and later Alpha), was the definitive leader of the non-IBM camp. SSA pretty much led the field on the IBM side. Back then there were two ways you could deliver a demo. Either the prospect came to one of your regional offices, or you went to their manufacturing facility and used a 1200 BAUD modem to dial in to do the demo over a phone line. This was after you had given your presentation – not using PowerPoint mind you, but using a carousel full of slides and a slide projector. Customizing meant reordering or removing some of the slides. You see, we didn’t have laptops back then and there was no Internet. Was 1984 really only 28 years ago? Seems like it must be a couple of lifetimes ago – at least.

So what has stayed the same? In many ways the demo flow and business processes that Jennifer Roberts, the senior solutions consultant demonstrated were the same as those I used to demonstrate in 1984. I generally started with the item master. Then I would enter a sales order, go through the planning cycle to produce, ship and invoice, purchasing components along the way. She started with the item master. Then we took a sales order, which of course could have been automatically generated from an opportunity in Salesforce.com (although not a prerequsite). OK, I didn’t do that. I just entered a quote and then converted it into a sales order. Then she did some planning… You can see where I’m going with this. Hmmm…

The big difference – Jennifer got through the entire scenario and also created a custom report (that she put right on her dashboard) in about 40 minutes. It probably would have taken me the entire day to do this on green screen MANMAN and I would have had to do a demo of Cognos’ QUIZ product to come anywhere near creating a custom report (without the nifty pie chart). That would probably have been another day. And we’re talking state of the art for 1984.

So today, Kenandy’s solution is delivered as a service (as in Software as a Service or SaaS). And the folks from Kenandy are quick to point out that it is “manufacturing management built for the cloud” using Salesforce.com’s Force.com platform. As a result, much of what Sandy had to develop specifically and exclusively for MANMAN (in Fortran) came already pre-packaged and ready to use. But there is more to this than just a technical platform. In formulating a vision and a philosophy behind Kenandy, Sandy not only recognized the seismic technology shifts that have occurred since the ‘70’s and ‘80’s but also perceived a shift in the way manufacturing is done.

While we had outsourced operations and purchased subassemblies even back 30 years ago, we didn’t have the level of outsourcing, offshoring and near shoring that we see today. Sandy picked up on a shift from vertically integrated manufacturing to what Kenandy now calls horizontally integrated manufacturing. Actually I don’t believe this is really new. Let me share an excerpt from a book with you….

“The strongest companies in the past were those that were vertically integrated. By being self-sufficient through each step of the entire process of transforming pure raw materials into a finished consumable good, and taking the added responsibility of delivering that product to the end customer, the strongest chain has been forged. By having a single company responsible for all of the steps in the entire process, that company has the greatest possible control, the least contention for materials and the best chance of synchronizing all the necessary components of the process.

“However, there are inherent weaknesses in this approach. While it reduces the tension between the links, this is basically the most rigid of supply chains. Because no company can achieve excellence in everything, this approach is most likely to produce a weak link and is susceptible to failure as a result….

“While companies have tended to become less vertically integrated in attempts to focus on their core competencies, this has also necessitate new ways of companies doing business with each other… These new business models involve multiple companies working cooperatively and collaboratively together in a seemingly seamless manner, as if they were a single, virtually vertical enterprise.”

This happens to be an excerpt from my book, ERP Optimization, which was written in 2002 (yes, 10 years ago) and published in 2003. I spent several years prior to this travelling around the world speaking about this concept of virtually vertical manufacturing. I believe this is what Kenandy is actually delivering and calling horizontally integrated manufacturing. So while I am obviously a big believer in the concept, I don’t regard it as particularly new. But it is gratifying to finally see a company zeroing in on providing tools for this coordination and collaboration and cloud based solutions indeed provide a leg up.

Interestingly enough, back in the day, one of my favorite quotes from Sandy Kurtzig was, “Writing software is like having a baby. You can’t put nine women on it and do it in a month.” Nonetheless, with the powerful tools available to her from Force.com and the backing of big names in the industry like Marc Benioff (Salesforce.com) and Ray Lane (Kleiner Perkins) she appears to have indeed brought her new baby to market in record time.

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KeyedIn Solutions: A Mixture of Old and New with Veterans Klaus at the Helm

You might not have heard of KeyedIn Solutions yet, but if you have been following the enterprise application/ERP space for any length of time, you will have heard of the founders of the young company: George and Lauri Klaus. George is the former Chairman of the Board and the CEO of Epicor Software, where he led that company from $30M to a valuation of $980M as it was acquired by Ajax Partners and merged with Activant. Lauri, who is George’s wife, was also at Epicor, most recently as Executive Vice President, Worldwide Sales and Services. George is now Chairman of the Board and Lauri is on the front line as CEO. As a former Marine, George always impressed me with his management style and leadership ability. I never really got to speak at length with Lauri, but she seems to have many of the same characteristics of her husband, including a concern for customers, the team and investors – in that order.

This makes their new company similar in philosophy to their old company. Back at Epicor George was known to say, “Some things shouldn’t and won’t change, including our priorities: customers, employees and shareholders.” He and Lauri have brought those priorities to their new startup. Other similarities exist as well. Epicor was (and still is) largely an ERP company which grew through acquisition. Early indications are that KeyedIn Solutions places itself in the ERP space, although not squarely in competition with Epicor. But only six months after kickoff, it just announced its second acquisition.

Following its announcement back in December of its majority ownership of Datacom International, on January 24, 2012 KeyedIn confirmed a formal, recommended offer for the acquisition of Atlantic Global PLC for $8M. Datacom provided KeyedIn with an initial product to sell – a solution for custom sign manufacturing, while Atlantic Global PLC, is a provider of Professional Services Automation and Project Portfolio Management solutions. Even the Datacom acquisition sits a bit outside of the traditional ERP market, although two more traditional solutions (dataSTOR – for discrete manufacturers and dataFAB – for metal fabricators and job shops) are planned for Q1 and Q2 2012 respectively. But Atlantic Global definitely sits on the periphery and I would argue is not ERP, but more PPM (project portfolio management).

Earlier this month I spoke with Karen Adame, CFO of KeyedIn. Karen also plays the role of CMO, which at first glance seems a bit odd. However, it made more sense when I learned Karen is an accountant by trade, but spent many years (also with Epicor) in product management and product marketing roles. After having worked directly for Lauri, it is also not surprising that KeyedIn positions itself as both a software and services company. Remember Lauri ran sales and service for Epicor.

Karen explained KeyedIn’s growth strategy was to attack specific micro verticals and expand. The custom sign market is indeed a microvertical. Professional Services is a bit broader, but still focused. Metal fab and job shops are certainly more “niche” than discrete manufacturing. But I wouldn’t blame KeyedIn for taking somewhat of an opportunistic journey.

KeyedIn’s intent is to provide an end to end solution, which today includes manufacturing, warehouse management, financials and CRM, but it will also consider partnering with other solutions such as Intacct and Salesforce in the future. You see, like Intacct and Salesforce.com, KeyedIn solutions are offered exclusively through a SaaS deployment model. These partnerships seem more in line with expanding the footprint that Atlantic Global now occupies with PSO organizations.

With veterans like George and Lauri Klaus at the helm and two acquisitions announced very quickly, KeyedIn Solutions certainly bears watching in both the near and distant future.

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Does SAP’s Cloud strategy reflect a convergence of trends?

For quite a while now, we’ve been hearing three major themes from SAP: in-memory, mobility and on demand. In-memory (HANA) seemed to dominate the discussion at Sapphire in Orlando and then again at TechEd in Las Vegas. Mobility took on a little more prominence in the discussions at the co-located (Sapphire and TechEd) events in Madrid. But it was the on demand theme’s turn to be front and center at the SAP Influencer Summit in Boston this week. Usually this is a one day event, with some follow-on special interest group meetings the following day. But this year, SAP felt its cloud strategy merited an entire day two for all.

Early on day two we heard Peter Lorenz, Corporate Officer and Executive Vice President of OnDemand Solutions say something that I think set the stage quite well: “We don’t have pieces of a strategy. We really have a cloud strategy.” This implies a re-think and a holistic approach. Cloud of course is not new at SAP. The company entered the cloud world several years ago with the introduction of Business ByDesign. But that product had some false starts and the installed base hovered at 40 “charter” clients for a long time before SAP was ready to really go to market. At the end of Q3 SAP claims 650 customers and is still confident in predicting it will reach 1000 by the end of the year (yes, only two weeks away). There is a lot of back story here, but the real turning point was when ByDesign became multi-tenant last year, allowing SAP to profitably scale the OnDemand business. Also a factor… the release of the ByDesign Software Developer’s Kit (SDK) to allow partners and customers to extend the solution.

So what is SAP’s strategy and how does this reflect a convergence of trends?

SAP’s Cloud Strategy

An important aspect of SAP’s cloud strategy is that it is at least partially a result of listening to its customers. SAP execs heard customers asking them to “protect cloud dynamics” while leveraging existing processes and investments. “Protect cloud dynamics” sounds bit like marketing spin to me, but I think it means that customers want all the benefits of cloud deployments and yet many are not in a position to abandon some, any or all of their existing solutions. SAP has heard that speed of deployment is what people like best about the cloud. My research indicates speed of deployment is certainly one very important factor but the top three perceived benefits are all about costs:

  1. Lower total cost of ownership (52% of respondents)
  2. Reduced cost and effort of upgrades (48%)
  3. Lower startup costs (46%)

Yet faster often equates to lower costs – because time is money.

Technology-wise SAP’s cloud strategy is based upon the platform it created in developing Business ByDesign. This too is not new news. Business ByDesign is part of SAP’s SME product portfolio and is an integrated business management suite intended to address the end-to-end business processes of a diversity of small to midsize enterprises. As such it fits my definition of Enterprise Resource Planning (ERP): an integrated suite of modules that forms the transactional system of record for a business. ByDesign is delivered exclusively as Software as a Service (SaaS). It’s a good platform choice since the product was developed from scratch for the cloud. I think you will soon see SAP repositioning it in the context of company size. Even now, ByDesign targets both SMEs as well as subsidiaries of large enterprises.

Since SAP announced the ByDesign platform as the strategic platform of choice for OnDemand solutions last year, it has also been using this platform to develop additional “Line of Business (LoB)” solutions. I have always found the reference to LoB a bit confusing, because any enterprise application should be designed for the business. But in this context I have really found it to mean extensions to ERP that are designed for a single functional area of the business – I suppose you could say, a single “line” of business role. But (less intuitively) LoB here also refers to a cloud deployment model. Examples of these are:

  • Sales OnDemand
  • Service OnDemand
  • Travel OnDemand
  • Career OnDemand
  • Sourcing OnDemand
  • Carbon Impact
  • Sales and Operations Planning (S&OP) OnDemand

Streamwork and Crossgate round out the OnDemand portfolio, providing collaboration services. But SAP is not relying exclusively on its own development efforts to bring end-to-end OnDemand solutions to market. Today there are more than 40 ByDesign partners and 70  ByDesign applications that have been developed using the SDK. SAP expects to continue to round out the framework and the base product but fully expects its ecosystem to supplement that functionality, particularly to address vertical industry requirements and to provide localizations for subsidiaries in countries that are not yet on SAP’s three year roadmap.

SAP’s strategy is to have OnDemand solutions sold by a dedicated cloud “go-to-market” organization which will be direct for large enterprises and indirect (through a channel) for SMEs. SAP sees a huge opportunity for this dedicated sales force in selling to all its 176,000 customers, which also includes the Sybase installed base of customers.

Now of course the finer points of the strategy are subject to change because of SAP’s recent announcement of its intent to acquire SuccessFactors (SFSF). SFSF calls itself a “Business Execution Software” company, but I put it in the category of Human Capital Management (HCM) software. While employees are certainly critical to the success of a business, for a lot of types of companies (e.g. manufacturers), there is a lot more to manage than people.

But the category of software is far less important here than the fact that SFSF’s business is entirely SaaS and Lars Dalgaard, founder and CEO, is also part of the package. Technology is only one part of providing cloud-based solutions, which are designed, built, sold, delivered and serviced differently than traditional on-premise solutions. And those traditional solutions are what made SAP the giant company it is today, making it a relative newbie in the on demand world. Co-CEO Jim Hagemann Snabe was quick to point to SFSF’s cloud DNA as a driving factor behind the acquisition.

Spotting the trends

So how is this strategy reflective of both historical and emerging trends in the software world? Three different trends come immediately to mind: trends in cloud computing, multi-tier ERP and mobility.

Cloud trends:

The topic of cloud deployment of enterprise applications has been heating up for the past several years. While ERP has lagged behind in terms of interest and adoption, cloud-based applications surrounding ERP have trended upwards. Now the barriers to acceptance of SaaS ERP appear to be crumbling. The 2011 ERP Mint Jutras Solution Study found almost half (45%) of over 950 qualified respondents would consider SaaS/On Demand as a deployment option if they were making an ERP selection today. The companies with the top performing implementations were even more likely to consider SaaS (62% of what we defined as “World Class”). Even more interesting, the percentage that would consider a traditional on-premise deployment was down to 56%. In years past, this would have been between 85% and 90%. And only 38% of World Class would consider traditional on-premise.

Expanding the target for ByDesign beyond SMEs to include subsidiaries of large companies is also in line with trends. While many think of the market for SaaS ERP as primarily small companies, the Mint Jutras ERP Solution Study found the interest in SaaS deployment did not decline with increased company size. In fact it escalated from 42% in small companies (those with annual revenues under $25 million) to 59% in large enterprises (those whose annual revenues exceeded $1 billion).

And looking beyond ERP to those LoB solutions, it is very likely that even those with existing on-premise solutions are keen to extend those processes with cloud extensions to leverage cost savings and speed of deployment. While we found lower cost to be the primary appeal of SaaS, more frequent updates and ease of supporting remote employees and remote operating locations were also significant factors.

However, while SAP sees all 176,000 of its customer base a prime target for these LoB solutions, I am not sure I would agree. More than 78% of SAP customers are SMEs. Sure very small companies could benefit from the functionality, but they can also live without it and there are very cheap (sometimes free) alternatives that will be “good enough” for the low end of the market. Take for example Expensify as an alternative to Travel OnDemand – a solution to make the capture, submission and reimbursement of travel expenses simple for all your road warriors. Of course SAP’s solution is more robust, but will a small company pay for Travel OnDemand when Expensify is free?

Multi-tier ERP:

The ease that “cloud” delivers in connecting remote employees and managing remote sites brings us to the second trend: that of a growing need for a multi-tier ERP strategy. Once upon a time a company generally had to be of a certain size (think fairly big) before it had to deal with multiple operating locations. That is no longer the case. In fact in our same ERP study, 67% of all our survey respondents had more than one operating location (served by ERP) even though our survey sample included companies of all sizes from very small to very large. Even small companies (revenues under $25 million) averaged 2.5 operating locations. Of course this average escalated steadily to 10.7 in companies with revenues over $1 billion.

Another shift: “back in the day” even if there were multiple operating locations, different sites might have little to do with one another. But in today’s globalized environment that is rare. We have shared services, feeder plants, decentralized distribution for centralized manufacturing and centralized distribution for decentralized production; all creating a growing need for collaboration. With little interoperability, historically individual business units or divisions might have been left to their own devices to select and implement enterprise applications, including ERP. But as the need for interoperability grows, leaving everyone to do their own thing can create a nightmare.

Today 98% of top performers (and even 84% of all others) define standards for ERP implementations, but that doesn’t necessarily mean a single ERP used at corporate headquarters and also at all operating locations. It might mean a single corporate ERP and one or more “standard” ERP solutions, depending on the level of autonomy or interdependence between sites. In fact we found that World Class implementations were more than 2 ½  times as likely to use a two tier standard (one ERP at corporate and a single different ERP at the divisional level) and 1 ½ times as likely to use a multi-tier standard (two or more “standards” are defined for business units).

What does this have to do with a cloud strategy? What better way to implement, enforce and control the “standards” at multiple, remote operating locations than through a SaaS deployment model? This is especially true if remote sites are in emerging markets where IT talent and ERP experience are rare commodities?

Mobility:

Which brings us to the final trend: an increasingly mobilized world. This is one area where emerging markets do not necessarily lag behind mature markets. Everyone carries some sort of mobile device today, sometimes multiple devices. By untethering ourselves from the wired world, we have actually tethered ourselves more to the business and expect to be connected “on demand” sometimes 24X7.

This is why mobility is at the forefront for the ByDesign platform, which currently supports BlackBerry, Windows Mobile 7, iPhone and Android. Mobile scenarios include sales, approvals, expense reports, and analytics. Feature Pack (FP) 3.5, due out in January will focus on the iPad, which seems to be emerging as the tablet of choice for executive management and sales. FP3.5 will deliver sales catalogs, account management, lead and opportunity management on the iPad.

Wrap-up:

Cloud strategies are a hot topic of discussion today.  However, sometimes the more vendors and industry “experts” discuss the topic, introducing their own definitions and requirements, the more confused the general audience becomes. So far SAP has resisted being dragged into the fray of accusations about “cloud washing” and “false clouds.” In evaluating SAP’s strategy, the reader would also be advised to evaluate the offerings based on their own individual needs rather than on any one person’s definition of “true SaaS.” After all, not all companies have the same needs or desires.

And in fact I believe eventually “cloud” as a topic will cool down significantly. One day in the not too distant future, deployment option will become just another check box. It won’t matter so much how it is deployed, only that it solves your business problems.

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Sage Launches Sage ERP MAS 90 and 200 Version 4.5

 On November 1, 2011 Sage North America announced the launch of Sage ERP MAS 90 and 200 version 4.5. The new release includes:

  • customer requested enhancements
  • a new option of upgrading to Microsoft SQL Server 2008
  • one free user and server license of the fully integrated SageCRM
  • one Sage MAS Intelligence Report Manager license

This announcement also coincides with the release of Sage ERP MAS 90 Online, the new cloud-based deployment alternative for  Sage ERP MAS 90 and 200. Together these announcements reflect Sage North America’s efforts to keep pace with the growing demand for a fully integrated, expanded footprint of Enterprise Resource Planning (ERP) while providing more choice.

First of all, for those not familiar with Sage MAS 90 and 200, The Sage MAS product line is one of three offerings in Sage’s ERP portfolio, which also includes Sage ACCPAC and Sage X3. MAS 90 and 200 share a common set of code that forms a fully integrated business management solution for small to mid-size businesses (SMBs) managing a local operation. While MAS 90 runs on a single computer, MAS 200 uses a client server structure. As part of a re-branding exercise, in January, these two products will become Sage 100. The numbers loosely relate to the number of employees and annual revenues in its target market. So in this case, Sage 100 is well suited to SMBs, often with up to 100 employees or $100 million in revenue. However, these are only guidelines and fit is primarily based on complexity of accounting and financial needs.

Why is this announcement significant? My research shows World Class ERP implementations (the top 15% in terms of results, progress against goals and current performance) are 44% more likely to be operating on the latest release of ERP. Yet companies also rate the challenge presented by the cost and effort of upgrades as 3.4 on a scale of 1 to 5 (where 5 is extremely challenging). While not a show-stopper, most companies will not upgrade unless there is significant benefit in doing so. Therefore it is important to provide enough value in the release to help customers build a business case for that cost and effort.

What’s new in 4.5 that can help Sage MAS 90 or 200 customers build that business case? Here are some highlights:

  • National account management: Even SMBs sell to large corporations with subsidiaries and branches and MAS customers have been asking for a more streamlined way of managing those relationships. Version 4.5 introduces a new type of customer, a National Account whereby a parent company can be billed for goods and services while still keeping a unique customer account for each entity.
  • Handling payroll complexities: Five new methods of calculations have been added to handle a variety of specialized deductions and benefit accrual has been enhanced to reflect conditions and minimums.
  • Sales Order enhancements: These include new pricing options, new capabilities for split commissions and the ability to automatically generate purchase orders from sales orders. Also added is the ability to allocate by lot and serial number and provide better integration with job costing.

The 4.5 release also incorporates 37 enhancements provided through downloadable Product Updates since the 4.4 version shipped last year. These updates touched Accounts Payable, Accounts Receivable, Bank Reconciliation, Inventory Management, Job Cost, Paperless Office, Payroll, Sales Order and system-wide features.

In addition to these enhancements to the core ERP solution, customers upgrading to version 4.5 will also receive one free SageCRM 7.1 user and server license and one Sage ERP MAS Intelligence Report Manager license.

SageCRM is really all about automating sales, marketing and service processes to improve communication and internal collaboration. SageCRM is available for iPhone and also allows companies to monitor and track customer communications on Twitter. SageCRM also integrates with Sage eMarketing, one of several Sage cloud-based connected services. A 60-day trial of Sage eMarketing is also included so that SMBs can experiment with executing marketing campaigns.

MAS Intelligence in version 4.5 extends General Ledger reporting allowing customers to attach Reporting Trees to Report Designer layouts to model reporting structures and let customers view their organizations in different ways. Report distribution can be set up to be fully unattended and allows distribution through a variety of formats, including Excel, sending reports to a file, publishing to an FTP site or sent via email.

Obviously Sage is hoping one free license of each will lead to the purchase of more licenses, but this is a good way for customers to kick the tires of both prior to making a purchase decision.

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New Sage ERP MAS 90 Online Provides SMBs with Choice

On November 1, 2011 Sage North America announced Sage ERP MAS 90 Online, a cloud-based solution of Sage ERP MAS 90 and 200. Hosted by Sage, this option lowers up-front costs, eliminates the need to build an IT infrastructure and associated staff, and provides web access to a fully integrated business management solution for small to mid-size businesses (SMBs). Because this deployment choice is added to current on-premise options, it also comes with the option for seamless migration to an on-premise deployment in the future. Sage ERP MAS 90 Online will be available November 22, 2011.

Here’s what you get for $169 per user per month:

  • Access to all core software modules
  • Sage Business Care support
  • Backup services and disaster recovery

For existing customers of Sage 90 and 200, this will also include an upgrade to the latest version 4.5, announced at the same time (more on that in the next post).  This may very well provide incentive to small companies currently running small business accounting solutions like Sage’s own Peachtree or Intuit’s QuickBooks.

The Product Line

The Sage MAS product line is one of three offerings in Sage’s ERP portfolio, which also includes Sage ACCPAC and Sage X3. MAS 90 and 200 share a common set of code that forms a fully integrated business management solution for small to mid-size businesses (SMBs) managing a local operation. While MAS 90 runs on a single computer, MAS 200 uses a client server structure. This new deployment option adds web-based access to the mix. As part of a re-branding exercise, in January, these two products will become Sage 100. The numbers loosely relate to the number of employees and annual revenues in its target market. So in this case, Sage 100 is well suited to SMBs, often with up to 100 employees or $100 million in revenue. However, these are only guidelines and fit is primarily based on complexity of accounting and financial needs.

Extending the Solution

In addition to ERP for SMBs Sage also offers what it calls “Connected Services.” These are extensions to ERP such as Customer Relationship Management (CRM) or payment services, employee benefits, sales, marketing and lead generation services, etc. By adding these as separate cloud-based solutions, Sage has been adding value to all its product lines simultaneously and making that added value easier to consume. So “cloud” is not necessarily a new concept for all MAS 90 and 200 customers.

How much do SMBs care about SaaS ERP?

However, sometimes any company, including SMBs might be receptive to moving these complementary solutions to the cloud while still resisting moving ERP, which runs their business. In the past I have referred to ERP as “the last bastion of resistance” to SaaS but these barriers are beginning to break down and we may very well be on the cusp of a mass change in mind set. The Mint Jutras 2011 ERP Solution Study collected responses from over 900 survey respondents, qualified by their knowledge of ERP implementations. It asked the question, “If you were selecting an ERP solution today, which deployment options would you consider?” The percentage that would consider SaaS, taking into account all sizes of companies, was 47%. But when we examine the same data cut in a variety of way we find some interesting results.

While many industry observers and ERP solution providers think of SaaS ERP as a small company play, our survey results actually see the willingness to consider SaaS ERP increases with company size:

  • 42% of small companies (revenues under $25 million) would consider SaaS ERP
  • 48% of lower mid-size companies (revenues between $25 and $250 million)
  • 51% of upper mid-market companies (revenues between $250 million and $1 billion)
  • 59% of large enterprises (revenues over $1 billion)

So while companies who initially select a cloud deployment might feel it is important to have the option to move to on-premise later, it may not be growth that prompts that movement. This is particularly true since many large enterprises are comprised of a collection of small to midsize divisions, operating locations or business units. Because many of them have a multi-tier strategy for ERP (an administrative ERP is implemented at the corporate location and one or more different ERP solutions run the operating locations), cloud deployment may indeed be a way to bring remote locations on line more easily while standardizing implementation. So growth as a result of expansion to a new geography or an acquisition might also prompt a new deployment. And it may not just be new purchases that are considering SaaS. We may start to see current on-premise installations moving to the cloud and therefore we may be just as likely to see current Sage MAS 90 and 200 implementations migrate to a cloud deployment in the future.

But there was another way of looking at this data that was even more “telling.” The Mint Jutras 2011 ERP Solution Study was also used to benchmark the performance of ERP. It defined “World Class” performance as the top 15% of implementations based on results produced, progress against company goals and current performance of selected metrics. Interestingly enough, those with World Class ERP implementations were 35% more likely to consider SaaS as a deployment option for ERP (58% of World Class versus 43% of all others). Generally speaking, the companies with World Class implementations focus more on the end goals of increased revenue and profits and less on the means to the end. IT and enterprise applications are that means to the end and not the end in of themselves.

The Service

Sage ERP MAS 90 Online will utilize the same cloud service that already supports Sage Accpac running in the cloud, which has had a 99.874% recorded up-time for 2011. While the application itself is managed by Sage, the data center is run by QTS Atlanta Metro Data Center, the second largest data center in the world with an on-site Georgia power substation and direct fiber access. It is also SaaS-70 Type II Compliant. This data center is backed up by a second data center on the opposite coast in Santa Clara, California which is a fully redundant environment, with near real-time data duplication and less than four hour recovery time.

While we are seeing increased interest in SaaS ERP, there are still lingering concerns. Only 12% of survey respondents indicated they had no real concerns at all, and the top concern is still one of security. Security should be a concern for everyone whether running in the cloud or on-premise. Unless your systems are behind an impenetrable fire wall with no access from the outside world (including remote employee VPN access); and laptops never leave the premises and are never connected to any other network, you need to worry about security. And this is where small companies should be looking to secure SaaS solutions to bring a level of redundancy and security they would never be able to afford to build on their own.

Key Takeaway: Choice

Sage MAS 90 Online is being announced along with new database options and innovation which includes 50 customer-requested enhancements. In combination, it is all about giving customers more choices. Sage MAS 90 is an important element in providing deployment options with no lock-in whether you choose to run on-premise or

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