professional services

Unit4 Lines Up Vertically: Higher Education Setting An Example

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

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

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

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

Unit4 fig 1Source: Mint Jutras 2016 Enterprise Solution Study

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Deltek On Track to Deliver More by Working Smart

When I think of Deltek, I think projects. But there are lots of different kinds of projects, both internal and external. In its own words, “Deltek provides software solutions specifically designed to meet the needs of project-driven businesses.” If all you need is software to manage the projects themselves, there is a plethora of software products to choose from – as many different options as there are different kinds of projects. It’s one of the most fragmented software categories in the market today, with hundreds of companies and products from which to choose. But when it comes to software that manages the business that is built around projects, that’s an entirely different story. Now we’re not only talking about ERP, but also a special kind of ERP… and possibly much more. And there are far fewer solutions on the market that are purpose-built to manage these project-based businesses. Deltek is not only the proud owner of not one, but several of these solutions.

In fact over the years, through organic development and acquisition, Deltek has collected a dizzying array of products: specialized enterprise solutions for government contractors and a wide range of professional services organizations including architecture and engineering (A&E) firms, management consultants, advertising, PR and marketing agencies and more. The one thing all these segments have in common is this: They are all people-centric, providing services, largely delivered through projects. Beyond this point of commonality, they can be very different. They don’t go after the same type of business; their customers are worlds apart; some are heavily regulated; others operate under few constraints. Some are small; others are large. Some manage projects that last days or weeks and others span multiple years. A general-purpose kind of solution just doesn’t work well here.

Other vendors that do offer general-purpose ERP solutions often make acquisitions in an attempt to grab market share. They buy out competitors and wind up with similar, often competing products. Few have been successful in rationalizing portfolios, and most promise never to “sunset” a product, but seldom do all products get equal attention. Some will be declared “strategic” while others slip quietly into maintenance mode.

But the combination of Deltek’s development and acquisitions has led it into a variety of different markets. Deltek Costpoint serves government contractors. Deltek Vision serves first and foremost A&E, but also has customers in management consulting. The Axium acquisition, which brought Deltek Ajera to the portfolio also serves A&E but allows Deltek to come down market from where Vision competes. Deltek Maconomy targets Professional Services organizations. While there might be some overlap between the targets of each of these product lines, rationalizing to a single product would add a level of complexity that really doesn’t serve the customer well.

There might be some opportunity to merge Vision and Ajera, because they both target the same industry, just at different ends of the market. But Deltek is smart enough to know it would have to do so very cautiously. Not only are Ajera customers quite loyal to the product, but being small companies, most of the leaders within these companies also contribute to revenue generation. Migrating to a new solution might very well be at the expense of generating direct revenue, leaving it low on the list of priorities.

So this leaves Deltek with a rather difficult challenge of providing continued innovation across a broad portfolio. But there are different ways of delivering innovation. Of course Deltek needs to add new features to the core of its products. Often this is driven by customer request.

But innovation of enterprise software is an interesting mix of push and pull. Customers push for new features and enhancements either because their business has changed or because they have discovered functional gaps or missing features, or because processes are clumsy and inefficient.

On the other side of the same coin you also see solution providers who want to be trendsetters. They incorporate new technology and offer new functionality and then try to pull their customers along. In some cases the vendors have better foresight than the customers who might be too busy fighting fires in the trenches to look up and recognize the possibilities of the brave new digital world.

Deltek has been doing both. It’s not enough to just cover the basics today. If you look at its full complement of products, you see that Deltek has been expanding the footprint of its solutions for quite some time now. You’ll see that Costpoint has been extended with a human resources (HR) solution and planning and budgeting and more. Vision has robust customer relationship management (CRM). People Planner extends Maconomy with resource planning and Traffic LIVE (acquired from Sohnar) was added as a front-end to help creative marketing communications agencies seamlessly create estimates and quotes, schedule resources, capture time worked, bill clients, and track tasks at a glance. And this is by no means a complete list. But as you can see, in the past these were most likely to be developed (or acquired) for specific product lines.

But that started to change earlier this year when it acquired HRSmart, a leading provider of global, unified talent management solutions with over 1,000 customers around the world. This acquisition both broadened and deepened Deltek’s portfolio of Human Capital Management (HCM) solutions by delivering cutting-edge, cloud-based talent management capabilities that are essential to project- and people-driven businesses…essential but often overlooked. This is not your run-of-the-mill HR system, but an integrated suite that supports talent acquisition, performance and compensation management, as well as learning and career development.

The goal of this acquisition was not to (only) satisfy Costpoint or Vision or Maconomy customer requirements. It was about bringing added value to all Deltek customers. Deltek Talent Management will be delivered as an external component, but with seamless integration back to all these products. This represents a shift in overall company/product strategy that we are also now seeing applied to other new modules even with initiatives that had previously been underway.

Other add-ons being developed include Deltek CRM, Deltek Resource Planning and a new user experience dubbed iAccess. iAccess will supplant previous user interface efforts such as Maconomy Navigator. The plan is to have a unified Deltek front office solution that can front-end the different back office (ERP) solutions. These new products will be introduced with this new experience (UX) and then gradually this new UX will find its way into each of the back office solutions. During this transition period customers will have a choice of the old and the new UX, with the old user interface eventually phased out.

This kind of approach is smart. It leverages development efforts across a range of products and should ultimately allow Deltek to deliver more innovation across its entire portfolio. The fact that these new modules/components are cloud-based is also significant. Deltek’s transition to the cloud seems to be an unintentionally well-kept secret. Even some of it customers haven’t “heard” that all three of its major product lines (Costpoint, Vision and Maconomy) have all made the transition into the cloud and are offered as multi-tenant SaaS solutions (note the applications are multi-tenant but each customer has its own instance of the data base, and Deltek does support a single instance installation exceptionally, on customer request). Multi-tenant SaaS solutions have the most potential for delivering more innovation, faster and these efforts are also reinforced by Deltek embracing rapid application (agile) development methodologies of late.

Why is this new approach so important?

I have been tracking priority of selection criteria for the better part of 10 years. For many years “fit and functionality” was, by far, the top selection criterion. The Mint Jutras 2014 ERP Solution Study, and other prior year studies asked participants to prioritize individual selection criteria (Table 1) on a scale of 1 to 5. And over a period of the last 5 years, we observed a change.

Table 1: Selection Criteria

Deltek Table 1Source: Mint Jutras 2014 ERP Solution Study

While fit and functionality still had the highest percentage of participant votes for “must have/most important,” ease of use took the top spot in terms of overall priority. Having all the functionality in the world is meaningless if you can’t figure out how to use it.

But the results were so close we wondered what would be the priority if respondents had to choose. So in 2015 we changed the format of the question, again listing the different criteria, but this time consolidating to 10 criteria and forcing the participants to stack rank them from 1 (least important) to 10 (most important). We substituted some of the prior criteria for new factors which had risen in importance in prior research and replaced “ease of use” with “user experience.” The overall results are clear. The top three criteria are all related to features and functionality.

Table 2: Selection Criteria Priorities Stack Ranked from 1 to 10

Deltek table 2Source: Mint Jutras 2015 Enterprise Solution Study

User experience is still in the top half, but when forced to choose, it fell in importance. Most are not willing to sacrifice functionality for what some vendors call “beautiful software” today. But “ease of use” means different things to different people, particularly across generational boundaries.

Figure 1: Defining Ease of Use by Generation (top 3 factors)

Deltek fig 1Source: Mint Jutras 2015 Enterprise Solution Study

Our survey respondents were asked to select the top three most important aspects of “ease of use.” While baby boomers and Gen Xers define it first and foremost in terms of efficiencies, millennials are far more likely to simply equate it to the visual appeal of the user interface (Figure 1). While baby boomers equate efficiency to intuitive navigation, millennials take intuitive navigation for granted. They have never used software that required a user manual. To them, a visually appealing user interface, which was at the very bottom of the priorities for baby boomers and GenXers, is most important. To their credit, while “beautiful software” is most important to ease of use, beauty is not the most important factor in selecting solutions.

There is an important lesson to be learned here. Most companies have representatives of all generations using ERP, which further validates Deltek’s efforts in re-architecting the way users engage with its products.

All told Deltek seems to be moving in the right direction to satisfy the growing requirements of project-based businesses and it is doing so much more aggressively than in the past. All goods news for customers and prospects alike.

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