QAD

QAD Channel Islands: Multiple Stops on the Journey to the Effective Enterprise

QAD defines the Effective Enterprise as one “where business processes are operating at peak efficiency and perfectly aligned with strategic goals.” Yet given the ever-accelerating pace of change in our world today, QAD also recognizes that the Effective Enterprise is more of a journey than a destination. The journey is one of continuous improvement and carefully balanced objectives.

The same could be said for the software that runs the business. Which is why its “Channel Islands” initiative is divided into milestones that have QAD (figuratively) hopping from one island to the next. A year ago it released Anacapa and this year Santa Cruz is ready for early adopters. Next year, it will navigate to Santa Rosa and in 2018, San Miguel. With two releases a year planned, chances are San Miguel will simply be another stop along the never-ending journey, but by then QAD will likely be on to other additional adventures suitable to whatever the future might bring.

Channel Islands: An Appropriate Metaphor

In the meantime, QAD appears to have chosen the name of its latest initiative well. QAD’s Channel Islands initiative has a dual purpose. The metaphor is perfect because the first goal of the initiative is to re-invent the entire user experience of QAD ERP, making it more natural (intuitive), visually appealing and easy to use. The Channel Islands of California are a chain of eight islands located in the Pacific Ocean off the coast of southern California along the Santa Barbara Channel near QAD headquarters. The main attraction of the real Channel Islands is their natural beauty, providing relief from the cluttered, hard-to-navigate urban setting.

But the second goal of the initiative makes it even more appropriate. The islands are divided into two groups—the Northern Channel Islands and the Southern Channel Islands. The four Northern Islands used to be a single landmass, but as water levels rose (thousands of years ago), Anacapa, Santa Cruz, Santa Rosa and San Miguel emerged and evolved as separate islands. While QAD ERP was originally developed as a single, tightly integrated solution that needed to move forward in lock step, the goal now is to support more modular upgrades, allowing different modules and disciplines (think finance versus purchasing or production) to move forward independently at their own pace. Mint Jutras often refers to this approach as “loosely coupled” versus tightly integrated, but it should not be confused with a collection of point solutions with arm’s length interfaces. Just like the Northern Islands, under the surface all these different functional areas are still connected.

In fact that was why QAD named the first phase Anacapa. Of the four Northern Channel Islands, Anacapa appears to be the smallest, but in fact has an enormous land mass hidden under the surface of the water. This is representative of the work done to re-architect the underlying infrastructure, reworking the application programming interface (API) structure and protocols, and future proofing the user interface (UI), including the framework for connecting devices. This supports the theory that sometimes the best UI is no UI at all and paves the way for succeeding phases (Islands).

To better understand how QAD is delivering on this modular upgrade approach as well as a new and improved user experience, read the full report (no registration required):

QAD Channel Islands: Multiple Stops on the Journey to the Effective Enterprise

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QAD Strengthens ERP with Acquisition of DynaSys and its Supply Chain Suite

Earlier this month QAD quietly announced what some in the industry might call a “tuck in” acquisition of DynaSys Société Anonyme. DynaSys is a supply chain solution provider based in Strasbourg, France. I say “quietly” because many acquisitions these days, large and small, strategic and tactical, are accompanied by so much hoopla, even before they occur, that you lose sight of the real value of the merger. QAD announced this as a done deal, after having kept on all Dynasys’ management and staff. Dynasys will continue to operate from Strasbourg as a division of QAD.

Why call it a “tuck in”? Because this is not a move to acquire a huge customer base (i.e. buy market share), but instead one to further strengthen QAD’s offering and presumably to garner a larger share of its customers’ wallet. According to Gordon Fleming, QAD’s Chief Marketing Officer, the company has seen supply chain planning as “becoming more important to our clients’ success, especially following the economic crisis which has caused companies to place far more emphasis on optimizing resources to meet variable global demand and other competitive pressures.”

This makes sense. For years we saw manufacturers increasingly sourcing components, raw materials and even operations from offshore, low-cost countries. But then as the price of oil rose and rose and the whole energy market became increasingly volatile, often the savings achieved by going offshore were eaten away by rising transportation costs. Supply chain planning and optimization became increasingly important, but also harder to achieve given the added complexities of global sourcing.

QAD sees a great demand for supply chain capabilities and while it offered forecasting, supply chain planning, trade management and a supply chain portal, Dynasys offers a much more extensive portfolio both in terms of depth and breadth. Its product, called n.SKEP is a demand and supply chain planning suite of solutions and its expertise in food and beverage, pharmaceuticals, chemicals, cosmetics, distribution and retail is a nice complement to the industries in which QAD is strong.

The Mint Jutras ERP Solution Study examines this hybrid type of environment by distinguishing between modules of ERP (i.e. what QAD already has) and extensions (what it adds through Dynasys). Let’s be clear on terminology used here. Any ERP solution, simply by definition, consists of a suite of integrated modules. All the modules of ERP use a single data base model. Integration is built in and there is little or no redundancy of data elements, except where there is a specific need. All modules are built with the same development tools, on the same architecture as the core of ERP. While a module can be implemented incrementally, its release cycle is in lock step with the remainder of the core ERP modules. The advantage to implementing a suite of modules is full and seamless integration. The downside is that everything and everyone using ERP has to move forward (or not) together. And a complete ERP solution extends very broadly across the business and impacts many departments and individuals.

“Extensions” to ERP are enterprise applications that might extend the functionality, but are sold and implemented as separate applications. This might eliminate the need for upgrades and release cycles to be in lock step, but also introduces the potential need for integration and the possibility of redundant data. It is fairly common for ERP vendors to use an acquisition strategy to add more robust functionality. But the value is typically directly proportional to the level of seamless integration between their ERP and the newly acquired product. Too often these same vendors would like you to believe that simply by acquiring the product they have a fully integrated solution. But there is no magic fairy dust you can sprinkle on to make this happen overnight. It is refreshing to see QAD acknowledging this.

QAD is being very conservative in predicting revenue growth in the first year but sees n.SKEP as augmenting its existing supply chain capabilities and ultimately becoming a “single coherent model to allow real-time planning of Demand, Distribution, Procurement and Production. The DynaSys suite will also provide the heart of QAD’s ‘next generation’ Sales and Operations planning capability.” As a result QAD’s first priority will be to integrate n.SKEP into the QAD Enterprise Applications. It will then roll it out to its global market. Beyond that it intends to invest in the Dynasys product, seeking a competitive advantage to other ERP solutions.

The Dynasys suite includes:

  • Sales Forecast (Demand Planning)
  • Sales and Operations Planning (S&OP)
  • Distribution Requirements Planning (DRP)
  • Master Planning
  • Network and Inventory Optimization
  • Master Production Scheduling
  • Procurement Planning and Optimization

Some of these components will at first appear to compete directly with modules that QAD already offers. But Mint Jutras research shows that sometimes what appear to be competing modules and extensions are in fact complementary. In our 2011 ERP Solution Study we intentionally included some functions as both modules and extensions and supply chain planning is a perfect example. A manufacturer or distributor might look to its ERP solution for supply chain functionality, while others might purchase a separate application. And it is clear from our results that some combine the two.

We presented a list of modules specific to a general industry (e.g. manufacturing or wholesale distribution) and captured which modules were fully implemented or partially implemented. We also allowed participants to indicate if certain modules were not relevant to their business. From this we can get general adoption rates across all companies, but more importantly adoption rates only counting companies where the modules are applicable.

As part of our solution study we also benchmark the performance of ERP based on a combination of results realized since implementing a solution, progress achieved against company-specific goals and selected metrics measuring current performance. The top 15% in terms of these performance metrics are determined to be World Class. We found that 92% of World Class implementations (where supply chain planning was relevant) had either partially or fully implemented these modules. And 39% had implemented supply chain planning extensions. Clearly this adds up to more than 100%, indicating some had both.

Even in All Others (those not World Class), 64% had (partially or fully) implemented supply chain modules. Yet only 7% of All Others had implemented extensions. Just this data alone does not prove that supply chain planning applications are necessary for World Class performance in manufacturers and distributors, but it certainly makes a case for QAD’s assumption that they are of strategic importance.

QAD’s strategic vision is for every one of their customers to become what they call an “Effective Enterprise.” It defines an effective enterprise to be one where every business process is working at peak efficiency and perfectly aligned to the strategic goals of the organization. Having an effective plan to manage the supply chain is an important step in realizing this level of effectiveness. And planning is what Dynasys solutions are all about.

 

 

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How are you paying for ERP? Here’s how others are.

Back in May I posted some commentary and a warning not to confuse how you buy ERP with how you deploy it. There is much written today about deployment options in general and cloud computing in particular. Although how you pay for ERP is different from the way it is deployed, the two are definitely intertwined because you will either be paying for software or you will be paying for a service or both. This service is not to be confused with the consulting and implementation services you may contract for. This is either software as a service (SaaS) or hosting services, which may also be combined with Application Managed Services (AMS), where the company hosting the software also manages the applications and perhaps even the business processes the software is used to model (e.g. Accounts Payable or Accounts Receivable). But how are companies generally paying for ERP these days?

Just to recap:

Enterprise application software is typically not bought and sold; it is instead licensed for use. It may be licensed to be used by a company, on a particular computer or by other criteria such as number of users. This is similar to consumer software. Buying it once doesn’t mean you can duplicate it and share it with all your friends, or even sometimes use it on all your own computers. For enterprise application software how you pay for that license and the term of the license can vary tremendously.

A software license can be perpetual. Early findings from our Mint Jutras 2011 ERP survey indicate that 76% of responding companies have perpetual licenses. That means you pay for it once and can use the enterprise application forever. Maybe. This used to be the case, but more and more often today a perpetual license agreement might have a stipulation that you have the right to use that software only for as long as you continue to pay maintenance to the software vendor that provides the product. In fact, if you are buying ERP today, expect this requirement to pay a recurring maintenance fee in order to continue to use the software. In our survey 62% of those with perpetual licenses have this requirement.

A maintenance agreement, which is a recurring cost, typically provides both technical support and certain innovations. Some of those innovations will be included in your maintenance fee and others may still need to be purchased. Maintenance is typically priced as a percentage of the software license and the going rate at list price today is around 22% for ERP. While anecdotal evidence tells us that most companies actually pay less than this (closer to 16%-18%) this is largely due to specially negotiated rates and older rates that have not necessarily escalated at the same pace of increased list prices. But if you are purchasing a new ERP solution, expect this to be the starting point for negotiation.

But perpetual licenses are not the only type offered. Instead your license might be for a specific period of time.  This is generally referred to as a “term” license. At the end of the term, you must either renew the license or discontinue use of the software. In fact the application might have the equivalent of a kill switch in it that will disable it and prevent you from continuing to use it at the end of the term.  This type of license is less common and in fact only 7% of our survey respondents indicated this was how they paid for their ERP. Effectively managing this type of license requires some license management code to be embedded in the solution and this was not always done, particularly in older legacy software. If it was not, and you don’t renew, you are in breach of contract and you might find some software auditors on your doorstep.

Subscription-based pricing is another alternative, particularly for those who are looking to expense their investment as an operating expense rather than a capital expense. About 15% of survey respondents pay by subscription. You might pay a nominal startup fee, but you avoid the big front-loaded expense of a software license. Unless this is coupled with a SaaS deployment, this does not necessarily address the up-front cost or the on-going expense of the hardware. Only 28% of the subscriptions paid by our survey respondents were SaaS-based.  Running in a hosted environment where the supporting hardware costs are embedded in the subscription fees may indeed address these capital costs and allow you to account for payment completely as an operating expense.

The findings noted come from the 2011 Mint Jutras ERP Solution study. Look for more data to be shared in the upcoming weeks. If you are in any way involved in the selection, management, maintenance or use of ERP in your company, please participate in our survey. By doing so, you will receive the full executive summary and also have access for inquiry to Mint Jutras for a 6 month period. Your contact info is entirely optional but we will need your email address to deliver your report and an access code for inquiry. Mint Jutras makes it a policy to never share contact info under any circumstances.

To participate click here: 2011 Mint Jutras ERP Solution Study Survey.

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Quick Update from QAD: BI, Mobility and Cloud

I wasn’t able to attend QAD’s Explore customer event this year. But the power of the web let me follow along for keynotes and Derek Singleton from Software Advice shared with me a couple of videos he shot with Phil Freidman, VP of industry and product marketing talking about the three key areas of focus of the conference: Business Intelligence (BI), mobility and cloud. Sound familiar? Yes mobility and cloud are hot topics with regard to any enterprise applications today and BI functionality embedded with Enterprise Resource Planning (ERP) is also drawing significant attention. ERP solutions have always been good at collecting and storing mountains of data but that data has often (and notoriously) been hard to extract for decision making.

QAD’s approach has been to combine BI with mobility. Its BI suite is now about one year old and therefore has achieved some level of maturity. It comes with a schema and data base model built in for QAD applications, but also is able to bring in external data (think potentially massive data from retailers). The analytics feature “what if” and “drill down” capabilities as well as integration with other solutions and what QAD calls “outbound transformation” (think export data to Excel). The tie-in to mobile is through iPhone and Android devices and a new release that brings a more robust BI solution to the iPad. Look for more mobile applications (e.g. for approvals) coming in the future.

I also heard an update today on “On Demand” by listening in to QAD’s first quarter (for fiscal year 2012) earnings call and heard subscription revenue, which includes QAD’s on demand deployment option, was $2.2 million, compared with $1.1 million for the same period last fiscal year. QAD offers its On Demand ERP worldwide and has been particularly successful in life sciences and automotive. It signed eight new ERP on demand sites in Q1 2012.  Other positive news on the call –

  • Total revenue grew 17% to $59.4 million for the first quarter of fiscal 2012, compared with $50.8 million for the first quarter of fiscal 2011
  • Professional services revenue was the biggest driver of growth to $16.5 million, compared with $12.3 million for the first quarter of fiscal 2011
  • Net income for the fiscal 2012 first quarter grew to $1.0 million, versus a net loss of $1.2 million,  for the fiscal 2011 first quarter

Good to see one of the last single product ERP vendors back in the black and on track for what are proving to be the hottest trends in ERP in 2011. Listen to Phil for yourself:

http://www.softwareadvice.com/articles/manufacturing/whats-new-in-qad-2011-1051811/.

And here’s a link to Software Advice’s  manufacturing page: http://www.softwareadvice.com/manufacturing/

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