(note: Although the post is attributed to Rich Dettinger, the interview with Chase Hippen was conducted by Mark Palony, Global Marketing Manager SAP Solutions for SoftBrands)

I recently sat down with Chase Hippen, channel manager for SAP Solutions at SoftBrands, to discuss the ERP market in light of the current recession. Specifically, I wanted to know what Chase is seeing when he visits prospect sites. How are manufacturers retooling their strategies and operations to survive now and position themsevles take advantage of the inevitable economic upturn?  

Today's podcast is part one of two.

Ok, here’s part 3 of my series responding to the CIO article What Customers Want from ERP Vendors on Software Pricing. You’ll recall from the first two posts here and here, that the article was a high level look at report authored by Ray Wang of Forrester fame. The report talked of three important elements IT decision-makers are examining when considering an application vendor. I posted on the first two, choice and value and this entry will look at the third, predictability.

In addition to predictability in maintenance fees and reasonable increases to price lists, Wang, according to the article also points out:

They [decision makers] also count on a more constant stream of innovation, Wang writes, "but current on-premise options limit user access to new functionality [emphasis mine] over long periods of time."

The article continues:

Of course, customer "access" to that new functionality typically necessitates expensive upgrades.

The answer…SaaS.

We looked at the flexibility of SaaS in the last post, and Wang says, "since they [SaaS vendors] can deliver constant innovation with quarterly and even monthly product updates," SaaS is the answer to accessing new functionality while avoiding expensive upgrades.

When one looks at the landscape of traditional on-premise ERP, it’s difficult to find a system that has changed dramatically over the past decade. All have certainly enhanced their functionality and upgraded databases and tweaked architecture as technology has advanced, but a complete overhaul of an existing system is almost unheard of. Rarer still is the company that has scrapped what they have in favor of building an entirely new system, from the ground up, that is positioned to take advantage of today’s technology and future technologies before they become reality. 

One technology that is making a tremendous splash in the market is N-Tier architecture. According to Webopedia, N-Tier architecture provides built in flexibility (recognize that word), “[by] breaking up an application into tiers, developers only have to modify or add a specific layer, rather than have to rewrite the entire application over, if they decide to change technologies or scale up.”

By virtue of its design, N-Tier architected applications are flexible and can be upgraded more quickly and at a lower cost than traditional on-premise ERP systems. In this arena they compete very well with SaaS applications. That’s not to say N-Tier systems are a dollar for dollar match to SaaS, but the prospect for reducing TCO is real,

The truth is most ERP systems in the market are built on older technology an will likely remain so because the investment- time and money – to bring an entirely new ERP system to market is prohibitive for most, especially in the today’s economy.

(If you are a regular reader of the FourthShift Edition Blog, you know our latest product release, FourthShift Edition 9.0, was built completely from the ground up using N-Tier. You can read more about that here. )

As I said in an earlier post, SaaS is being used successfully as a point solution today and in the future may even see expansion throughout the enterprise as a fully integrated ERP system. However, that future is not today and may not be for many years. After all, companies making profits with SaaS as their primary business have margins much smaller than on-premise ERP providers. And on-premise providers are still searching for profitable SaaS models of their own.

Bottom line: there’s not a big money maker right now.

Over time ERP vendors may find a profitable model for SaaS, and some may even decide to rewrite their systems using N-Tier and other state-of-the-art technologies, but that time is likely many years away.

So where does all this leave the IT decision-maker who is looking for choice, value, and predictability? I’m afraid some things never change.

There are ways for IT decision-makers to fulfill their desire for choice, value and predictability whether they go with on-premise, SaaS or a mix. What’s important is to understand needs and know the right questions to ask. 

In a previous post I wrote about consolidation in the ERP industry and how it has impacted consumer choice. Inspired by a CIO.com article called What Customers Want from ERP Vendors on Software Pricing, choice was one of the three important considerations for decision-makers looking for technology to manage their businesses. The three, choice, value and predictability, were culled from a Forrester report by Ray Wang. Ray is a vice president and principal analyst at Forrester. For this post, I will focus on the second of the three issues, value.

Value, like beauty, is in the eye of the beholder. According to the Forrester report CIO.com reported on, ERP customers are looking for value in a few specific areas: maintenance fees, implementation and operating costs, and flexibility to add and remove licenses as needed. Unfortunately for vendors there is no single definition of value. Each company, indeed each individual, defines value on their own terms and vendors have to be ready to either meet those terms, work to change them, or face the possibility of losing a customer and the revenue that comes with them.

According to Wang’s report questions about maintenance fees and how they are used to fund reinvestment, innovation and support are becoming more common. Is the customer getting what they are paying for or, more importantly, what is their perception of the correlation between give and get? It’s an important question and you should be able to answer it for each of your customers and for the most important and influential individuals within each customer site.

It’s a tall order, but one that is well worth filling.

The second piece is a bit tricky. The report says customers find value in decreasing implementation and operating costs while increasing flexibility. The obvious way to do all three, as the article points out, is through deployment of a SaaS strategy. Doing so provides maximum flexibility with minimum cost. SaaS gives you the freedom to add and remove licenses as necessary and there is no need for server rooms or system administrators. Additionally, because SaaS is not on premise, you can dramatically reduce costs for consulting services.

SaaS is perfect, or is it?

Depending on your requirements, SaaS solutions just might work, assuming your requirements are few and not very complex. SaaS holds tremendous promise, but for now the industry is made up of several solutions. Some are very good, others not so, and there are many more on which the jury is still out. One thing they have in common, however, is they are point solutions focused on improving one portion of your operation.  ERP did away with on premise point solutions - one for accounting, one for production, one for sales, etc. – by offering a fully integrated, end to end solution. Now SaaS has brought us full circle back to the world of point solutions.

It offers the three things IT decision-makers say they want: decreased implementation and operational costs, and flexibility. But the promise needs to be balanced against what is given up by going the SaaS route: a fully integrated end to end ERP system that is supported by a single vendor.

CIO.com recently ran a piece based on a report from Forrester Research. The article by Thoman Wailgum (@twailgum), What Customers want from ERP Vendors on Software Pricing, quoted from a report by Ray Wang (@rwang0) and (Software Insider). In addition to cutting software costs, the report identified out three specific things decision makers are looking for from their application vendors: Choice, value, and predictability.

There’s a lot to be said for each so I’m going to tackle all three in individual posts. 

Choice
The article cited consolidation in the enterprise application market as a prime culprit for a lack of choice in the ERP market. Customers, according to Wang, are seeking solutions that integrate to existing applications. Nothing new about this: except those same customers are concerned that consolidation has hampered the development of third party applications because vendors have brought ERP, CRM, BI, PLM, etc. under one roof and brand.

But is consolidation per se bad for the market? Maybe, but maybe not.

I realize that’s not an answer, at least not a definitive one, but there are several factors to be considered before deciding the good or bad of a particular case:

1. Is the company making the acquisition trying to fill gaps in their product offerings or are they only interested in taking control of a competing product?
2. Does the company have a history of making acquisitions and, if so, what is their MO?
3. Is the acquisition strategic, opportunistic, etc?
4. Does the acquisition even make sense?

Not all consolidation is bad. In fact, the big 3 - SAP, Oracle, and Infor – have all grown through acquisition. Some have grown more than others, but growth through M&A is definitely a strategy each is willing to employ when it makes sense.

It is true that consolidation has had an impact on the availability of independently developed niche software that fills many of the functional gaps ERP software leaves open. CRM, HRM, BI, QA, PLM, all of these business needs were traditionally, and to some extent still are met by third party applications that integrated – sometimes easily and sometimes not – with existing enterprise systems. That model changed dramatically as ERP vendors began to first partner with and ultimately acquire those that developed the applications.

The new model appears to have impacted consumer choice, but what of the impact on the acquired applications. It’s an important point that is almost always overlooked.

There are numerous cases of entrepreneurs identifying a need and creating an application to fill it. They take their vision from the drawing board to the market and work day and night to sell, implement, support and continue development of their baby. For many of these entrepreneurs, their company reaches a point where consistent growth is hindered by a lack of resources – human and financial.

Then, in steps another with the resources, infrastructure and reach to bring a small, regional product to a national or even global audience. In a case such as this, the positive impact of consolidation is hard to measure, but it is obvious.

Bottom line: Consolidation is not per se bad. Most often, what determines the answer to that question are the answers to some or all of the questions I asked earlier in this post:

1. Is the company making the acquisition trying to fill gaps in their product offerings or are they only interested in taking control of a competing product?
2. Does the company have a history of making acquisitions and, if so, what is their MO?
3. Is the acquisition strategic, opportunistic, etc?
4. Does the acquisition even make sense?
   

Recall.

For consumers it can mean illness and, in some cases, death from ingesting tainted products. For producers a recall, however modest, can mean lost business and, often, bankruptcy.

The bottom line: Recalls are not good for anyone. 

For food and beverage producers surviving a recall hinges on several factors, not the least of which is the ability to trace up and down their supply chain from supplier to retailer.  There are many ways to implement lot trace in an enterprise, some good and some not so good. 

Today’s podcast explores the importance of lot trace to a food and beverage enterprise, the differences between single and multi-level lot trace, and what to look for when evaluating an ERP system to automate your manufacturing processes.

By now this is old news, but it doesn't hurt to give it another push. SoftBrands - the company behind FourthShift Edition and this blog - entered into a definitive agreement to be acquired by an affiliate of Golden Gate Capital and Infor.

Read the entire press release.

It's been a while since we've seen a recession as deep as this one. So long, in fact, that most of us in management positions were still in high school during the last one. The recession's impact on business is obvious, but what's not as apparent is what businesses are doing to make sure their doors are still open when the economy recovers.

To get a gage on how your company has reacted, we invite you to take a short survey; just 8 questions to tell us what you're doing to survive the recession.

You can remain anonymous, but if you don't mind offering a few bits of contact information you'll be entered into a drawing for an 8GB iPod Touch.

You can only do it once, but feel free to pass the link along to anyone you wish. The poll closes when the clock strikes midnight on July 3rd, 2009, so don't wait too long. You can check out all the rules here.

Click here to take the poll.

For the second consecutive year, SoftBrands has been named to the Top 10 list of revenue generators for SAP Business One and SAP All-in-One partners. A lot of hard work goes into winning this award and goes without saying that our partners played a key role.

Rich Dettinger, director of channel sales for SoftBrands puts it this way:

We wouldn't have the success we've had without the support and hard work of our channel partners around the world. Our partners help bring our products into the regional and vertical markets they specialize in, and they're invaluable to me and my colleagues at SoftBrands.

Read the entire release.

In early January we I told you about the coming release of FourthShift Edition 9.0, two weeks ago you listened as Diane Palmquist, vice president and general manager of SAP Solutions at SoftBrands, talked about 9.0, the technology behind it and what it means to the market.

Today, I'm happy to announce that FourthShift Edition 9.0 has arrived!

To introduce the it to the world we put together a little video. Take few minutes - closer to 10 actually - and find out why FourthShift Edition 9.0 is a different.

Click To Play

SearchManufacturingERP reported on a survey released by Panorama Consulting Group. The survey addresses the question, Why do ERP implementations fail. The number one answer - and it wasn't close - Lack of employee buy in.

Of all the variables one needs to consider when evaluating an ERP system - or any enterprise-changing purchase for that matter - one of the most important and, dare I say obvious, is the people who will be directly impacted by its implementation. To undertake an evaluation and spend tens, if not hundreds, of thousands of dollars without engaging or informing the representatives from the functional areas is a horrible miscalculation. 

From the article:

Assembling a team with a strong project manager and "A-players" from several departments to identify and track key business needs will help ensure ERP implementation success. That includes involving executives outside IT in vendor evaluation and process planning to identify the benefits and hidden costs of ERP projects, according to Panorama president Eric Kimberling.

"Really focus on the business -- because it's not about the software," Kimberling said. "Set realistic expectations, and take the time to really plan the project. Go in with eyes wide open."

The results of the survey shine light on an issue that continues to haunt many companies, the issue of managing change - big and small. By nature, people resist change. We gravitate toward what we know because its comfortable and predictable. Small changes are usually absorbed with little or no problem, but major changes, such as the announcement that you get to learn a new ERP system (no one told me they were even looking) can cause upheaval among the troops. The result is reduced morale and lack of interest in the project.

Simply put, without getting buy in you're setting yourself up for potential failure.

The culture of business has come a long way over the years with flexible schedules, telecommuting (I'm in a local coffee shop now), etc., but it looks like some are still a work in process.