ERP accelerates its move to the cloud

Netsuite just reported record Q3 results.   They are being touted (mostly by Netsuite) as the next SAP.  While that seemed outrageous and overambitious a few years ago, it is now seeming more plausible. 

As the most visible SaaS ERP company, Netsuite is helping to establish a market and increase the awareness and acceptance of ERP in the Cloud.  Workday is growing rapidly in size and prominence.   These are harbingers of the coming shakeup in ERP.  Industry analyst Laura Lederman of Wm Blair says:

We are in the early stages of a decade‐long ERP replacement cycle to the cloud. We have seen market after market move to the cloud, from salesforce automation (SFA) to human resources and call centers. The vendors that dominate each space end up taking significant market share from the on‐premise players.  …SaaS has gone mainstream over the past decade, and we are seeing more mission‐critical application categories—such as accounting software—moving to the cloud.

 At Plex, we see every day the growing acceptance of and even insistence on SaaS ERP.  We have staked out our rather broad niche in Cloud ERP for Manufacturers with deep vertical features for the enterprise and SMB.  The success of the general-purpose vendors such as Workday and Netsuite help accelerate the acceptance of Cloud Computing even for mission-critical applications like accounting and manufacturing.

Three cheers for the new world order!

Kenandy joins SaaS ERP market for manufacturers

Kenandy is getting huge press as the latest startup in SaaS ERP for manufacturing.  I welcome a new competitor wholeheartedly.  It is yet another signal that SaaS will make enormous inroads in the coming years, displacing the aging on-premise solutions of the 80’s and 90’s. 

SAP was the first major player to recognize the trend when it announced Business By Design in 2007.  It has struggled to come up with a product and business model that makes sense for its customers, its channel and its broader ecosystem that loves the dollars associated with the on-premise offering.

Workday and Netsuite have proven that companies will put sensitive financial and HR data in the cloud.  They are both succeeding at replacing older on-premise solutions.  However, neither has ventured into the manufacturing market.  With so few providers of SaaS ERP for Manufacturing, many analysts and investors assume that the customers are just not ready.  That’s not the case at all.  Developing manufacturing solutions is very hard and very complex.  When manufacturers learn about SaaS they are eager to get on board.  There just have not been enough voices.

Now, finally, there is a new company with a loud voice saying that this is where ERP for manufacturers is going.  The marquee names of the leadership and investors are getting the message out and will help make SaaS the default delivery mechanism for ERP in the future. 

Welcome to the market, Kenandy!

Amazon Outage – Too Cloudy?

The much publicized outage at Amazon’s cloud service has many cloud users and potential cloud users wondering about the reliability of cloud-based infrastructure and applications.  And rightly so. When you put your trust in an outside resource to provide vital services, you have to have a certain level of confidence that those services will be there when you need them – essentially 24/7 for most purposes.

 That, in fact, is why cloud service suppliers will provide a service level agreement or SLA that specifies the minimum “uptime” or availability for the service they provide. Keep in mind, though, that uptime and down time are measured against a 24/7/365 standard – 525,600 minutes per year. A guarantee of 99% availability sounds really great, until you realize that it  allows more than 87 hours without service – more than three and-a-half days! Amazon’s standard SLA specifies 99.95% or a maximum of about 4.5 hours of outage.

Another consideration is the actual service that is guaranteed. In Amazon’s case, it was EBS and RDS services that experienced the failure but the SLA specified EC2 (Elastic Compute Cloud) so legally-speaking, the agreement was not violated. In any case, the remedy is a refund of the service fee for the failure period. That’s small consolation for a company that might have been unable to take orders or ship product for hours or days.

All that aside, there are differences among cloud providers that should be considered when evaluating reliability and risk. In their rush to the market some application providers rely on too many third-party components they don’t fully understand, treating them as “black boxes”. A software vendor who builds their entire application on a third-party platform and hosts it on someone else’s infrastructure is opening themselves up to potential disaster.  Phil Wainwright at ZDNet.com points out that software vendors must engineer around the weaknesses of the platform and infrastructure providers.  However, if the weaknesses aren’t completely understood (can they be?), this is a futile effort.

Needless to say, when a company considers placing critical services in the hands of an outside organization, whether it is simple infrastructure (Platform as a Service, Infrastructure as a Service) or full-blown Software as a Service, due diligence is warranted. Know your supplier. Question their back-up, fail-over and contingency plans. Scrutinize the SLA closely and watch for imprecise definitions and too-precise limitations. Make your own contingency plans just in case the service fails to live up to your specifications.

This is really no different than what you should do with any other critical resource – whether it is handled in-house or contracted to an outside service provider. Ultimately, you must take responsibility for the availability of that resource or service and insure that you can continue operation in the event that the resource becomes unavailable. Quite frankly, it is more likely that a reputable cloud provider will have more complete and functional backup, fail-over and contingency (disaster recovery) capabilities than most companies provide for themselves and for their in-house resources.

Infor – What Flavor This Month?

The strategy at Infor seems to change as rapidly as it acquires businesses. 

SOA… SaaS… Microsoft… No, not Microsoft, maybe Java?

It seems like just a few months ago that Infor touted SOA (service-oriented architecture) as the magic that would allow their customers to get value out of their absurd menagerie of products.  It turns out that SOA sounds good, but is just another layer on top of very old applications with very different user interfaces and data structures. 

When the pressure to have a cloud strategy became too much to bear, Infor announced that Syteline (formerly Symix) was now a SaaS solution.  I would bet that other on-premise vendors are eager to learn that brand of magic. 

On June 23, 2010 Infor made a very big deal about choosing Microsoft as its strategic platform provider.   Infor ION (i.e. SOA-type middleware) was to be powered by all of the cloud-enabled Microsoft tools.   A PCWorld article at the time said:

“While Infor and Microsoft already had a partnership, the new announcement takes the relationship much further.

Microsoft’s SharePoint collaboration product will serve as a foundation for “portal based, unified interfaces for all Infor applications,” Infor said in a statement. The vendor will also use Microsoft’s Silverlight RIA (rich Internet application) platform; Microsoft Reporting Services for BI (business intelligence); and Microsoft Single Sign-On for identity management. It has also named SQL Server and Windows Server as its “preferred” infrastructure components.”

Now, with the acquisition of Lawson, Infor is making another abrupt turn.  Frank Scavo describes the new technology strategy which is not Microsoft-centric.  I can’t imagine being a software developer at Infor… unless you really like variety.

Now a Viable Competitor to SAP and Oracle?

Becoming the third-largest ERP provider does not make Infor the third best, or best or fifth-best.  It simply makes it the third-largest.  Customers want up-to-date applications that fit their business.  They want as much functionality as possible in one suite so they don’t have to learn different user interfaces.  Customers want products that can rapidly evolve as their businesses evolve.  At some point, if it really intends to be relevant, Infor must do the hard (and expensive) work of rewriting the core system. 

There is no magic wand.  Ask Microsoft who gave up on Project Green.  Ask Oracle how long Fusion was (is) in development.  Ask SAP about the lead time and resources to develop ByDesign.  Changing direction with each new acquisition or market challenge will not get Infor where it needs to go.

The supply chain is changing – are you ready?

The supply chain is a dynamic thing. Supplier capabilities and prices change. Currency exchange rates fluctuate daily. Commodities have been particularly volatile recently. Transportation costs vary with the price of oil and are affected by geopolitical events. Weather, earthquakes, floods, fires, piracy… lots of things can affect availability, cause price swings, and disrupt the smooth flow of goods from one place to another.

The supply chain is set up to support company operations and goals, according to the prevailing conditions at the time. When those conditions change, the supply chain must be ready and able to change accordingly. And the more elements in the chain (the further it is from supplier to buyer, the more transportation links involved) the higher the risk of change or disruption.

Many companies establish long supply chains to take advantage of favorable pricing from low-wage area suppliers. This is a sound approach, as long as all the other related costs are included in the analysis. In addition to transportation, customs, duties, and service fees (agents, consolidators, brokers), be sure to include consideration for the extra inventory you’ll need because of the longer lead time and a factor for obsolescence risk and reduced agility.

 Another consideration that many companies ignore, however, is risk. While there is risk associated with any supplier and supply chain, risk of disruption increases with the length of the chain. In order to assess risk, it is necessary to imagine the worst case scenarios. What would be the impact if “x” happened? How would that affect operations? What are the alternatives? What are the costs of those alternatives?  Many companies do some level of succession planning for their managers and executives.  This is a similar discipline.

While risk assessment will provide additional insight in to the true cost of a supply decision, it also offers an opportunity to develop recovery plans. Then, if the problem does occur, you will be prepared to act immediately – you will already know what to do to keep the plant in operation and keep products flowing.   

Sometimes, however, there is no practical alternative. In this situation, it is helpful to consider the cost of shutting down the plant for however long it takes to get the supply back on-line. The cost may well be high enough to justify development of another alternative (another supplier, substitute material or part, different transportation modes or providers), the existence of which could well change the original risk/justification equation.

As you can see, even risk and recovery planning is dynamic. Supply chain planning goes beyond just setting things up the first time. Risk must be included in the plan and every part of the supply chain should be continually monitored to detect any changes in the assumptions that went into the current plan. Then, consider the “what if” possibilities, factor risk and impact into cost justification, and prepare recovery alternatives ahead of the need.

Egypt – Pro or Con for SaaS?

The Egyptian authorities have reportedly “shut down the Internet” in Egypt.  There is much discussion as to whether that is possible and what the implications are. 

It appears that they did indeed shut it down and the implication are enormous.  Think about how much we rely on the Internet every day.  It’s all around us. We rely on it for email, news and more.  Many businesses are even more reliant on the availability of the web.  So, does this mean CIOs should not choose SaaS solutions? 

I think this situation argues the opposite.  One of my colleagues summarizes it as follows:

“The government is falling.  There is chaos in the streets.  Availability of your SaaS application is the least of your worries.  While you are are analyzing OEE, your plant manager is buying weapons and putting on a bullet proof vest. 

Every ex-pat in Egypt is getting in a plane, train, automobile, or ship to leave the country. When they get to their destination, they will be able to access their applications, which is more than could be said than for the on-premise solution, which will be UNAVAILABLE outside of Egypt because……….the Internet is down.”

I have heard many CIOs say they are very happy not to have critical company intellectual property on the ground in unstable countries or those that don’t respect IP protection laws. 

Mission-critical applications from a reliable SaaS provider with datacenters in stable, democratic countries are a great solution for companies with global operations.

Specializing to Expand Opportunities

Carving a Niche

Many companies find success by creating or exploiting a niche – sometimes inadvertently. A company might, for example, start out as a provider of general-purpose steel bookshelves for offices and storerooms. Then, one day, a potential customer asks if the company can make a specific kind of shelf for a point-of-sale display. The company takes the order and produces the shelf, and the customer comes back for several re-orders.

Adjacent Markets Appear

 A short time later, another prospect who saw the display shelf approaches the company and asks for a somewhat different version for their products. Once again, this is a successful piece of business, and both customer and producer are pleased with the result.

 Sometime later, management realizes that the company has become a specialist in display shelving. The company phases out the commodity-type general-purpose shelving, and soon becomes a leading designer and builder of point-of-sale displays. This was not the original intention, but the company was aware enough to recognize an opportunity and built on early success to move into a higher-margin niche.

Autos to Food – Interesting Similarities

 In this example, specialization narrowed the market focus for the shelving company. Specialization can lead to broader markets, as it did for my own company. Based in Michigan, Plex started out providing software for suppliers to the automotive industry. But automotive suppliers are a more diverse bunch than you might realize. One customer mixed rubber for coating steel coils before stamping out parts from the coated steel. We developed recipe management functionality and batch process management for this customer. After our initial success there, this functionality attracted the attention of a packaged-food company, and we soon had experience and a reference account in the food industry.

 Recognizing this new opportunity, we expanded product features to better serve food companies, “beefed” up our marketing, and increased our footprint in this new direction. Customers drove initial product development in this new direction, but we recognized the new market opportunities and built the rest of the infrastructure to address it.

 Sometimes, new opportunities are forced upon you when existing markets change or deteriorate. A number of automotive suppliers, faced with declining business during the industry shakeup over the last several years, have begun making products for emerging “green” industries. Making parts for wind turbines is not that different from making parts for automobiles. These companies are applying their capabilities to serve new markets that are projected to grow while their traditional markets shrink. Some remain as suppliers to the automotive market, while others are redirecting their business entirely in this new direction.

 It is easy to get complacent, especially if your market is stable or growing. A market decline can force you to look at new markets, but new opportunities are out there even if your current business is doing well in its existing niche. It is always important to recognize your capabilities – your core competencies and the things you do particularly well – and think about other industries and markets that could benefit.

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