Suite strategies for midmarket ERP
How product rationalization of acquisitive midmarket ERP vendors impacts Organic Valley, others
By Roberto Michel, senior contributing editor -- Manufacturing Business Technology, 8/1/2006 12:00:00 AM
Imagine after a full-blown ERP implementation, the midsize company you work for successfully goes live with the system. Time to celebrate, right? While most companies would allow themselves a pat on the back for smooth system deployment, in these times of consolidation in the enterprise software market, going live with a system may be closely followed by news that your vendor just got bought.
Since ERP systems—the integrated software suites used for everything from taking orders to planning production—are meant to stay in service for 10 years or longer, acquisitions can be unsettling. And with some ERP vendors now offering a half-dozen or more ERP products, users potentially have much more at stake when a vendor sets up its road map post-acquisition—including whether or not to develop a common suite.
For vendors, the lure of ERP suite commonality lies with streamlined development, support, and even marketing costs, says Sanjeev Aggarwal, a senior analyst with Boston-based Yankee Group. "Over time, continuing to invest in dozens of similar ERP products doesn't work," says Aggarwal. "For one thing, you have all these products, so what do you tell companies looking to buy? Vendors can have a difficult time just positioning all of these acquisitions."
Follow the map
Aggarwal and others say keeping multiple ERP suites going can make sense if there is enough of a difference between their functionality and target market, and if the vendor invests in overarching integration architecture. So while there are no hard rules about whether ERP vendors should move to common suites, market consolidation has users paying close attention to product road maps.
At Organic Valley Family of Farms, IT Director George Neill watched Organic's ERP vendor, Infor, transform itself into the most acquisitive vendor in the ERP midmarket to date. When the LaFarge, Wis.-based company began looking for a new ERP system earlier this decade, what was to become Infor's ERP suite aimed at process manufacturers was under the wing of a vendor called SCT, which sold the business to an entity that became Infor. Along the way, Infor and its investors began buying other ERP vendors with solutions aimed at specific industry sectors. Infor continues to advance these ERP suites, which it sees as having distinct markets.
Neill says it doesn't bother him that Infor—currently set to acquire enterprise vendor SSA Global—now has multiple products. The vendor continued to enhance its Infor Process ERP suite with frequent upgrades since Organic Valley purchased the solution in late 2003, Neill says, as well as retain key employees.
"Any time a vendor starts buying other vendors, it's normal for people to get a little nervous," says Neill. "But one of the strengths of Infor has been the longevity of its staff. From an operational point of view, as a user, we've seen no impact."
The market for ERP solutions aimed at small to midsize businesses (SMBs) remains a wider-open market than the Tier 1 ERP market, where SAP dominates, followed by Oracle. But when it comes to SMBs, especially in manufacturing, several other vendors thrive (see listing beginning on p. 32).
Vendor product strategies vary, often dependent on how many acquisitions a vendor has made, or the verticals it targets. Some acquisitive vendors, such as Oracle, are building a common, next-generation ERP suite that its users can migrate to, while also supporting and enhancing acquired suites for years to come.
Other vendors, such as Infor, believe in a portfolio of ERP solutions aimed at different verticals, but sharing a common service-oriented architecture so that add-ons like business intelligence can be integrated in a consistent way.
Strategy's first watchers
Robin Pederson, executive VP of business group operations at Infor, says Infor's ERP suites for different industries are each viable business platforms.
"We have every intention of continuing to enhance and support those platforms," Pederson says. "Product rationalization for us is driven by our customers, and they are telling us to move forward."
Neill says Organic Valley's chief financial officer looked at Infor's business model as it began to acquire more vendors to see if it was committed to enhancing the products, or was looking to "churn and burn" its short-term financial strength by slashing costs and milking maintenance dollars. "None of those things showed up as risk factors for us," says Neill.
Functionally, says Neill, Infor's ERP suite for the process industry was strong on features such as catch weights, bulk tank management, and other capabilities needed in food & beverage. Organic Valley also uses Infor's supply chain planning solution, which Neill says is crucial to supporting its unique business challenges.
The company, he says, works with farmers to obtain organic milk and other organic ingredients, and then needs to plan production with a network of contract manufacturers—all the while matching that up with demand on the retail side. "We are not your typical food manufacturer. We are more appropriately described as a marketing and distribution cooperative, with virtual manufacturing activity," he says.
Infor's solution, Neill says, has the vertical-industry features needed to purchase and manage the supply of raw materials from farmers, as well as to plan production in a way that maximizes the potential of the organic milk. "There is a shortage of organic milk in the country, so we can't go out onto the open market and buy more milk," he says. "When we have milk coming in, we have to figure out how to best utilize it."
The argument for a vendor having a single ERP suite, or at least greater commonality, revolves around concentrated research & development.
"It has to be difficult to deploy the level of resources needed to develop those multiple products," says Sharon Ward, worldwide manufacturing industry director of Microsoft Dynamics for Microsoft Business Solutions.
Microsoft, of course, is itself an acquirer, having bought Great Plains and Navision to gain a foothold in the market several years ago. But under an initiative initially code-named Project Green—and now simply part of the product road map for its Dynamics brand—Microsoft is building more commonality into its suites.
The first areas of commonality will be user interface and add-on applications like customer relationship management (CRM), but eventually, using the .NET development framework, the infrastructure for the company's four suites will become common. However, says Ward, this evolution will not involve a big-bang move to a new suite.
"There is nothing scarier to the midmarket than [redeploying ERP]," Ward says. "No one wants to finish an implementation [only to find] another big project on the horizon. That's why we've made such a commitment to being evolutionary."
Common benefits
One Microsoft ERP user that sees the benefits of greater commonality is Webasto Products North America (WPNA), Fenton, Mich. A subsidiary of Webasto Global Comfort Solutions, WPNA makes aftermarket and original equipment thermosystems, and distributes aftermarket sunroofs. It has used Microsoft's Dynamics GP (formerly Great Plains) suite since 1996, and has continued to migrate to new versions. It also uses Microsoft's CRM package, Microsoft Office, and the SharePoint portal environment.
Andrew Fralick, WPNA IT director, says Microsoft has achieved a common look and feel to its ERP products. What's more, he says, since Microsoft has been using the .NET development framework to build newer versions of its suites, it should make user migration to progressively more common releases relatively smooth. "Use of .NET for its products will make this transition easier than if they were doing hard coding under different development frameworks," claims Fralick.
The commonality should come in handy for Webasto Global Comfort Solutions, which is adopting the Dynamics AX (formerly Axapta) suite for all its OEMs, as well as the aftermarket side of the business in Europe, while continuing to use Dynamics GP for WPNA. Both suites sport a user interface that resembles Microsoft Outlook, says Fralick.
The GP suite began with the Outlook-style user interface a couple of releases ago, adding the ability to embed pieces of SharePoint portal information into the suite's start or "home" page. WPNA uses SharePoint for its company intranet, and plans to roll out a Microsoft solution called the Microsoft Business Portal that will add improved key performance indicators and self-service processes such as purchase requisitions.
All for one
Sourcing collaboration, office productivity, and ERP software from one financially stable vendor carries definite benefits, adds Fralick. "It's nice to have all the software packages from one vendor, because you know they are going to work well together," Fralick says. "And you know Microsoft is going to be around. It isn't the type of vendor you have to worry about disappearing."
The biggest ERP vendor around—SAP—hasn't needed to acquire rival ERP vendors, though it has made smaller buys in areas like portals. It also developed a separate suite for the small business market dubbed Business One, having just notched its 10,000th user for the suite.
Simon Bragg, European research director with Dedham, Mass.-based ARC Advisory Group, says a cleaner, stable product line is a key factor that SAP has going for it in the market. By contrast, he says, if more acquisitive vendors become too aggressive in trying to force their installed bases to a common suite, they risk losing users. "If you start offering customers what amounts to a big, nasty upgrade, you will start losing your customer base," Bragg says.
For some acquisitive vendors, says Bragg, there are enough vertical-industry differences in acquired products to preclude the need for a common suite, though most vendors need an integration strategy to allow them to more effectively cross-sell extended applications. Says Bragg, "To produce one single suite, one common code base, is just not viable for some of these vendors."
At Epicor Software Corp., an ERP vendor that's done its own share of acquisitions, the strategy is to continue support for—and enhancement of—acquired suites, while building a service-oriented architecture to facilitate integration, according to John Hiraoka, chief marketing officer. This integration layer—dubbed Service Connect—brings Epicor development and services efficiencies, but allows users to stay with the suites they sought out in the first place.
"What users tell us is, 'We don't want to be forced to migrate,'" explains Hiraoka.
To date, says ARC's Bragg, acquisitive vendors haven't had much success building common ERP suites and getting large numbers of users on them. However, he says, given enough time, big vendors such as Microsoft or Oracle may be able to pull it off.
"These are big software companies, and they're throwing a lot of money at it," says Bragg. "They know how to implement similar development standards across their organizations, so eventually, they will achieve more commonality."
Midmarket ERP at a glance
| Company | Vendor niche | Recent news |
| Cincom Systems www.cincom.com | Long history of ERP solutions for build-to-order, complex product makers, including quotation and configuration management. Cincom also supports lean manufacturing. | Cincom's Demand Suite includes new capabilities for Smart Client User Interface, a Demand Management Portal with backlog analytic tools and key performance indicators, improved production sequencing and kanban algorithms, and increased performance and scalability for high-volume operations. |
| Epicor www.epicor.com | Epicor offers ERP, CRM, supply chain management, and professional service automation solutions for midmarket companies and divisions of the Global 1000. Founded in 1984, Epicor serves 20,000-plus customers in more than 140 countries. It delivers solutions for manufacturing, distribution, retail, hospitality, and services organizations | U.K.-based steel plate processor and distributor Brown McFarlane recently replaced its 10-year-old, Unix-based system with the Vantage ERP suite from Epicor for its suitability in make-to-order manufacturing operations. Brown McFarlane will deploy Vantage manufacturing, accounting, and stock-handling modules to 55 U.K. users, and replicate the system to its Middle East operations later in the year. |
| Exact Software www.exactamerica.com | Dutch ERP vendor Exact's acquisitions of Macola and Kewill's ERP business, as well as JobBOSS and Alliance, give it substantial presence in the small to midsize market. Exact embedded workflow to the Macola ES suite, and also offers a suite called e-Synergy that blends customer, content, and business process management. | Exact Software announces upgrades to its MAX ERP system for midsize discrete manufacturers; and to its Exact Business Analytics solution. MAX features an expanded database, tighter systems integration, enhanced security, larger transaction volumes, enhanced accounting management, and improved reporting functionality. |
| Glovia www.glovia.com | Part of Fujitsu, a $45 billion-plus global technology vendor, Glovia's ERP solution is used by both midsize and larger companies. Targeted verticals include automotive, capital equipment, electronics, telecommunications, and project-oriented enterprises. | Dallas-based lighting and control systems maker Genlyte Controls is using glovia.com ERP to gain visibility into manufacturing costs. The system will give Genlyte interactive management of inventory and material movement, product configuration control, and an integrated online environment for processing sales orders and managing inventory. |
| IFS www.ifsworld.com | This Swedish vendor with global operations offers a component-based suite with dozens of modules, including MRO and asset management, as well as product-data management functionality. | IFS' Applications 7 for the metals industry will run operations at the Nucor steel plant in Decatur, Ala. Applications 7 supports all critical business processes, including plant design, maintenance, manufacturing, quality, asset, and product life-cycle management; standardized real-time automation integration; order handling; and demand planning. |
| Infor www.infor.com | Infor's strength is in enterprise software for manufacturing and distribution verticals, with offerings in ERP; CRM; and asset, product life-cycle, and supply chain management. The company strategy is to buy up best-of-breed vendors that complement its own offerings, such as Lilly Software and Datastream. Its most recent buy was rival SSA Global, making Infor the third-largest supplier in the midsize ERP market. | Viking Yachts, New Gretna, N.J., is upgrading its Infor SyteLine ERP system to Version 7 to control operations across multiple sites. All 15 of its business units are using SyteLine for managing product configuration, inventory control, production, procurement, and financial management, and Infor's Field Service-Plus for service history, scheduling, and execution. |
| IQMS www.iqms.com | IQMS offers deep functionality in the automotive, medical device, and plastics verticals, as well as general discrete and process manufacturing. The vendor notched 25-percent revenue growth in 2005, and launched IQMS organizations for Asia and Europe. | The latest version of EnterpriseIQ ERP system supports serialized inventory control, processing of inbound transactions in XML format, expanded graphical scheduling, an optional inter-company transaction module, e-kanban functionality, a report catalog module, and email alerts from CRM systems. The upgrade is free to current IQMS customers though the IQMS Maintenance Program. |
| Lawson/Intentia www.lawson.com | In April 2006, Lawson Software and Intentia merged to form the new Lawson, pairing Intentia's strengths in manufacturing verticals such as apparel with Lawson's strength in nonmanufacturing sectors such as services firms and government. Both support IBM's iSeries platform. Most other major iSeries-based vendors are now under the wing of Infor. | As a sign of its post-merger financial strength, Lawson Software is listed in the new NASDAQ Global Select Market, which comprises the highest initial listing standards of any exchange in the world based on financial and liquidity requirements. |
| Made2Manage Systems www.made2manage.com | Under the wing of Battery Ventures, Made2Manage bought other vendors with vertical appeal—such as DTR Software, which targets plastics processors; and AXIS Computer Systems, with systems for metals, wire & cable manufacturers. Made2Manage runs its acquisitions as separate business units. In June it acquired Intuitive Manufacturing Systems. That deal—which marked Made2Manage's sixth since being taken private—gives it one of the most extensive product portfolios in the SMB space. | Made2Manage recently acquired CRM solution vendor Onyx Software, and Encompix, a project-based and engineer-to-order focused ERP provider. Both will operate as separate business units of Made2Manage. Its latest acquisition is Intuitive Manufacturing (see left). In other news, the company recently notched an ERP system sale when James Monroe Wire and Cable Corp., a manufacturer of insulated wire products, selected the AXIOM Enterprise Management System from Made2Manage's AXIS Computer Systems division. |
| Microsoft Business Solutions www.microsoft.com/dynamics | The Microsoft Dynamics rebranding is the result of the rationalization of Microsoft's acquisition of midsize ERP vendors Axapta, Great Plains, Navision, and Solomon. The addition of Dynamics CRM to the mix gives Microsoft solutions for a broad spectrum of enterprises operations from project- and service-driven companies to discrete and process manufacturers. | Microsoft's Dynamics CRM 3.0 is now available in a software-as-a-service (SaaS) version, called Microsoft Dynamics CRM Live, which will be operated and managed by Microsoft within its Windows Live data centers. It will use the same code base as the on-premise and partner-hosted versions, and will be integrated with Windows Live and Office Live services. Users will be able to access Dynamics CRM Live from Outlook, from a browser, and from a range of mobile devices. |
| OpenMFG www.openmfg.com | Vendor offers an ERP suite built with open-source tools such as the "Qt" toolkit for C++, the PostgreSQL database, and the Linux operating system. While its licensing model incorporates elements of both the open source and proprietary models, OpenMFG says its use of open-source technology puts Tier 2 ERP software within reach of Tier 3 companies. | OpenMFG has reached an agreement to use Trolltech's Qt/Linguist translation tool at no charge. The tool enables easy translation of OpenMFG's ERP suite into other languages. It is available for Windows, Linux, and Apple Mac OS X environments, and can be downloaded from the OpenMFG site. |
| QAD www.qad.com | QAD consistently targets select verticals with deep functionality. Users in these sectors—consumer products, electronics, food & beverage, industry products, and life sciences—include some Tier 1-size enterprises, but also many midmarket manufacturers. | QAD is shipping its flagship ERP software with a Microsoft .NET Framework-based user interface, and will offer support for Microsoft SQL Server 2005 database technology in the near future. Users can take advantage of Internet Explorer, Office tools, and Web-based navigation. Compatibility with Microsoft Vista also is ensured. |
| Sage Software www.sagesoftware.com | One of the largest enterprise software vendors, Sage offers a broad lineup of applications aimed at the small and midsize market, including Peachtree accounting, Sage CRM SalesLogix, and ACT! by Sage, as well as ERP systems under the MAS moniker with extensive manufacturing functionality. | Using the Sage Compliance Utility, MAS 90 ERP and MAS 200 ERP users can outsource payroll tax compliance processes to Sage Compliance Services. They also can manage day-to-day payroll functions in-house, extract data from MAS payroll modules, and send it to Sage Compliance Services to complete IRS forms, pay taxes, and initiate all liability payments. |
| SoftBrands www.softbrands.com | SoftBrands manufacturing products trace back to the former Fourth Shift, a widely used ERP package in the small and midsize business market. The vendor continues to offer Fourth Shift while branching out with Demand Stream, a lean manufacturing solution; the Evolution ERP package; and a "Fourth Shift" edition of SAP's Business One package for SMBs. | Buddy's Plants Plus, Ballinger, Texas, recently replaced multiple systems with Fourth Shift Edition for SAP Business One. Key benefits are ease of-use in a process-manufacturing environment, and tighter alignment with supply chain initiatives mandated by Buddy's sole customer, Scotts, which runs mySAP Business Suite. |
| SYSPRO www.syspro.com | Formed in 1978 and now with customers in 60 countries, SYSPRO's suite offers broad and deep functionality for manufacturing and distribution, and makes extensive use of Web services. The suite has features useful to select verticals, such as a material yield system for manufacturers that manage materials according to customer-specific dimensional requirements; and a trade promotion and deductions management solution for selling to big retailers. | SYSPRO entered an OEM agreement with Business Objects to integrate Crystal Reports XI enterprise reporting software into SYSPRO ERP. The deal gives SYSPRO customers access to Crystal Reports analytical and reporting tools out of the box, and the ability to customize any standard report to meet individual requirements. |
