ISV model for midmarket apps unfolds

"Software markets for small and medium-size enterprises will become more vertical in nature over the next five years," says Doug Burgum, senior VP, Microsoft Business Solutions (MBS), Microsoft's enterprise applications business unit. "We won't be able to own all the intellectual property for all those different verticals; we will develop core functionality that feeds many markets. The rest will be left to our ISV [independent software vendors] partners—better 1,000 partners than 10 verticals."

Both the strengths and weaknesses of this ISV-centric approach were on display at Microsoft Convergence, a user conference held last quarter in Orlando. The MBS distribution channels—ISVs, value-added resellers (VARs), and just plain old systems integrators—were at the conference touting application extensions that integrate seamlessly with one or more of MBS's four enterprise solutions: Axapta, Navision, Great Plains, and Solomon. These extensions range from time clocks to report writers to warehouse management systems.

Microsoft compares this tendency—for functionality to proliferate spontaneously through its distribution channels—to similar trends with desktop productivity tools such as Excel. Some say it also bears comparison to the open source movement. On the other hand, as yet, there doesn't seem to be a comprehensive listing of available extensions, nor is there a certification process guaranteeing that an extension's developers used methods that ensure ongoing compatibility with MBS products.

The largest Axapta ISV in the U.S.—named [en'tegrate] usa inc.—announced at Convergence general availability of two Microsoft Axapta integrated solutions. First is Axapta Lean Enterprise, a lean manufacturing system based on principles developed in the automotive industry and popularized in the book Lean Thinking by James Womack and Daniel Jones. Second is ERP Complete, said to significantly lower the cost of implementation configuration of Axapta, and its support training and project management.

"So much of the cost of implementing is paying a consultant to sit there while you set the parameters," says Steve Balow, an [en'tegrate] partner. "Now, full instructions for that are in ERP Complete, as well as examples—all built right into Axapta."

The darker side of working with ISVs was revealed by John Henry Larsen, CIO with Stolt Sea Farm, Toronto, a fresh-fish supplier to markets worldwide. Larsen says Stolt is very pleased with its Microsoft Navision ERP system, which is centrally managed but includes five regional localizations.

Getting fresh fish to market is a different kind of distribution puzzle, related mainly to the fact that while demand has to be taken into consideration, once the fish are harvested they need to be sold quickly, one way or another. "We needed customizations specific to our farm sites, transportation, and the distribution challenges related to fresh fish," says Larsen.

The first systems integrator Stolt worked with to do the required customizations was, says Larsen, "a disaster. They didn't follow the rules so the customizations didn't roll over into the next version. We trusted them, but what they did had to be done all over again once it came time to upgrade. It was a $50,000 to $100,000 mistake."

Larsen adds that this all took place when Navision was still an independent vendor, "and there is a huge difference in the quality of the integrators since Microsoft took over."

Balow contends the advantages of the ISV distribution model far outweigh any growing pains MBS may be going through. "Anybody can do bad development, but Axapta has been designed from the beginning to be extensible, to add things without changing things. There is a business practice manual for ISV development work that outlines best practices."