Business Accent

Competition intensifies for the SMB ERP customer

Users benefit as vendors reduce enterprise complexity and deliver integration

This is the conclusion of an article whose first portion was published in our issue dated October 8th 2007.

Because no single solution provider has the resources to deliver the complete set of last-mile requirements, vendors must rely on solutions-centric ecosystems to extend a vendor’s product portfolio, fill white space in solution road maps, and augment and expand the execution team (see Figure 5).

Solution providers differ in their approach to the SMB ERP market

SMBs face many choices as established vendors, software giants, and SaaS providers enter this growing market (see Figure 6). Each segment varies in its approach and prioritization of innovation.

Established vendors build deeper vertical functionality

For incumbent SMB vendors, the goal is to focus IP development on last-mile solutions. Instead of committing 27 to 33 percent of development costs to tools and technology, [you should] adopt middleware platforms like BEA’s WebLogic, IBM’s WebSphere, Microsoft’s Visual Studio .NET, Oracle’s Fusion Middleware, and SAP’s NetWeaver and free 17 to 20 percent of your R&D budget for new investment. Forrester expects significant market consolidation along these middleware platforms, especially among solutions built on Microsoft Visual Studio .NET. Key SMB ERP vendors in this category are listed below. (see Figure 7)

Software giants focus on acquisitions to meet SMB requirements

Vendors with $1 billion in overall annual revenues fall into two camps: those traditionally in the SMB market that have acquired to grow, like Infor, Intuit, and The Sage Group, and those that have recently entered the market via acquisitions, like Microsoft, Oracle, and SAP. Success in the market requires strong solutions-centric ecosystems that put feet on the street and provide coordinated partner development to reach micro-verticals. Most software giants, with the exception of Intuit, lack a true multi-tenant SaaS offering and instead offer hosted or single-tenant on-demand solutions. Key SMB ERP players in this category include:

Intuit: With 38,000 customers, QuickBooks Enterprise Solutions targets small to mid-size firms with 50 to 500 employees. Version 7.0 provides new features like improved employee or contractor time tracking, online backup services, payroll centers, and integration with TrueCommerce EDI. Intuit has an extensive partner ecosystem among accountants, financial institutions, and other professional services for SMBs.

Infor: Infor’s stable of acquired vendors improves and unites under one roof more than 30 ERP brands like Baan, BPCS, BRAIN, Infinium Software, Lilly Software Associates, MAPICS, and System21. Serving more than 70,000 customers, Infor has the economies of scale to provide mid-market customers with an alternative to SAP or Oracle for process and discrete manufacturing, distribution, and supply chain solutions. Key products for the SMB market include Infor ERP Visual, Infor ERP SyteLine, and Infor ERP LN.

Microsoft: Microsoft entered the SMB ERP market via the $1.1 billion acquisition of Great Plains in 2001 and the subsequent acquisition of Navision in 2002. With 100,000 customers and more than 9,000 partners around the globe, Microsoft relies on its partners to deliver sales, implementations, and additional micro-industry functionality. Key products include Dynamics AX, Dynamics NAV, Dynamics SL, and Dynamics GP. Although each Dynamics ERP product has its own customization tools, Microsoft can improve its offering by providing standardized customization tools on its latest technology and making them consistently available across the portfolio.

Oracle: Oracle has been a quiet but significant player in the SMB space, with more than 19,000 SMB applications customers for Oracle E-Business Suite (EBS), PeopleSoft Enterprise, and JD Edwards. As Fusion Middleware represents Oracle’s integration strategy, Oracle Accelerate represents the centerpiece of the vendor’s go-to-market SMB strategy. New pricing models, solutions catalogs, collaborative campaigns, referral fees, and partner loyalty programs provide the supporting infrastructure for this SMB program. The solutions catalog identifies 70 target industry segments across four product lines (i.e., Oracle EBS, JD Edwards, PeopleSoft, and Siebel) and 72 geographies/localizations to offer more than 20,000 possible solutions. Included in the offering are Accelerators, which are rapid implementation tools.

SAP: SAP’s 2002 acquisition of TopManage Financial Systems, later rebranded SAP Business One, provides access to a product and partner network that supports the small-end of the SMB market. With the new SAP All-in-One solution, SAP now reaches about 25,000 customers via 2,400 partners. Its new SAP All-in-One solution based on SAP ERP 6.0 delivers out-of-the-box best practices, new UI, and NetWeaver 2004’s support for vertical enhancement delivery. New products in the pipeline include the code-named project A1S, which is being designed as SaaS. Seen as a leader in partner program development, SAP has built a strong solutions-centric ecosystem through its PartnerEdge program. Long term, partners and customers look to SAP to extend service enablement of Enterprise SOA into future versions of SAP Business One. In addition, SAP faces short- and medium-term challenges in delivering better tooling for NetWeaver.

The Sage Group: With the largest customer base, The Sage Group delivers solutions for 2.8 million customers in North America and 5.4 million customers overall worldwide. A plethora of acquired products support accounting, ERP, operations, human resources, and time tracking. The Sage Group continues an active strategy of acquiring country-specific solutions. The company’s MAS and Accpac ERP product lines are its primary ERP applications in North America; Adonix is marketed as the primary ERP application in France and is a market leader in other Western European countries. Other vertical acquisitions focus on the construction, distribution, healthcare, manufacturing, non-profit, and real estate industries. The Sage Group’s success stems from a strong partner and reseller network.

The article has been authored by R Ray Wang, Principal Analyst-Enterprise Applications & Strategy with Sharyn C. Leaver, Paul D. Hamerman and Meghan Donnelly. Ray analyzes trends in ERP for the enterprise and mid-market. He provides strategy and guidance to many global and Indian CIOs and can be reached at: rwang@forrester.com