Grow-as-you-go enterprise functionality permeates the middle market.
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By Richard McCausland
Pat Sigmon has heard it too many times. After outlining to a mid-market prospect how the company can benefit from automated inventory control or bar coding or customer management as part of an integrated Enterprise Resource Planning solution, she gets this response: "We don't do ERP.
"They think of it as something that's going on at Procter & Gamble or at Barnes & Noble," says Sigmon, president of LPS Consulting in Fanwood, N.J. The reality, she contends, is that financial software developers have extended their product suites to encompass true enterprise-class business management capabilities that include accounting, manufacturing, distribution, and e-commerce.
Ironically, "even the smallest clients" are insisting on enterprise functionality these days, although they probably aren't calling it that, according to Sigmon. They expect a comprehensive audit trail, and costing tools, and order tracking, and automated bills of lading, and maybe integrated payroll, or capacity scheduling, or even an online store. "They believe that these are all standard things that the system should come with--which is a lot different than it was five years ago," she notes.
Times change. Exact Software reseller Business Computer Technologies still concentrates on the mid-market, "but we don't shy away from moving up the chain," says chief operating officer Tod Replogle. He elaborates, "Five years ago, we would have looked twice at 150 concurrent users and up. Now, we don't blink at that."
A pallid economy has given new urgency to retaining existing accounting software clients by ensuring that they have an upward migration path, as well as exploiting cross-selling opportunities through all sorts of front- and back-office functional extensions. It's no accident that market leaders Microsoft Business Solutions (Great Plains, Solomon, Navision, and Axapta) and Best Software (MAS 500, AccountMate, Accpac Advantage Series, and Pro Series Enterprise Edition) have been piling on the functionality in recent years through acquisitions, internal development, and alliances with third-party application developers.
They're hardly alone. Exact is going down this road with its Macola-Enterprise Suite/e-Synergy combo, as is the Epicor portfolio of front- and back-office solutions complemented by a Web overlay. There's the Syspro suite, comprising more than 40 modules that address everything from financial controls to material requirements planning (see Channels, page 43). And Chantilly, Va.-based iCode has weighed in with its "mini-ERP" Everest Advanced Edition.
Even Mountain View, Calif.-based Intuit has seen fit to move upstream with its QuickBooks Enterprise Solutions, supporting up to 10 simultaneous users and priced at $3,500. Introduced a year and a half ago, these packages can accommodate a hefty 29,000 contact names and a similar number of inventory items, allow remote access via Windows Terminal Services, and generate specialized reports.
As these companies move up-market, the once-formidable J-BOPS (J.D. Edwards, Baan, Oracle, PeopleSoft, and SAP) appear vulnerable to varying degrees. All of these Tier One ERP vendors have found the going rough in the middle-market space; some have even lost their independence. Baan, a Dutch company, has switched hands twice since 2000, and now operates as a unit of Chicago-based SSA Global Technologies. JDE was purchased by PeopleSoft, which has subsequently been preoccupied with fending off the unwanted overtures of Oracle.
Not that the top-tier players are ready to slink away. SAP is targeting "emerging" enterprises with Business One, whose core components address accounting, reporting, sales, distribution, purchasing, warehousing, and partner management. Oracle, via its NetSuite progeny, has NetERP, which integrates Web-based order, inventory, and procurement management with financials to provide an e-business solution for mid-sized firms.
Whether a business has five employees or a thousand, "You have to have access to real-time information," says Michael Williams, NetSuite senior vice president for worldwide sales. "If you don't, it could derail your business."
Jim Bowling, business development manager for Microsoft Business Solutions partner, Norcross, Ga.-based IBIS, voices a similar sentiment. "These days, even smaller companies have to have the same technologies and platforms as large enterprises in order to be successful," he comments.
Need to Integrate
"When we install something, it's always part of an integration. I don't sell anything that doesn't integrate," says Sigmon.
That's why she has hooked up with software brands that have a clear migration path, whether to Best's MAS 200/500 or to its newly-acquired cousin, the open-source Accpac Pro Series Enterprise Edition. Both solutions also benefit from their access to the vast Best network of software development partners for complementary functionality.
For much the same reason, LPS recently signed on to sell SAP Business One, whose Solution Partners are already developing industry-specific functionality that will include Internet sales, reporting and logistics, warehousing, and customer relationship management.
Phased-in functional enhancements are the way to go, in Sigmon's view. "The happy camper doesn't think about 'Get rid of it!'" when a growing business confronts functional constraints, she points out. Instead, "He's thinking about 'Let's add on.'"
A case in point: Astrolab is a Warren, N.J.-based manufacturer of RF/microwave components for military, space, and commercial applications. A few years back, the company decided to scrap its "antiquated" computer system, recalls president Steve Toma. "We wanted to get something that we could start using right away, and then add on from there," he says.
With the guidance of LPS, Astrolab put in an Accpac Pro Series suite of financial, order, and inventory control modules running on Microsoft Visual FoxPro. Toma cites improved visibility with regard to what's in stock, thereby increasing inventory turns. Also, "We're able to generate a financial statement more quickly, and stay on top of what our costs are running us."
Now, Astrolab is ready for more. LPS recently completed implementing a customized job-and-labor-tracking module that allows Astrolab to use bar codes to manage production. Also, buoyed by a resurgent market for military components, Astrolab is looking to expand its number of licensed users from 15 to as many as 25. Thought is being given to upgrading to SQL as well.
Slowly but surely, "Adding more production features to their existing system is giving [Astrolab] the functionality of a full ERP system," says Sigmon.
The $10M Threshold
"Any company over $10 million needs an ERP backbone to maximize how they do business," contends Rick Nichols, chief marketing officer for IBIS, a Great Plains stronghold.
More specifically, he insists that what middle-market businesses want is this: "Make it simple, make it so it's not cost-prohibitive, and if I've got a problem, make it so that I can dial one phone number to correct it."
That's where the Tier One ERP vendors, with their "extremely expensive" database administrators, fail to deliver, in Nichols' view. "It's like this black pit where you keep throwing money in, yet you never see the comparable value," he says. That's why, when coming up against these ERP vendors, IBIS can prevail with Great Plains Edition. "You can install and maintain it for a much lower cost than you could Oracle or SAP," he says.
Nichols cites the case of the Henry County Water Authority in Georgia. A few years back, in need of extensive utility billing and financial reporting capabilities that would accommodate more than 38,000 customers, the agency implemented a PeopleSoft system. Then the agency discovered that it would need the ongoing support of outside consultants, significantly raising their system expenses.
The authority turned to Ibis to solve its problem. The remedy was to substitute a SQL-based Great Plains install--including financials, HR, project management, some supply chain management functionality, and customization tools--at approximately 70 percent of the PeopleSoft price. The implementation took two and a half months.
According to Nichols, agency users find it easier to enter purchase orders, invoices, vouchers, and receipts. The agency also has realized savings from doing their own upgrades, and making customizations with less dependence on consultants.
Clearly, competition in the mid-market is heating up. "The Tier One [ERP] guys are coming downstream because there are fewer large customers for them to go after," notes Larry Schiff, president of New York-based Business Management International. They're making some headway with what Schiff describes as their "very compelling software license pricing," along with fixed-fee implementation services.
"I expect this competition to intensify in the future," he says, but Schiff isn't running scared. "The flexibility of many mid-market ERP solutions, as well as pricing and ease of use, make a compelling argument against purchasing the global ERP solutions," he says. BMI believes it's well-positioned with Microsoft's Great Plains, Navision, and Axapta lines, along with the iCode Everest Advanced.
Sunham Home Fashions, a New York-based textile importer, was "growing at a nice rate," but still invoicing and allocating inventories manually. "Our volume [of transactions] was in the thousands on a weekly basis, both ingoing and outgoing documents. It was a nightmare," recall Richard Landis, operations manager.