Friday, May 18, 2012
NetSuite Manufacturing: Right Direction, Long Road Ahead
As one of the first cloud ERP providers, NetSuite is looking to grow its customer base across multiple industries and up-market to larger customers. Those efforts include NetSuite’s renewed focus on the manufacturing sector, as unveiled at NetSuite’s annual user conference, which I attended this week.
Bottom Line: NetSuite is making the right decision and good progress to build out manufacturing functionality as part of its core system, but there is still much work to be done to achieve functional parity with other cloud and on-premises solutions in the marketplace. Nevertheless, the rapid development capabilities of NetSuite's platform offer hope that it will get there quickly.
From Partner Solutions to a Core Offering
Until recently, NetSuite’s approach to serving manufacturers was to provide what it called “light manufacturing,” coupled with customer-specific customizations, supplemented by partner solutions such as Rootstock
when heavier manufacturing functionality was required. But this approach could only take NetSuite only so far.
- Support for manufacturers is essential in light of NetSuite’s product strategy. As explained by Zach Nelson in a small group briefing, the customer order is central entity in NetSuite, and NetSuite wants to “own” anything that is input into, or output from, the customer order. In the manufacturing sector, this would include production work orders. It makes no sense, therefore, for NetSuite to hand off these business processes to partners.
- At the same time, the manufacturing sector represents a large potential market for NetSuite. There are more manufacturing companies—especially small manufacturers—in the US than in any other sector. Inadequately serving such a large potential market made no sense as NetSuite looked to accelerate its growth.
- However, some basic features for manufacturers have been missing. For example, standard costing were not addressed in the core product, and few prospects would be willing to customize their implementations for such a fundamental need.
As a result of this realization, NetSuite in 2011 began work in earnest to build out its manufacturing functionality. In a briefing during NetSuite's conference I met the key players hired for this mission. They include:
- Roman Bukary, Head of Manufacturing and Distribution Industries. Roman previously worked for SAP, Baan, and other software companies. Earlier in his career, he was a manufacturing engineer.
- Ranga Bodla, Director, Industry Marketing. Ranga held product management positions at SAP and Pilot Software.
- Thad Johnson, Sr. Product Manager for Wholesale Distribution and Manufacturing Verticals. Earlier in his career, Thad was a product manager at QAD and also held several materials management positions in industry.
- Frank Vettese, Practice Manager. Frank has manufacturing software experience with IFS and Effective Management Systems.
- Gavin Davidson, Vertical Market Expert, Manufacturing. Gavin’s experience includes implementation work with manufacturing systems from Baan, Epicor, Microsoft Dynamics, and Visual.
I’m pointing out the experience of these individuals to show that NetSuite’s push into manufacturing is more than a marketing campaign. It has put together a serious team of individuals to lead the product development effort for this vertical.
An Expanding Footprint
In terms of manufacturing methods, NetSuite is primarily targeting discrete manufacturers although it intends to provide some support for process manufacturing down the road. An ideal prospect would be a discrete manufacturer that does a mix of in-house and contract production.
Let’s take a look at some of the manufacturing functionality that NetSuite has recently added or will be adding. From these few points we can get a sense for where NetSuite is in its current and near-term ability to better support manufacturing customers.
- Standard costing. As mentioned above, the lack of this capability in the past was a showstopper for many manufacturing prospects. But NetSuite reports that it added this capability in 2011, along with standard cost rollups.
- Bills of material. NetSuite has had BOM capabilities for some time, and it will soon support revision levels on BOMs along with effectivity dates. Users can also set a default scrap percentage on BOM components. Support for alternate BOMs is not in the roadmap.
- Routings. NetSuite added production routings to the standard system in 2011. These, of course, are used to create production work orders. Alternate routings will not be provided. .
- Cycle counting. Standard NetSuite code will now support cycle counting of inventory by ABC code.
- Material Requirements Planning (MRP). NetSuite now does a BOM explosion, but it does not generate reschedule messages for purchase orders or production work orders. Neither does it support all types of lot-sizing methods.
- Unit of measure conversions for purchasing, receiving, and inventory management have been part of the standard system for some time.
- Multi-facility planning. It appears that NetSuite will allow customers to maintain separate material plans for multiple facilities while still providing a global view of inventory. If so, this would go beyond what is typically offered in most Tier III on-premises manufacturing systems.
- Labor reporting. The team demonstrated a basic clock-in, clock out process using a tablet computer that can be used to report production completions and labor from the shop floor. This capability is currently in proof-of-concept.
- Capacity Planning will be supported, based on the NetSuite’s “demand plan,” but it does not appear that it will highlight capacity constraints as it will not track available work center capacity.
- Inventory Allocations and Available-to-Promise (ATP). This basic capability—to allocate available inventory and scheduled receipts against customer orders, and to provide visibility into projected inventory availability—is also scheduled as part of standard NetSuite functionality. (Kudos to NetSuite CTO Evan Goldberg for providing a layman’s explanation of ATP during his keynote.)
- Lot and serial number traceability. The team claims capabilities in tracing lot numbers and serial numbers from receipt through production into finished goods. I did not have a chance to verify this functionality, but if present, it would be of interest for a number of manufacturing sub-sectors such as high tech electronics and medical devices.
I believe that NetSuite means business in pursuing the manufacturing sector. However, as can be seen, many of these capabilities (e.g. routings, cycle counting, labor reporting) are very basic manufacturing requirements, things that have been present in systems such as ManMan, AMAPS, BPCS, and others back into the 1980s. Furthermore, some of the planned capabilities will lack key things that a manufacturing prospect would expect. For example, the team characterized NetSuite’s material planning system as a “lean manufacturing system,” which to me is a polite way of saying, “minimal.”
Contrast this with NetSuite’s current capabilities and roadmap for eCommerce (SuiteCommerce) or support for back-office processes of software vendors, which go far beyond what most other ERP providers offer.
Now, it may be that the major opportunities for NetSuite will not be in the hard-core job shops or industrial manufacturing companies. Inasmuch as many manufacturing companies in the United States and elsewhere in the world are outsourcing much of their heavy production processes, it might be that the feature set in NetSuite’s roadmap will be enough to satisfy the majority of its target manufacturing market.
The Time and Place for Customization
One thing that I do not think will satisfy such prospects, however, is the use of customization to fill basic functionality gaps. NetSuite promotes its ability to augment its standard processing with customer-developed or partner-developed customizations, without modifying standard NetSuite code. During his keynote, Evan Goldberg gave an impressive demonstration of the latest version of NetSuite’s development platform, SuiteCloud. I continue to be impressed with the ease-of-use that providers such as NetSuite and Salesforce.com are delivering with their Platform-as-a-Service offerings.
However, the ability to customize and extend the solution should not be taken as an excuse for not offering expected features/functions in the standard product. When prospects need full-blown work center capacity planning, for example, the last thing they want to hear is, “Oh, we can use SuiteCloud to build whatever you need.” For customer-unique requirements, SuiteCloud is a powerful attraction. For what should be standard functionality, no.
Rapid Progress Possible
I’m encouraged by NetSuite’s renewed interest in serving the needs of the manufacturing sector. However the feature set currently in the roadmap does not go as far as I would like to see in building comprehensive functionality for manufacturers. Nevertheless, I believe NetSuite will see success with its product strategy for two reasons. First, as mentioned earlier, it may be that a comprehensive footprint is really not needed to serve the majority of prospects. Second, NetSuite’s cloud platform—like other PaaS systems—offers a rapid development environment. NetSuite will certainly make more rapid progress in filling out its feature set than it would if it were a traditional on-premises vendor.
Compared to the services industries, the number of cloud ERP providers for manufacturers has been limited. But with NetSuite’s renewed focus, the list is now getting a little longer.
Disclosure: NetSuite paid for my travel expenses for its user conference in San Francisco
NetSuite a Viable Alternative for SAP Customers
Key success factor for SaaS suites: functional parity
Kenandy: A New Cloud ERP Provider Emerges from Stealth Mode
The Simplicity and Agility of Zero-Upgrades in Cloud ERP
Labels: cloud, ERP, manufacturing, NetSuite, Rootstock, Salesforce.com
Wednesday, May 16, 2012
The Simplicity and Agility of Zero-Upgrades in Cloud ERP
I am coming to the conclusion that a primary benefit of cloud ERP is the reduction or complete elimination of version upgrades. This observation was reinforced again this week in my one day attendance at the Plex Systems user conference in Indianapolis. Plex is a great example of what a cloud ERP vendor can accomplish by taking what I call a “zero upgrades” product strategy.
The Goal: Zero Upgrades
Originally founded in 1995, Plex went through a complete product overhaul in 2001, when it completely rewrote its ERP system as a cloud offering. At the time, NetSuite was the only other product that came close to cloud ERP and even then, NetSuite was largely a financials-only service.
Interestingly, in my interview this week with CEO Mark Symonds, becoming a “cloud ERP” provider was not their primary goal, but rather a means to an end. Passing through the client-server era, Plex grew tired of the difficulty in getting customers upgraded to new versions and rolling out patches and fixes to its installed base. The move to an online system (Plex Online)—the term “cloud computing” had not yet been coined—was the means by which Plex would to solve this problem. Customers would not have their own installations of the system. Rather they would access one central instance of Plex, which would be developed and maintained directly by Plex. Customers would never have to upgrade.
Implications of Zero Upgrades
Actually, I've known about the Plex approach
for some time. But the implications of this strategy became more apparent as I sat through the keynote and some of the individual workshops.
- You Like It? You’ve Already Got It. A good part of the opening keynote included the announcement and live demo of a new embedded report writer, called IntelliPlex. Now I wouldn’t say that the demo blew me away. It's good. It has an easy drag-and-drop method to allow users to create their own reports, generate charts and graphs, calculate new columns based on formulas, produce pivot tables and cross-tabs—all good stuff. Is it as powerful as the embedded BI capabilities that other vendors have demonstrated recently? In some cases, no.
But here’s the catch. Every Plex customer watching that demo knew that they could immediately log on to their Plex system and have access to that report writer. They don’t need to order it, pay separately for it, install it, or be on a certain version of Plex to use it. Perhaps that’s the reason I didn’t see a single person walk out early from that keynote.
- Functionality is Front and Center. I attend a lot of vendor conferences. Many of the sessions are taken up with subjects such as “Planning for Version X,” “What’s New in Release 7.2.345b,” “Prerequisites for Migrating Product X to Version Y of Database Z.” The Plex conference has none of these tactical, infrastructure-type subjects. All attention is on what the software does, not what you need to do to get it to do those things.
For example, I sat in on part of a presentation on work center production scheduling—not a subject that I would consider a major draw. In much larger vendor conferences, I might see 20 or 30 people in this sort of presentation. But, as shown in the photo nearby, there were about 150 (out of 800 total) conference attendees in this session. Because Plex users do not have upgrades to deal with and plan for, they can devote all of their time to learning how to use the functionality that they already have access to. There appeared to me to be a much greater percentage of line-of-business users than I see in many vendor events.
- User-driven Enhancements. Plex’s approach frees it from having to spend time managing multiple versions of its product, creating sandboxes, and phasing in customers from one version to the next. This gives its developers more time to work on product enhancements, which are largely driven by customer-funded requests. Although one customer may fund a change, all customers have the option to “flip the switch” and use it if they so choose, without having to schedule a version upgrade. All new functionality is delivered with the switch set “off,” so that individual customers can choose what and when to implement it.
Ultimately, the zero upgrades strategy enables business agility for customers. This point was stressed to me in an interview I did with Plex customer Ben Stewart of Inteva. His company has a growth-by-acquisition strategy and needs to be able to bring new plants and new locations on-board quickly. Plex’s zero upgrade approach and rapid response to his change requests (e.g. enable a new EDI partner) supports this strategy of agility to accommodate rapid change. Other customers report Plex implementations of new plants in timeframes of weeks, not months.
Are There Downsides?
I have discussed the zero upgrades approach with other cloud ERP vendors, and many of them disagree. They maintain that ERP is different from CRM or other non-critical applications, that cloud customers want control over their environments, that they want to choose when to upgrade and to be able to regression-test their business processes against new versions. In some cases, I think this is simply a legacy of the on-premises world: we’ve always released new functionality as version upgrades. In other cases, I believe that this position is taken for the vendor’s convenience, especially when their cloud ERP systems are using the same code base as their on-premises systems. Because the on-premises customers have to have version upgrades, the cloud ERP customers of the same system must also have version upgrades. Otherwise, the two classes of customers do not have the same code base.
This does not mean I am against the hybrid model—allowing a customer to run the same system on-premises and in the cloud, or to go from one deployment model to another. I have written that there are some advantages to the hybrid model
. But forcing customers to do version upgrades is not one of them.
There is one scenario, however, where version upgrades are desirable, and that is in a regulated environment, an area I have some experience in. For example, current US FDA regulations require pharmaceutical and medical device manufacturers to demonstrate that they have control over software configurations that are used to support regulated processes. This does not necessarily rule out use of cloud computing, but it does make it difficult to claim that the user has control over the system if the vendor is changing it on a daily basis. In such cases, it is easier to defend the use of a cloud ERP version that is frozen in its configuration, where the customer can choose when to upgrade and can run testing to confirm acceptance of the new version prior to upgrade. In non-regulated environments, however, I believe that the Plex practice of delivering new functionality “with the switch turned off” is better, as it promotes agility.
Some may argue that the Plex approach may lead to bugs being introduced into the production system on a daily basis. For example, Plex may implement a new feature in one part of the system and it may affect processing in another part of the system—even though a customer may not flip the switch for the new functionality. One long-standing Plex customer indicated that this does happen from time to time, but still he is strongly in favor of the zero-upgrades approach. I would add, I have seen many cases where traditional on-premises vendors ship code that notoriously bug-ridden, where they are shipping “patch releases” for months, even years, later. At least with the Plex approach, when bugs are discovered, they can be fixed in a few hours.
One final issue has to do with the practice of letting customers drive new enhancements. This approach may have worked well when Plex was small, but I question its wisdom as Plex scales. If uncontrolled, this can lead to many one-off enhancements being introduced into the core system, which only pertain to a single customer.
Fortunately, I heard two things during the conference that mitigate this problem. One is that Plex is establishing a formal product management function to review and clear all customer change requests and to evaluate which ones have merit for multiple customers. Second, Plex has introduced a web services platform capability called VisionPlex, which allows customers and partners to develop their own enhancements to interoperate with Plex, but outside of the core systems. This capability is just being rolled out in several pilot projects, but if successful it will go a long way toward keeping one-off enhancements out of the core system. It also has the benefit of enabling an ecosystem of Plex partners to build on Plex as a platform—something that has been lacking to date in Plex’s strategy.
Plex is not a large cloud ERP vendor, having only about 750 customers. It is narrowly focused on a few manufacturing industries, such as automotive, industrial products, plastics, electronics, and a few others. However, it is showing strong and steady growth—30% revenue growth in 2011 and expecting 20% growth in 2012. Furthermore, it is an existence proof for the principle that a zero-upgrades product strategy has major benefits for both customers and the vendor.
Plex Online: Pure SaaS for Manufacturing
Computer Economics: Cloud Players Storm the Gates of ERP
Key success factor for SaaS suites: functional parity
Labels: cloud, ERP, NetSuite, Plex
Saturday, May 12, 2012
Making Sense of the New Epicor
Epicor held its annual Insights user conference this week in Las Vegas. This was the first gathering for customers of both Epicor and Activant since the two firms merged last year. As such, it was a good opportunity for the firm's executives to introduce what they are calling the "New Epicor" to 4000 conference attendees.
Three Elements of Strategy
Although Epicor made many announcements, in this blog post I prefer to focus on three elements of Epicor's strategy, along with my point of view.
- Blending of Two Cultures. CEO Pervez Qureshi and other presenters made a point of emphasizing the new Epicor as a blending of the best of "heritage Epicor" and "heritage Activant." (In the enterprise IT world, the word heritage is preferred to legacy.) Qureshi characterized heritage Epicor as having been a global company, technology-oriented,
entrepreneurial, and top-line focused. Heritage Activant, he said, was oriented more toward service, process excellence, and profitability. The new Epicor blends the best of these two cultures, he claimed.
- Protect, Extend, Converge. The second element is Epicor's strategy and vision to protect, extend, and converge the product portfolio. "Protect" means to continue investment in the current products in its portfolio. "Extend" means to introduce new applications and infrastructure capabilities that deliver additional value across current products. Finally, "converge" implies a gradual evolution of current products with new technologies.
- Azure as the Cloud Platform. The third element is Epicor's evolving cloud strategy. Prior to the conference, Epicor's cloud strategy was limited to a small business cloud version of its Epicor ERP product ("Epicor Express") along with some hosted solutions for functions such as HCM and retail merchandising. However, the strategic direction announced at Insights went much further. Wading through the dense language of the press release, I see the Azure announcement as having three sub-parts: (a) Epicor will allow its Epicor ERP product to be deployed on Microsoft's Azure cloud platform, planned for Q3, 2013, (b) Epicor will also use Azure to provide interoperability between on-premises Epicor systems and Epicor point solutions deployed on Azure. (c) A new version of Epicor's SOA middleware ("ICE") will also be deployed on Azure to provide a PaaS offering, facilitate mobility apps, and satisfy other integration needs between Epicor and third-party products.
Epicor executives were upbeat in presenting these and other elements of the new Epicor. But how differentiated is Epicor's strategy, and what does it mean for Epicor customers? Here's my take.
The Azure Strategy is a Winner
Taking these three elements in reverse sequence: although I do not see the Azure strategy as unique, I do see it as attractive. In fact, it is more attractive because
it is not unique. Epicor is at least the fourth major enterprise software vendor in the past three months that has announced plans to deploy ERP in the Azure cloud. The first, of course, is Microsoft Dynamics, which in March announced its plans to deploy Dynamics GP and Dynamics NAV on Azure
by the end of 2012.Then, earlier this month, Sage announced similar plans. And now, Epicor.
I have no doubt that others will follow, making Microsoft Azure a first choice for delivery of cloud-based enterprise applications. I have long felt that, just as on-premises database management systems have been standardized on just a few popular products, so also cloud platforms should be standardized. By way of analogy, very few on-premises vendors today write their own DBMSs, with Oracle being the exception that makes the rule. Why then should SaaS providers build their own cloud infrastructure? Salesforce.com did it. NetSuite did it. Workday did it. But how many more can or should roll their own IaaS and PaaS platforms? There is a tremendous amount of cost and effort involved in doing so, not to mention the economies of scale that can only be realized by having thousands of customers. Epicor, Sage, and others are making the right choice by building on an established public cloud infrastructure provider.
Why didn't this happen earlier? Essentially, because Azure (specifically, SQL Azure database capabilities) has not been robust enough to support ERP-class applications. But in speaking with Microsoft earlier this year, it appears that these limitations are now being overcome, which explains why Microsoft Dynamics, Sage, and Epicor are all moving to Azure at about the same time.
There is one more advantage to the Azure strategy. The current Epicor Express offering is limited to customers with under 20 users. I do not believe Epicor's current infrastructure architecture allows customers to scale beyond that point in a multi-tenant environment. Moving to Azure frees Epicor from that limitation, allowing it to sell cloud ERP to larger customers, though I suspect in practice it will still be most attractive to small and midsize businesses.
Finally, moving to Azure immediately allows Epicor to offer cloud ERP in a number of geographies where it does not have partner data centers. Epicor ERP has good international capabilities. Now customers in international locations will also be able to choose cloud deployment in their own geographies to meet regulatory or performance requirements.
Strategy of "Protect, Extend, Converge" Is a No-Brainer
The protect/extend/converge message has two things going for it: it's easy to remember and and it's customer-friendly. It also happens to be the only product strategy that makes any sense for a vendor such as Epicor. Epicor's growth strategy, like Infor's and Oracle's, has been to acquire or roll up a number of smaller vendors to build a large customer base with a diverse portfolio of products. The benefits of such a strategy is clear: growth. The downside of such a strategy is the diverse portfolio. But with a certain level of attention paid to customer support, the large number of existing customers will continue to pay maintenance revenues (the mother's milk of enterprise software) and will also be candidates for cross-selling other Epicor products.
It is interesting, therefore, to compare Epicor to Oracle and Infor and to see the similarities. All three have large customer bases. All three have diverse portfolios. All three have some sort of middleware offering to connect all the solutions: Oracle has Fusion middleware, Infor has ION, and Epicor has ICE. All three have customer programs to "protect" existing customer investments: Oracle has its "Applications Unlimited" program, Infor made its promise to "never sunset" a product, and Epicor has its strategy of "protect." Likewise, all have their strategies to "extend," such as Oracle with its continued point releases of J.D. Edwards, PeopleSoft, Siebel and others; and Infor, with its continued investments in its portfolio. Finally, all have some sort of convergence strategy, such as Oracle with its Fusion Applications, Infor with its development of ION, common user interface, and other common functions.
In other words, Epicor's strategy is the only rational way to deal with a large and diverse installed base built through acquisition. Qureshi's plan to continue aggressively with new acquisitions means that successfully protecting, extending, and converging its product portfolio will become even more important.
The Culture Message Has a Subtext
I found Qureshi's keynote regarding the blending of the Activant and Epicor cultures to be interesting, if not unusual for a customer conference. It would be the sort of thing one would expect to be presented internally, in an "all hands" meeting, for employee consumption. Delivering this message to customers, however, also sends an implicit message: heritage Epicor needed improvement in product quality and customer service.
Perhaps this subtext is so well understood by the majority of Epicor customers that there was little risk in sending this message. Still, if Activant's strength--in contrast with Epicor's--was (among other things) process excellence and customer service, what does that say about heritage Epicor?
It didn't end with the keynote. Later in the day, there was a session on
the product roadmap for Epicor ERP. The presenters were proud of
reports from early adopters of the most recent point release (ERP 9.05.700). But
in touting the quality of the release, they were, in effect, reminding Epicor customers of their past experiences. One customer quote was damning with faint praise, referring to the new version as:
A more solid product than we've seen before.
If my wife makes me a nice dinner, the last thing I would tell her is, "This is a more delicious dinner than you've made me in the past."
But, if Epicor customers are all-too-familiar with product quality and service delivery problems in the past, perhaps Qureshi's approach is best: to tacitly acknowledge the problem. Key
executives in the new Epicor come from Activant, starting with Pervez Quereshi (CEO), Kevin Roach (EVP and GM, ERP Americas), and Paul Salsigiver (EVP and GM, Retail), sending the message that Activant's focus on software quality and service delivery processes will prevail in the new Epicor.
My question, however, is this: are customers seeing an actual improvement in Epicor's product quality and customer service? Or, is it too early to tell?
I invite Epicor customers and partners to send me an email, or leave a comment on this post. As always, confidentiality is assured.
Microsoft Dynamics ERP on Azure: What Are the Benefits?
Infor’s Two-Pronged Cloud Strategy
Labels: Azure, cloud, Epicor, ERP, Infor, Microsoft
Thursday, May 03, 2012
Infor’s Two-Pronged Cloud Strategy
While enterprise cloud computing pioneers such as NetSuite and Salesforce.com get much of the attention, there is some interesting cloud-work going on among traditional enterprise software providers. One such provider is Infor.
I had the opportunity to get an update on Infor’s cloud computing program last week, at Infor’s annual user conference, Inforum. The bottom line: I see Infor’s cloud strategy as having two prongs, and it is beginning to bear fruit.
I gave a brief overview of my thoughts on Infor’s cloud strategy in my video interview with Dennis Howlett
. In this blog post, I expand on those initial thoughts.
Infor Representative of Traditional Enterprise Software Providers
Infor is generally known as a vendor that has accumulated a huge portfolio of enterprise software, by acquiring a number of players over the past decade. As a result, it claims an installed base of over 70,000 customers, making it the third largest enterprise applications provider by revenue, following SAP and Oracle. As such, it epitomizes the dilemma that such enterprise software providers face:
- They are competing against cloud-only ERP providers, such as NetSuite, Plex, Intaact, FinancialForce, Rootstock, Kenandy, and others, who offer simple one-stop subscription-based cloud ERP. Infor is increasingly seeing these providers in net-new deals for core ERP systems, especially in the SMB market.
- They are also battling against a host of cloud-based point-solution providers, who are creeping into Infor’s installed base offering everything from CRM to expense management to talent management. Infor has a number of good on-premises point solutions, but customers are increasingly finding cloud-based point solutions more attractive in terms of ease-of-implementation, flexibility, and time to value.
The largest of these cloud providers, of course, is Salesforce.com, which a number of Infor customers have already chosen for CRM. Interestingly, Infor does not have its own best of breed CRM system—even on-premises. It does have its Epiphany CRM system, but that is more of a marketing automation solution, not a sales force automation system, which is what most prospects are looking for.
Infor, as typical for most established enterprise software providers, needed an answer to both of these competitive challenges. In response, Infor has a two-pronged strategy, as I see it.
First Prong: Infor Business Cloud
The first prong of Infor’s strategy is to offer customers its own cloud solutions, both for full ERP and for point solutions. This program, first launched as Infor24 in 2006, is now branded as the Infor Business Cloud
. The products offered therein are not merely hosted offerings—some of them were originally built as cloud offerings, while others are originally on-premises offerings that have been re-architected, allowing them to be deployed as multi-tenant cloud services.
In other words, Infor is not merely hosting its on-premises offerings and relabeling them as “cloud” (so-called “cloud washing). In my interview with Jim Ploude, who is responsible for Infor’s cloud business, he made it clear: the cost for Infor to deliver multi-tenant cloud services is orders of magnitude lower than it is for single tenant hosted services. There are also great advantages in terms of economies of scale, administrative overhead, risk reduction, and flexibility.
For Infor customers that insist on traditional single-tenant hosted services, Infor or one of its partners can provide that. But those services are separate from Infor’s Business Cloud, which offers the full benefits of cloud computing, and are more cost-effective.
- In terms of ERP, the Infor Business Cloud currently offers only its Syteline product as a cloud service. But other products—which Jim was reluctant to name—are also in the pipeline for re-architecture as cloud offerings. These will give new customers additional choices for cloud ERP.
- In terms of point solutions, Infor has a broader selection of cloud services, including Infor’s Enterprise Asset Management (EAM) product (originally the Datastream acquisition), expense management, property management, workforce management, and hospitality management. Jim himself came onboard with Infor as part of the Datastream acquisition and already had extensive experience in deploying that product as a cloud service.
As I point out in the accompanying video, most of Infor’s large customer base cannot move their entire applications portfolio to the cloud. They have already invested in on-premises systems. But they are increasingly interested in cloud solutions that interoperate with their on-premises investments. Infor, therefore, must provide hybrid offerings. Hybrid cloud offerings are not a compromise—they are necessary to meet customers where they are. This first prong of Infor’s strategy, therefore, represents a pragmatic approach that can work for the majority of Infor’s customers.
Infor’s Business Cloud is more than a statement of direction—it already boasts 1,200 customers and somewhere in the neighborhood of 2.4 million named users consuming its services. Although Jim would not give specifics, I have reason to believe that the majority of these customers are for the point solutions, with cloud ERP (Syteline) representing a small, but growing, number. This is not surprising, as ERP is really the last bastion for enterprise cloud computing
Cloud Services to Facilitate Version Upgrades
There is one more angle to Infor’s business cloud that Jim was not able to discuss at length, because Infor still has announcements pending in this area. This is in regard to the use of cloud infrastructure, such as Amazon Web Services, to facilitate customer upgrades to new versions of Infor products.
When customers are considering to upgrade an existing on-premises system, much of the preliminary planning work—such as exploring features of the new version, conference room piloting, and analyzing differences between the customer’s version (which may include source code modifications or extensions)—requires a second working instance of the application. Those activities are a natural use-case for cloud infrastructure. For vendors such as Infor, who have a large installed base of customers—a significant percentage of whom are trapped in older, highly modified versions—cloud infrastructure represents an opportunity to more quickly move those customers to new versions, where they can benefit from the new products that Infor is developing.
At Inforum, Infor was not ready to announce plans for leveraging cloud infrastructure to support customer upgrades. But there is a real need in this area, and I’m looking forward to hearing more about how Infor plans to move in this direction.
Second Prong: Partnering with Salesforce.com
The second prong of Infor’s cloud strategy is its partnership with Salesforce.com, branded “Inforce.” As Salesforce already has made inroads into Infor’s installed base, and as Infor does not have its own best-of-breed salesforce automation system, a partnership between the two players makes a lot more sense than Infor attempting to build or buy its own cloud CRM offering.
I discussed the first deliverable of this partnership, Inforce Everywhere, in my blog post, Infor and Salesforce.com: More Than a Barney Relationship
, and I was happy to see one Infor executive “borrow” this phrase in an analyst briefing.
Inforce Everywhere is an application, built natively on the Force.com platform and using Infor’s lightweight ION middleware, that allows a Salesforce.com users to see Infor ERP data in Salesforce.com screens. Conversely, it gives Infor ERP users access to Salesforce.com data. As a result, users can have a 360 degree view of customer information encompassing both CRM and ERP data.
For most ERP customers buying Salesforce.com, system integrators build such integration on a one-off basis. What Inforce Everywhere does is to provide such integration as a standard product. During Inforum I had an opportunity interview Julia Klein, CEO of CH Briggs, one of the first early adopters of Inforce Everywhere, and she gave a powerful testimony of how important this integration is to her company. She said that if Infor didn’t build this integration, she would have to hire someone to do it for her company.
Success Hopeful but Not Guaranteed
Infor’s two-pronged cloud strategy is coherent, but as with any strategy there are obstacles. On the first prong, the Infor Business Cloud, I see difficulties moving a sales force accustomed to selling software licenses with large up-front payments to selling cloud subscription services. I did receive some indication that Infor is aware of this problem and is taking steps to mitigate the sales disincentive to sell cloud services.
The second prong, the relationship with Salesforce.com, also has the same challenge related to the sales model, which it hopefully will address. In addition, the pricing I have seen so far for Inforce Everywhere appears a bit rich, especially when combined with Infor’s own ERP pricing and Salesforce.com subscription fees. Of course, nothing stops Infor or Salesforce.com from negotiating more aggressive discounts, but wasn’t cloud computing supposed to simplify the rug-merchant nature of enterprise software sales? My concern is that if the pricing is too rich, many good prospects may find it more attractive to just do a minimal amount of one-off integration between the two products, just like they’ve done in the past.
In spite of these challenges, I think Infor has a good chance of success. If so, it will be a good sign for other traditional vendors working on making the transition to the cloud.
Labels: cloud, ERP, Infor, Salesforce.com, SFDC
(c) 2002-2014, Frank Scavo.
Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.
About the Enterprise System Spectator.
Send tips, rumors, gossip, and feedback to Frank Scavo, at
I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.
Selecting a new enterprise system can be a difficult decision.
My consulting firm, Strativa, offers assistance that is independent and unbiased.
For information on how we can help your organization make and carry out these decisions, write to me.
My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, ROI/TCO studies, outsourcing statistics, and more.
Go to latest postings
RSS News Feed
ERP Support Staffing Ratios
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report
Get these headlines on your site, free!
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, mapping, consultants
Strativa: IT due diligence
Strativa: ERP selection consulting and vendor evaluation
Strativa: CRM selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica