This note concerns the launch of SAP Business One by SAP AG (NYSE:SAP), the pairing of SAP and the Tax and Business Services (TBS) unit of American Express, and the delivery of 13 new mid-market solutions designed specifically for companies with $50 to $500 million in annual revenues by PeopleSoft Inc. (NASDAQ: PSFT). For details of these announcements see Part One.
The fact that the mid-market and the SMB segment are the next frontiers and a promised land for all the enterprise vendors, small and large alike, has long not been news. Still, the willingness of smaller IT departments to go for more sophisticated technology beyond the all-too-common dispersed islands of information on Excel spreadsheets, Access-based reports and queries, or even managers' pocket paper-pads and post-it notes, does not guarantee any vendor an easy ride. That has been proven by a number of trials-and-errors, and consequent strategy reiterations that the larger enterprise vendors have espoused during last several years.
Look also for a continued evolution of these applications, since over the last several years the market has seen a plethora of fixed-scope and fixed-price applications, pre-packaged vertical solutions, attractive support programs and hosting services with catchy names (e.g., �Fast Forward', �Select', �Accelerated', �On Board', �Genesis', etc.), all aimed at making it faster, simpler and cheaper for enterprises under a few hundreds $ million to use them. However, all of these typically have also implied some form of trade-off in the name of expediency. The features forsaken will have been functionality, customizability, platform options, solution scalability or extensibility.
Unfortunately for both vendors and users, small and mid-size enterprises, like their bigger brethren, generally operate in a dynamic, competitive environment and have global, multi-site operations that are either wholly owned or that function in a complex supply chain relationship. Consequently, all these companies need some level of support for advanced collaborative functionality, scalability, supply chain management (SCM), CRM, e-commerce/e-sourcing, and distributed computing environments. And they have to accomplish these feats with less (or completely without) IT staff and a much more limited budget compared to their bigger counterparts. For these reasons, the first generations of Tier 1 vendors' offerings for smaller enterprises have had only a limited success.
Still, a patient man may win the day, and the likes of SAP, PeopleSoft and Oracle will likely get it eventually right through their deep pockets-backed perseverance, their brand recognition, and repeated modifications and fine-tuning of their strategy to win the less chartered lower-end of the market. The latest above tacks should be regarded as prudent moves, although indisputably belated. Nonetheless, these moves should confirm these vendors' commitment to smaller customers through the renewed focus and better-attuned offering. A less known fact might be that almost two-third of all SAP's installations are enterprises with less than $500 million in revenues; PeopleSoft too deserves commendation for achieving its notable mid-market milestones (i.e., ~25% of all its customers are mid-market, whereby lately at least one out of every three new PeopleSoft customers reportedly also comes from this segment). For that reason, these moves should slowly alleviate the market perception of these solutions being overkill for smaller enterprises.
Although many vendors have come with different tacks, one could notice two emerging school of thoughts among large enterprise applications vendors seeking to capitalize on the mid-market opportunity. Since these are much related to different ends of the mid-market, it would be useful possible demarcate these. The lower-end of the mid-market, or the small-to-medium enterprises/businesses (SMEs/SMBs) segment, could roughly be defined as companies with up to 500 employees and with up to $250 million in annual revenue, while the upper-end of the market would be enterprises with up to 1,000 employees and up to $500 million in revenues.
It is in the upper mid-market that these vendors stand the best chance of more immediate success given here they can still deploy a hybrid model of direct selling (which has been their forte) and rely on partners for implementation and services.
At the high end of the mid-market PeopleSoft and J.D. Edwards are also taking a business process approach, i.e., slicing, dicing and packaging their existing applications along business process lines in order to attract mid-market companies, although within this, J.D. Edwards appears to have a far more fine-grained and less constrained approach, given its nativity within the market segment (i.e., almost the entire product has been designed with a mid-size to large customer in mind).Another factor is its increasingly strong relationship with IBM Corporation, whereby the two not only sell pre-packaged single server solutions based on IBM's server platform but also offer pre-integrated software solutions in which IBM's middleware/enterprise application integration (EAI) technology is embedded within the J.D. Edwards suite of applications (see J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation).
The overall strategy is geared towards reducing complexity and total cost of ownership (TCO) and ROI, which have long been the key criteria for the mid-market companies that form JD Edwards' core market. In addition, the vendor has also lately taken steps to broaden its footprint so as to meet as many of the functionality needs of its customers as possible with serious investment in its CRM and SCM application areas.
However, as indicated earlier, PeopleSoft seems to have conducted a due diligence, learned a few lessons, and grasped the key factors for greater success in the coveted low-end market segment. PeopleSoft has internally identified its target customers' characteristics and needs, as to tailor the most appropriate solution. To that end, these companies have complex business requirements similar to their up-market brethren, they value integration and a �one-stop-shop' provider's capability, but with modular components, and, as a rule, they have smaller IT budgets and project teams, creating the "do more with less" mantra as the order of the day. Furthermore, these enterprises typically look to scale both horizontally (i.e., to extend business processes across departmental silos, e.g., to achieve customer order capturing integrated with order management) and due to growth (organic or through acquisitions).
PeopleSoft's research also indicated that cost, complexity, and risk are the key considerations for these targets, with a distinction that the first time buyers (so called �green field plants') put the highest importance on price, best-of-breed modular but integrated functionality, speed of implementation and quick ROI, whereas experienced (repeated or follow-up) buyers value the vendor's reputation & support and integrated software & services solutions the most.
Consequently, the company has made genuine attempts to provide value proposition for both profiles of mid-market customers. Each Mid-Market Solution bundle selected PeopleSoft 8 product functional components, which have being sold to larger enterprises too, but with preconfigured implementation, training and support services, resulting therefore with accompanying rapid, fixed-time and fixed-price implementations. The company has come up with each solution after a painstaking process of analyzing its first ~400 mid-market customers, identifying the functionality that each customer had found critical to be implemented first, identifying the highest ROI impact component, and finally, developing a pre-configured product set, integrated business processes and fixed-price implementation scope for each particular solution.
Moreover, to exceed the notion of d�j� vu offering from its peers in the past, PeopleSoft has attempted to offer a few differentiating �extras' in its solutions, which are often neglected (or intentionally omitted) by many competitors and often come as unpleasant �extra cost' surprises for the customer after the fact. Some of these lie in a pre-configured modular (and recently process-based ) integration, as the modular product structure enables customers to cherry-pick what they need and when they need it, thereby avoiding the proverbial �overkill factor' of large applications. To that end, each available solution can be combined to create extended business processes, and, alternatively, any number of available add-on modules can be supplemented, and each solution and/or add-on module has a pre-configured fixed-price no frills implementation scope.
These have been developed from PeopleSoft's own Compass Methodology, which uses accelerated tools to pre-define the planning & strategy phases of the implementation, and thereby avoid all-too-commonly dreaded "scope creep" (the company touts estimated average 37% reduction in time and cost so far). The methodology also caters for optimized best practices, as necessary workflows, interfaces, and data conversions have been mapped out by each solution beforehand. Although PeopleSoft, like every other vendor, frowns at customizations, these are not prohibited, as a built-in change control allows for customizations' tracking, but these implementations will logically carry a different price tag.
Once the project scope has been agreed upon and the appropriate solution has been pinpointed, PeopleSoft touts its �no frills' complete solution delivery purported with unlimited user license number for an upfront flat rate, fixed price implementation and training, pre-configured hardware, rapid but full implementation rather than with a �stripped-down' scope (i.e., standardized data conversion maps, developed testing scripts across all products, and pre-defined configuration data baseline best practices come delivered as a part and parcel of the implementation).
Also, by delivering projects (full-fledged implementations rather than only pilots) via its 35 mid-market implementation centers across North America (an implementation server is hosted in each centre), the company believes to have eliminated on average up to 50% traditional on-site delivery costs, as it eliminates hardware and database administrator requirements well until deployment on site, as well as consultants' travel and other expenses for the customer, it creates a non-invasive environment that removes on-site distractions by a daily grind business, customers gain access to the highest skilled PeopleSoft consultants that are not burned out by extensive traveling, and these resources can be leveraged across multiple customers.
Another pillar of success in this target segment lies in the delivery channel, for both implementation services and localized regional and vertical industries expertise. To that end, all of a handful of selected partners were made privy to the same above-mentioned implementation tools that PeopleSoft's own mid-market consulting group uses for deploying the accelerated applications, along with the usual marketing, sales and technical support.
The fact that the mid-market and the SMB segment are the next frontiers and a promised land for all the enterprise vendors, small and large alike, has long not been news. Still, the willingness of smaller IT departments to go for more sophisticated technology beyond the all-too-common dispersed islands of information on Excel spreadsheets, Access-based reports and queries, or even managers' pocket paper-pads and post-it notes, does not guarantee any vendor an easy ride. That has been proven by a number of trials-and-errors, and consequent strategy reiterations that the larger enterprise vendors have espoused during last several years.
Look also for a continued evolution of these applications, since over the last several years the market has seen a plethora of fixed-scope and fixed-price applications, pre-packaged vertical solutions, attractive support programs and hosting services with catchy names (e.g., �Fast Forward', �Select', �Accelerated', �On Board', �Genesis', etc.), all aimed at making it faster, simpler and cheaper for enterprises under a few hundreds $ million to use them. However, all of these typically have also implied some form of trade-off in the name of expediency. The features forsaken will have been functionality, customizability, platform options, solution scalability or extensibility.
Unfortunately for both vendors and users, small and mid-size enterprises, like their bigger brethren, generally operate in a dynamic, competitive environment and have global, multi-site operations that are either wholly owned or that function in a complex supply chain relationship. Consequently, all these companies need some level of support for advanced collaborative functionality, scalability, supply chain management (SCM), CRM, e-commerce/e-sourcing, and distributed computing environments. And they have to accomplish these feats with less (or completely without) IT staff and a much more limited budget compared to their bigger counterparts. For these reasons, the first generations of Tier 1 vendors' offerings for smaller enterprises have had only a limited success.
Still, a patient man may win the day, and the likes of SAP, PeopleSoft and Oracle will likely get it eventually right through their deep pockets-backed perseverance, their brand recognition, and repeated modifications and fine-tuning of their strategy to win the less chartered lower-end of the market. The latest above tacks should be regarded as prudent moves, although indisputably belated. Nonetheless, these moves should confirm these vendors' commitment to smaller customers through the renewed focus and better-attuned offering. A less known fact might be that almost two-third of all SAP's installations are enterprises with less than $500 million in revenues; PeopleSoft too deserves commendation for achieving its notable mid-market milestones (i.e., ~25% of all its customers are mid-market, whereby lately at least one out of every three new PeopleSoft customers reportedly also comes from this segment). For that reason, these moves should slowly alleviate the market perception of these solutions being overkill for smaller enterprises.
Although many vendors have come with different tacks, one could notice two emerging school of thoughts among large enterprise applications vendors seeking to capitalize on the mid-market opportunity. Since these are much related to different ends of the mid-market, it would be useful possible demarcate these. The lower-end of the mid-market, or the small-to-medium enterprises/businesses (SMEs/SMBs) segment, could roughly be defined as companies with up to 500 employees and with up to $250 million in annual revenue, while the upper-end of the market would be enterprises with up to 1,000 employees and up to $500 million in revenues.
It is in the upper mid-market that these vendors stand the best chance of more immediate success given here they can still deploy a hybrid model of direct selling (which has been their forte) and rely on partners for implementation and services.
At the high end of the mid-market PeopleSoft and J.D. Edwards are also taking a business process approach, i.e., slicing, dicing and packaging their existing applications along business process lines in order to attract mid-market companies, although within this, J.D. Edwards appears to have a far more fine-grained and less constrained approach, given its nativity within the market segment (i.e., almost the entire product has been designed with a mid-size to large customer in mind).Another factor is its increasingly strong relationship with IBM Corporation, whereby the two not only sell pre-packaged single server solutions based on IBM's server platform but also offer pre-integrated software solutions in which IBM's middleware/enterprise application integration (EAI) technology is embedded within the J.D. Edwards suite of applications (see J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation).
The overall strategy is geared towards reducing complexity and total cost of ownership (TCO) and ROI, which have long been the key criteria for the mid-market companies that form JD Edwards' core market. In addition, the vendor has also lately taken steps to broaden its footprint so as to meet as many of the functionality needs of its customers as possible with serious investment in its CRM and SCM application areas.
However, as indicated earlier, PeopleSoft seems to have conducted a due diligence, learned a few lessons, and grasped the key factors for greater success in the coveted low-end market segment. PeopleSoft has internally identified its target customers' characteristics and needs, as to tailor the most appropriate solution. To that end, these companies have complex business requirements similar to their up-market brethren, they value integration and a �one-stop-shop' provider's capability, but with modular components, and, as a rule, they have smaller IT budgets and project teams, creating the "do more with less" mantra as the order of the day. Furthermore, these enterprises typically look to scale both horizontally (i.e., to extend business processes across departmental silos, e.g., to achieve customer order capturing integrated with order management) and due to growth (organic or through acquisitions).
PeopleSoft's research also indicated that cost, complexity, and risk are the key considerations for these targets, with a distinction that the first time buyers (so called �green field plants') put the highest importance on price, best-of-breed modular but integrated functionality, speed of implementation and quick ROI, whereas experienced (repeated or follow-up) buyers value the vendor's reputation & support and integrated software & services solutions the most.
Consequently, the company has made genuine attempts to provide value proposition for both profiles of mid-market customers. Each Mid-Market Solution bundle selected PeopleSoft 8 product functional components, which have being sold to larger enterprises too, but with preconfigured implementation, training and support services, resulting therefore with accompanying rapid, fixed-time and fixed-price implementations. The company has come up with each solution after a painstaking process of analyzing its first ~400 mid-market customers, identifying the functionality that each customer had found critical to be implemented first, identifying the highest ROI impact component, and finally, developing a pre-configured product set, integrated business processes and fixed-price implementation scope for each particular solution.
Moreover, to exceed the notion of d�j� vu offering from its peers in the past, PeopleSoft has attempted to offer a few differentiating �extras' in its solutions, which are often neglected (or intentionally omitted) by many competitors and often come as unpleasant �extra cost' surprises for the customer after the fact. Some of these lie in a pre-configured modular (and recently process-based ) integration, as the modular product structure enables customers to cherry-pick what they need and when they need it, thereby avoiding the proverbial �overkill factor' of large applications. To that end, each available solution can be combined to create extended business processes, and, alternatively, any number of available add-on modules can be supplemented, and each solution and/or add-on module has a pre-configured fixed-price no frills implementation scope.
These have been developed from PeopleSoft's own Compass Methodology, which uses accelerated tools to pre-define the planning & strategy phases of the implementation, and thereby avoid all-too-commonly dreaded "scope creep" (the company touts estimated average 37% reduction in time and cost so far). The methodology also caters for optimized best practices, as necessary workflows, interfaces, and data conversions have been mapped out by each solution beforehand. Although PeopleSoft, like every other vendor, frowns at customizations, these are not prohibited, as a built-in change control allows for customizations' tracking, but these implementations will logically carry a different price tag.
Once the project scope has been agreed upon and the appropriate solution has been pinpointed, PeopleSoft touts its �no frills' complete solution delivery purported with unlimited user license number for an upfront flat rate, fixed price implementation and training, pre-configured hardware, rapid but full implementation rather than with a �stripped-down' scope (i.e., standardized data conversion maps, developed testing scripts across all products, and pre-defined configuration data baseline best practices come delivered as a part and parcel of the implementation).
Also, by delivering projects (full-fledged implementations rather than only pilots) via its 35 mid-market implementation centers across North America (an implementation server is hosted in each centre), the company believes to have eliminated on average up to 50% traditional on-site delivery costs, as it eliminates hardware and database administrator requirements well until deployment on site, as well as consultants' travel and other expenses for the customer, it creates a non-invasive environment that removes on-site distractions by a daily grind business, customers gain access to the highest skilled PeopleSoft consultants that are not burned out by extensive traveling, and these resources can be leveraged across multiple customers.
Another pillar of success in this target segment lies in the delivery channel, for both implementation services and localized regional and vertical industries expertise. To that end, all of a handful of selected partners were made privy to the same above-mentioned implementation tools that PeopleSoft's own mid-market consulting group uses for deploying the accelerated applications, along with the usual marketing, sales and technical support.
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