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.
As well known and much publicized, the major factors of success in business applications for the mid market segment have traditionally been price, speed of implementation, vertical focus, product scalability and scope expandability, and a single point of contact. Therefore, all the Tier 1 vendors discussed in Part Two seem to have captured (or at least tackled) most of these, partly owing to finally breaking its product in more manageable components (which provides for faster phased implementations and system agility) and Internet-enabling it (which provides for easier deployability and user interface intuitiveness). Their solutions within ERP, CRM, SCM, portals. Product lifecycle management (PLM), and supplier relationship management (SRM) functionality provide a wide scope of features, and very few smaller vendors can provide tightly integrated applications of this magnitude under one umbrella.
Furthermore, these vendors have the strongest product technology in terms of scalability, and support for almost all industry relevant platforms and/or middleware standards, with Web service standards like eXtensible Markup Language (XML), Simple Object Access Protocol (SOAP) and Universal Description, Discovery, and Integration (UDDI) being already embedded within their latest product releases. These facts, bundled with their corporate viability and mind share, have encouraged many small companies to opt for their offering, which has not been quite conceivable until very recently.
However, at the lower end of the market, PeopleSoft and J.D. Edwards do not really compete yet, while SAP and Oracle offer a separate application suite in the form of SAP's Business One and the Oracle Small Business Suite, which uses the technology from NetLedger Inc., a company that is majority-owned by Oracle's chairman and CEO Larry Ellison. Tackling this market segment has proven to be a much tougher nut to crack, for several reasons.
The main reason would be that this is the home ground of the likes of Intuit, Microsoft Business Solutions (see Microsoft Lays Enforced-Concrete Foundation For Its Business Solutions), the Sage Group (whose US subsidiary is called Best Software, see Best Software To Hold Competition At Bay), and ACCPAC (see ACCPAC -- Being Much More Than Meets The Eye), as well as a number of highly specialized smaller companies catering to specific industries for accounting systems, while also building simple homegrown systems to handle functions like CRM or SFA.
These vendors understand this market and have thus gained market and mind share and loyal customers. Their knowledge of their customers' business is reflected in product interfaces, easy-to-use functionality, attractive price points, and in making application programming interfaces (APIs) available to external developers to help integrate their primarily accounting-based products with vertical market extensions provided by their partners. They offer "no-frills" online or retail sold business-application packages that attract small businesses early on; then these vendors provide more advanced functions and more scalable software as the small businesses grow.
Recently, for example, Microsoft has released Microsoft Business Network, a web-based communications network that allows transactions to be exchanged between trading partners via XML or EDI, tied directly into ERP applications of Microsoft Office applications. These vendors also can distribute risk by initiating partner programs for developers, such as furnishing marketing and technology resources to small developers as a way of extending the reach into the SMB sector. The vendor does not get involved in direct support of its partners' customers, but it does give these technology suppliers a competitive edge in being able to hook straight into their existing renowned back-end applications at small enterprises.
More than their larger counterparts, SMEs are looking for relatively simple and inexpensive software that is easy to install yet it is also easy to customize and extend. Consequently, there is a plethora of micro-verticals around, from a chiropractor's office to a B2B mortgage banking solution. These clients essentially want the same things that larger enterprises want, but their peculiar requirements are quite diverse. One size does not fit all, at all. Thus, trying to sell dumbed-down versions of mySAP Business Suite or Oracle E-Business Suite, without a serious re-engineering of these products, has not worked so far in the lower-end of the market. To date, Oracle and SAP have responded by acquiring more suitable genuine products for the segment, while it is not unlikely to see PeopleSoft and J.D. Edwards follow suit in the future.
The Oracle Small Business Suite, stemming from a couple of years old partnership based on NetLedger, possesses some strengths, and its modest perpetual license or monthly fee provides enough functional breadth and depth to suit many SMBs. The product comes as a complete suite or as two components covering either back- or front-office functionality; it aims to provide easy-to-use application services for such processes as financial management and accounting (with multiple currencies and consolidation of multiple companies, subsidiaries, and inventory locations), CRM, inventory management, purchasing and e-commerce (with direct deposit, electronic fund transfer (EFT), and multiple ship-to addresses). NetLedger has developed a notable base of close to 6,000 customers and 100 partners (e.g., Sprint and Yahoo), although almost exclusively in the North America. The suite also offers a hybrid service delivery capability to enable small businesses to own, manage and maintain system hardware while Oracle provides the software and support remotely via the Web.
While having resorted to an acquisition, which has even not been a common SAP practice in the past, may mean the admission of failure to successfully capture the global SMB market so far, SAP and Oracle might have thereby killed two birds with one shot. First, an acquisition (or a sort of a close partnership in Oracle's case) typically shortens the time-to-market, as proven by a number of achievements in a short time bracket, and second, these vendors will have tackled the small business market with a product designed specifically for that market, instead of repeating their previous attempts of fitting a square peg into a round hole, with functionally-depleted versions of mySAP Business Suite (i.e., formerly R/3) or Oracle E-Business suite or their pre-configured templates. Furthermore, SAP Business One and NetLedger provide simple products that can be more easily sold and supported by SAP's and Oracle's channel partners. These channel partners will also benefit from touting SAP's and oracle's leadership position, brand recognition, and viability.
On its hand, SAP Business One software features natively the SAP Enterprise Portal's Drag & Relate capabilities obtained in its acquisition of TopTier in 2001 (see SAP Acquires TopTier To Further Broaden Its Horizons), which was another vendor with Israeli roots. A user is for example able to add a data field to an invoice, and then drag and drop the newly created data field into another part o the system, which should be able to produce new report based on the data field in case. At the time of its acquisition in 2002, TopManage had nearly 800 customers in Europe, and it offered financials, distribution, and CRM functionality and supported English, Spanish, and Hebrew versions. Today, it already has 1,300 customers and 150 partners in Europe, Middle East, and the Americas; it is also now available in 14 languages and 12 countries, with the idea to be available in 22 countries by end of 2003. It also features embedded business process management/improvement (BPM/BPI) integration to mySAP Business Suite products (e.g. Business Intelligence, Portals, Exchange Integration), and a strong Software Development Kit (SDK) facilitating integration of third party software and services with SAP Business One, since it utilizes SAP Business One business logic and has the ability to read and write to and from each object in the system, and a simpler development and maintenance of integrated processes
The above might lead to an enthusiastic and stroonger channel that eventually will provide SAP with a product to sell to divisions of large global companies with mySAP Business Suite used at the corporate level, by reducing the potential of eroding divisional account control to another more nimble and/or more vertically or plant-level focused ERP vendor's offering. The fact is that a high percentage of SAP's customers outside the US are small and mid-market companies. One can wonder why that is still not the case in the US. In addition to SAP's US-based competitors' good propaganda job mainly by exploiting some well-publicized SAP implementations' flops in the US, a major reason is still the nascent indirect channel. Having only a handful of certified partners for the entire US market sound rather dismal compared to the thousands that Microsoft Business Solutions or Best Software cite, or he several hundreds touted by Lilly Software, SYSPRO, or Made2Manage.
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.
As well known and much publicized, the major factors of success in business applications for the mid market segment have traditionally been price, speed of implementation, vertical focus, product scalability and scope expandability, and a single point of contact. Therefore, all the Tier 1 vendors discussed in Part Two seem to have captured (or at least tackled) most of these, partly owing to finally breaking its product in more manageable components (which provides for faster phased implementations and system agility) and Internet-enabling it (which provides for easier deployability and user interface intuitiveness). Their solutions within ERP, CRM, SCM, portals. Product lifecycle management (PLM), and supplier relationship management (SRM) functionality provide a wide scope of features, and very few smaller vendors can provide tightly integrated applications of this magnitude under one umbrella.
Furthermore, these vendors have the strongest product technology in terms of scalability, and support for almost all industry relevant platforms and/or middleware standards, with Web service standards like eXtensible Markup Language (XML), Simple Object Access Protocol (SOAP) and Universal Description, Discovery, and Integration (UDDI) being already embedded within their latest product releases. These facts, bundled with their corporate viability and mind share, have encouraged many small companies to opt for their offering, which has not been quite conceivable until very recently.
However, at the lower end of the market, PeopleSoft and J.D. Edwards do not really compete yet, while SAP and Oracle offer a separate application suite in the form of SAP's Business One and the Oracle Small Business Suite, which uses the technology from NetLedger Inc., a company that is majority-owned by Oracle's chairman and CEO Larry Ellison. Tackling this market segment has proven to be a much tougher nut to crack, for several reasons.
The main reason would be that this is the home ground of the likes of Intuit, Microsoft Business Solutions (see Microsoft Lays Enforced-Concrete Foundation For Its Business Solutions), the Sage Group (whose US subsidiary is called Best Software, see Best Software To Hold Competition At Bay), and ACCPAC (see ACCPAC -- Being Much More Than Meets The Eye), as well as a number of highly specialized smaller companies catering to specific industries for accounting systems, while also building simple homegrown systems to handle functions like CRM or SFA.
These vendors understand this market and have thus gained market and mind share and loyal customers. Their knowledge of their customers' business is reflected in product interfaces, easy-to-use functionality, attractive price points, and in making application programming interfaces (APIs) available to external developers to help integrate their primarily accounting-based products with vertical market extensions provided by their partners. They offer "no-frills" online or retail sold business-application packages that attract small businesses early on; then these vendors provide more advanced functions and more scalable software as the small businesses grow.
Recently, for example, Microsoft has released Microsoft Business Network, a web-based communications network that allows transactions to be exchanged between trading partners via XML or EDI, tied directly into ERP applications of Microsoft Office applications. These vendors also can distribute risk by initiating partner programs for developers, such as furnishing marketing and technology resources to small developers as a way of extending the reach into the SMB sector. The vendor does not get involved in direct support of its partners' customers, but it does give these technology suppliers a competitive edge in being able to hook straight into their existing renowned back-end applications at small enterprises.
More than their larger counterparts, SMEs are looking for relatively simple and inexpensive software that is easy to install yet it is also easy to customize and extend. Consequently, there is a plethora of micro-verticals around, from a chiropractor's office to a B2B mortgage banking solution. These clients essentially want the same things that larger enterprises want, but their peculiar requirements are quite diverse. One size does not fit all, at all. Thus, trying to sell dumbed-down versions of mySAP Business Suite or Oracle E-Business Suite, without a serious re-engineering of these products, has not worked so far in the lower-end of the market. To date, Oracle and SAP have responded by acquiring more suitable genuine products for the segment, while it is not unlikely to see PeopleSoft and J.D. Edwards follow suit in the future.
The Oracle Small Business Suite, stemming from a couple of years old partnership based on NetLedger, possesses some strengths, and its modest perpetual license or monthly fee provides enough functional breadth and depth to suit many SMBs. The product comes as a complete suite or as two components covering either back- or front-office functionality; it aims to provide easy-to-use application services for such processes as financial management and accounting (with multiple currencies and consolidation of multiple companies, subsidiaries, and inventory locations), CRM, inventory management, purchasing and e-commerce (with direct deposit, electronic fund transfer (EFT), and multiple ship-to addresses). NetLedger has developed a notable base of close to 6,000 customers and 100 partners (e.g., Sprint and Yahoo), although almost exclusively in the North America. The suite also offers a hybrid service delivery capability to enable small businesses to own, manage and maintain system hardware while Oracle provides the software and support remotely via the Web.
While having resorted to an acquisition, which has even not been a common SAP practice in the past, may mean the admission of failure to successfully capture the global SMB market so far, SAP and Oracle might have thereby killed two birds with one shot. First, an acquisition (or a sort of a close partnership in Oracle's case) typically shortens the time-to-market, as proven by a number of achievements in a short time bracket, and second, these vendors will have tackled the small business market with a product designed specifically for that market, instead of repeating their previous attempts of fitting a square peg into a round hole, with functionally-depleted versions of mySAP Business Suite (i.e., formerly R/3) or Oracle E-Business suite or their pre-configured templates. Furthermore, SAP Business One and NetLedger provide simple products that can be more easily sold and supported by SAP's and Oracle's channel partners. These channel partners will also benefit from touting SAP's and oracle's leadership position, brand recognition, and viability.
On its hand, SAP Business One software features natively the SAP Enterprise Portal's Drag & Relate capabilities obtained in its acquisition of TopTier in 2001 (see SAP Acquires TopTier To Further Broaden Its Horizons), which was another vendor with Israeli roots. A user is for example able to add a data field to an invoice, and then drag and drop the newly created data field into another part o the system, which should be able to produce new report based on the data field in case. At the time of its acquisition in 2002, TopManage had nearly 800 customers in Europe, and it offered financials, distribution, and CRM functionality and supported English, Spanish, and Hebrew versions. Today, it already has 1,300 customers and 150 partners in Europe, Middle East, and the Americas; it is also now available in 14 languages and 12 countries, with the idea to be available in 22 countries by end of 2003. It also features embedded business process management/improvement (BPM/BPI) integration to mySAP Business Suite products (e.g. Business Intelligence, Portals, Exchange Integration), and a strong Software Development Kit (SDK) facilitating integration of third party software and services with SAP Business One, since it utilizes SAP Business One business logic and has the ability to read and write to and from each object in the system, and a simpler development and maintenance of integrated processes
The above might lead to an enthusiastic and stroonger channel that eventually will provide SAP with a product to sell to divisions of large global companies with mySAP Business Suite used at the corporate level, by reducing the potential of eroding divisional account control to another more nimble and/or more vertically or plant-level focused ERP vendor's offering. The fact is that a high percentage of SAP's customers outside the US are small and mid-market companies. One can wonder why that is still not the case in the US. In addition to SAP's US-based competitors' good propaganda job mainly by exploiting some well-publicized SAP implementations' flops in the US, a major reason is still the nascent indirect channel. Having only a handful of certified partners for the entire US market sound rather dismal compared to the thousands that Microsoft Business Solutions or Best Software cite, or he several hundreds touted by Lilly Software, SYSPRO, or Made2Manage.
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