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.
Still, the ride to SAP's and Oracle's SMB success will not go that smoothly, given that managing two different products may go outside of these vendors' strongholds so far.
The challenge of recruiting new partners and of getting them up to speed with new, still relatively unknown, albeit simple products, is imminent. Also, likely market confusion (not to mention channel confusion and/or conflict due to emotional ties to a certain product line) may aggravate already existing confusion about the huge flagship product portfolios. For example, while NetLedger remains separate from Oracle, the demarcation line where one company begins and the other ends is quite blurred. Also, how far the Oracle Small Business Suite will scale upward as a business grows also remains unclear. With no intermediate solution to grow into, Oracle E-Business Suite remains the only alternative, which might often be a too steep undertaking. In addition to the expenses of educating the market and its channel, one should expect higher R&D expenses and possible product delivery delays due to added new product and integration issues.
Thus, we believe the SAP Business One and NetLedger initiatives will still take a couple years to materialize in earnest. The best near-term opportunity for SAP and Oracle will be to sell to existing large customers for deployment in smaller subsidiaries and divisions, since these products provide viable options for staying with a single vendor corporate-wide. Some mid-market vendors with impressive global reach and localized products, immaculate vertical focus and knowledgeable channel, offering a very flexible modern product, very well attuned for local regulatory requirements of several dozen countries and supporting well over 30 languages, such as Scala (see Scala Shows Far More Than A Bit Of A Backbone) and Systems Union/SunSystems, have long devised predatory strategies at the large company subsidiary market and SAP and Oracle will need to move quickly to shore up their own installed base.
SAP and Oracle customers should begin to consider SAP Business One and NetLedger as software solutions for smaller, autonomous business units based on the integration benefit. With the current and/or upcoming more comprehensive CRM solution, these products will compete well against the aggressive newcomer Microsoft CRM product.
However, SAP Business One or NetLedger will not suit manufacturers as they lack MRP (manufacturing resource planning) and strong field service, and many other manufacturing-oriented modules, which will again require the higher-priced and more complex mySAP All-In-One or Oracle E-Business Suite. This might only defeat the purpose, and it might not help much in preempting the intrusion of some competitors that specialize in plant-level manufacturing systems (e.g., QAD, Ross, Agilisys, SSA GT, SYSPRO, etc.). The basic functionality will consequently need to evolve substantially in order for these low-end versions to compete in the broader market. While SAP is not planning to develop manufacturing functionality for SAP Business One, it however, encourages current partners to team with SAP to create MRP offering for smaller companies. The first manufacturing solutions from independent software vendors (ISVs) for SAP Business One are expected towards the end of 2003.
Much other work-in-progress is still outstanding, e.g., Business One requires customized integration with third-party accounting systems, but the connectors, which would speed up the integration of those applications, are not yet available. However, SAP has already llaunched its SDK (software Development Kit) for all previous versions of SAP Business One (6.01, 6.02). For new version 6.2, there is a new generation SDK (including user interface functionality, and tools for accelerated development). This version is being tested by partners and is expected to be released for general use at the beginning of July
A mobile client is also currently not available in the US, and thus are traveling salespeople still unable to remotely access the software. Again, SAP claims a mobile client is being developed by partners to cover common remote tasks like contact management, warehouse management and CRM capabilities. First remote devices will be available by the end of 2003, while remote synchronization is planned for Q1 2004. Finally, while Business One includes an embedded e-mail server, it does not integrate with large e-mail products such as Microsoft Exchange/Outlook and Lotus Notes. SAP is well aware of the need for these enhancements, and integrated e-mail is also planned for Q1 2004.
As for the upper mid-market, the Tier 1 vendors' offerings remain complex applications, and the Internet architecture and new intuitive interface can mitigate that only so much. This perception of complexity remains ammunition that the incumbent Tier 2 & 3 vendors will continue to exploit in order to hinder bigger brethren's attempt to penetrate their traditional stronghold. Furthermore, not all powerful functionality (e.g., SRM or PLM) is readily available for these pre-configured solutions, which may be a serious drawback when competing against the solid Tier 2 vendors which have long offered their entire suites without any disparity between solutions for bigger and smaller customers (e.g., J.D. Edwards, Intentia, IFS, or Epicor). The "Accelerated Solutions" while enabling large vendors and their channel to offer a fixed price and fixed time implementation program in modular way, may sometimes not necessarily offer total extended-ERP functional scope but still only a part thereof. By the time the customer puts together modules to build a full collaborative enterprise system for a mid-market company, and then adds up the multiple implementation time and cost, all the touted benefits might have been annulled in some instances when incumbent mid-market vendors cover all the bases with their well-entrenched offering.
Therefore, it may still take some serious doing to produce a real magic bullet to attract vast majority of midsize enterprises, since at this stage, many might fail to find a compelling rationale for an SME to go for PeopleSoft or Oracle as opposed to, e.g., Lawson, Epicor or Infinium (now part of SSA GT) in service industries, or an army of channel-focused manufacturing-oriented smaller ERP vendors. While fixed time and cost solutions delivered packaged from pristine laboratories do have their appeal, SMEs are becoming increasingly savvy to ask for more than just these implementations perceived as cookie-cutter approach. Therefore, PeopleSoft and its peers will have to repeatedly prove it has not taken a cookie cutter approach, as each of its solutions is preconfigured to reduce cost and complexity, but also allows for available extensions based on each customer's need.
This combination might make a differentiating trait, and since the vendors have also developed industry or process templates for each solution, these could keep cost, complexity and risk down. Despite the challenges, Tier 1 vendors have raised the bar in providing solutions for smaller enterprises, and Tier 2 and Tier 3 vendors should be in for a tough battle to defend their turf, especially as they are concurrently trying to expand and modernize their products with ever diminishing resources and wary prospects. SAP has stated that it intends to grow its small and midsize business from the current ~ 7% of license revenue to 15% by 2005, and that means finding and closing thousands of new customers. PeopleSoft and Oracle too are undeniably tenacious and persistent fighters able to endure the long hauls, although Microsoft, Sage ad ACCPAC would not be pushovers in that regard either.
Still, the ride to SAP's and Oracle's SMB success will not go that smoothly, given that managing two different products may go outside of these vendors' strongholds so far.
The challenge of recruiting new partners and of getting them up to speed with new, still relatively unknown, albeit simple products, is imminent. Also, likely market confusion (not to mention channel confusion and/or conflict due to emotional ties to a certain product line) may aggravate already existing confusion about the huge flagship product portfolios. For example, while NetLedger remains separate from Oracle, the demarcation line where one company begins and the other ends is quite blurred. Also, how far the Oracle Small Business Suite will scale upward as a business grows also remains unclear. With no intermediate solution to grow into, Oracle E-Business Suite remains the only alternative, which might often be a too steep undertaking. In addition to the expenses of educating the market and its channel, one should expect higher R&D expenses and possible product delivery delays due to added new product and integration issues.
Thus, we believe the SAP Business One and NetLedger initiatives will still take a couple years to materialize in earnest. The best near-term opportunity for SAP and Oracle will be to sell to existing large customers for deployment in smaller subsidiaries and divisions, since these products provide viable options for staying with a single vendor corporate-wide. Some mid-market vendors with impressive global reach and localized products, immaculate vertical focus and knowledgeable channel, offering a very flexible modern product, very well attuned for local regulatory requirements of several dozen countries and supporting well over 30 languages, such as Scala (see Scala Shows Far More Than A Bit Of A Backbone) and Systems Union/SunSystems, have long devised predatory strategies at the large company subsidiary market and SAP and Oracle will need to move quickly to shore up their own installed base.
SAP and Oracle customers should begin to consider SAP Business One and NetLedger as software solutions for smaller, autonomous business units based on the integration benefit. With the current and/or upcoming more comprehensive CRM solution, these products will compete well against the aggressive newcomer Microsoft CRM product.
However, SAP Business One or NetLedger will not suit manufacturers as they lack MRP (manufacturing resource planning) and strong field service, and many other manufacturing-oriented modules, which will again require the higher-priced and more complex mySAP All-In-One or Oracle E-Business Suite. This might only defeat the purpose, and it might not help much in preempting the intrusion of some competitors that specialize in plant-level manufacturing systems (e.g., QAD, Ross, Agilisys, SSA GT, SYSPRO, etc.). The basic functionality will consequently need to evolve substantially in order for these low-end versions to compete in the broader market. While SAP is not planning to develop manufacturing functionality for SAP Business One, it however, encourages current partners to team with SAP to create MRP offering for smaller companies. The first manufacturing solutions from independent software vendors (ISVs) for SAP Business One are expected towards the end of 2003.
Much other work-in-progress is still outstanding, e.g., Business One requires customized integration with third-party accounting systems, but the connectors, which would speed up the integration of those applications, are not yet available. However, SAP has already llaunched its SDK (software Development Kit) for all previous versions of SAP Business One (6.01, 6.02). For new version 6.2, there is a new generation SDK (including user interface functionality, and tools for accelerated development). This version is being tested by partners and is expected to be released for general use at the beginning of July
A mobile client is also currently not available in the US, and thus are traveling salespeople still unable to remotely access the software. Again, SAP claims a mobile client is being developed by partners to cover common remote tasks like contact management, warehouse management and CRM capabilities. First remote devices will be available by the end of 2003, while remote synchronization is planned for Q1 2004. Finally, while Business One includes an embedded e-mail server, it does not integrate with large e-mail products such as Microsoft Exchange/Outlook and Lotus Notes. SAP is well aware of the need for these enhancements, and integrated e-mail is also planned for Q1 2004.
As for the upper mid-market, the Tier 1 vendors' offerings remain complex applications, and the Internet architecture and new intuitive interface can mitigate that only so much. This perception of complexity remains ammunition that the incumbent Tier 2 & 3 vendors will continue to exploit in order to hinder bigger brethren's attempt to penetrate their traditional stronghold. Furthermore, not all powerful functionality (e.g., SRM or PLM) is readily available for these pre-configured solutions, which may be a serious drawback when competing against the solid Tier 2 vendors which have long offered their entire suites without any disparity between solutions for bigger and smaller customers (e.g., J.D. Edwards, Intentia, IFS, or Epicor). The "Accelerated Solutions" while enabling large vendors and their channel to offer a fixed price and fixed time implementation program in modular way, may sometimes not necessarily offer total extended-ERP functional scope but still only a part thereof. By the time the customer puts together modules to build a full collaborative enterprise system for a mid-market company, and then adds up the multiple implementation time and cost, all the touted benefits might have been annulled in some instances when incumbent mid-market vendors cover all the bases with their well-entrenched offering.
Therefore, it may still take some serious doing to produce a real magic bullet to attract vast majority of midsize enterprises, since at this stage, many might fail to find a compelling rationale for an SME to go for PeopleSoft or Oracle as opposed to, e.g., Lawson, Epicor or Infinium (now part of SSA GT) in service industries, or an army of channel-focused manufacturing-oriented smaller ERP vendors. While fixed time and cost solutions delivered packaged from pristine laboratories do have their appeal, SMEs are becoming increasingly savvy to ask for more than just these implementations perceived as cookie-cutter approach. Therefore, PeopleSoft and its peers will have to repeatedly prove it has not taken a cookie cutter approach, as each of its solutions is preconfigured to reduce cost and complexity, but also allows for available extensions based on each customer's need.
This combination might make a differentiating trait, and since the vendors have also developed industry or process templates for each solution, these could keep cost, complexity and risk down. Despite the challenges, Tier 1 vendors have raised the bar in providing solutions for smaller enterprises, and Tier 2 and Tier 3 vendors should be in for a tough battle to defend their turf, especially as they are concurrently trying to expand and modernize their products with ever diminishing resources and wary prospects. SAP has stated that it intends to grow its small and midsize business from the current ~ 7% of license revenue to 15% by 2005, and that means finding and closing thousands of new customers. PeopleSoft and Oracle too are undeniably tenacious and persistent fighters able to endure the long hauls, although Microsoft, Sage ad ACCPAC would not be pushovers in that regard either.
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