Tuesday, July 24, 2007

Interim Summary...

To get a better perspective on the discussion so far, lets review the main topics reviewed so far:

  • Changing Market dynamics - What is driving the ERP vendors to the SMB market,

  • The technology aspect - SOA & how it is helping vendors in preparing for the mid market,

  • On-demand model - that is revolutionizing the way software is delivered to customers,

  • Open source - the movement that is gaining momentum. Interesting read "In Search of an Open Source Business Model" @ http://www.sandhill.com/opinion/editorial.php?id=144&page=1

From the above it is clear that our focus has been mostly on software/technolgy so far. We have neither touched upon the needs of a SMB nor have we discussed the business benefits that a SMB can accrue from ERP.

More to come...


Sunday, July 22, 2007

Open Source & ERP II

Most of the open source software can be downloaded at no charge. For example, you could simply go to www.compiere.com or http://sourceforge.net/projects/compiere and download Compiere's ERP + CRM Business Solution.

As a technical person, this is great news. You could download the software including its source code and make any enhancements to it as per the license agreement. You could resell the product, start a service company around the product and do what any software/service company will do with their own proprietary product.

Essentially, Compiere gives you a ready made platform to launch your own software business. A huge head start in my estimation.

Without digressing further... At least you have choice now. We will summarize these choices in the next posting.

As a SMB owner, you download Compiere and then what...You neither have the time nor resources to go much further. Invariably, you will need the services of a trained technical person to install & configure & run the software. Compiere has business partners in many countries who specialize in providing services, enhancements around the product. So although the product itself comes at ZERO cost, you have to pay a price for the services associated with the product.

We believe any open source software will have a similar cost model - free software with services that come at a price.

Alternative Solution
An alternative is to buy license with a hosted service provider. Compiere has partners who provide such services. The advantage is that you do not need to download the software or get into its installation, configuration and maintenance. These will be taken care of by the service provider. Of course, this service comes at a price.

Download the free software but pay a price to install, configure and maintain it OR go with the hosted model and pay a (periodic) fees....

- amit

Friday, July 20, 2007

ERP & Open Source

Like the parallel economy...There is a parallel revolution going in the software industry. It is called the OPEN SOURCE development. Numerous Open Source softwares are being designed and developed by exceptionally talented and dedicated software professionals around the world. Unlike their commercial counterparts, these softwares are available for FREE with (almost) no strings attached. Of course, downloading a software and making it work for you is not a trivial task. So, there is an ecosystem of smart companies around the OPEN SOURCE movement that make these software available to their users at minimal (compared to their commercial rivals) cost.

ERP is not untouched by this revolution.

A notable company in the ERP arena is Compiere. We will talk more about Compiere in the next post. Pl visit Compiere at www.compiere.com and you will find interesting stuff out there.

As we will see, Open Source ERP is yet another feasible alternative with limitations of course. More later.


Thursday, July 19, 2007

On Demand Software; SaaS; Software plus Service; Hosted Software

Having touched upon SOA, we now move on to the next big shift. This one relates to how the software is delivered to the customer. The marketing czars have given it many different names: On Demand Software, Software as a Service (SaaS), and the latest one from Microsoft - Software plus Services.

Different names but similar underlying concept.

In this avatar, software is not installed on customer site (on premise) but on servers located outside of customer's "firewall" or off premise to be more exact. There is tons of research weighing the pros and cons of providing software as a service to the customers and we leave that discussion for a later time.

The takeaway is that together SOA and SaaS can make the ERP dream real for the SMB market. On the same token, the dream of selling ERP software to SMB market is much more realizable for a vendor now than it was a decade ago. Perhaps in the next decade or so ERP and SMB will be synonymous as has been the case with larger organizations.


Friday, July 13, 2007

The Fundamental Shift

One of the primary challanges for the existing (and new) ERP vendors is to architect their solutions in such a way that it can be made available to the SMB market. In large opart this has been made possible by advent of Service Oriented Architecture (SOA). According to Wikipedia,

There is no widely agreed upon definition of service-oriented architecture other than its literal translation that it is an architecture that relies on service-orientation as its fundamental design principle. Service-orientation describes an architecture that uses loosely coupled services to support the requirements of business processes and users. Resources on a network[1] in a SOA environment are made available as independent services that can be accessed without knowledge of their underlying platform implementation.[2] These concepts can be applied to business, software and other types of producer/consumer systems.

In simple terms, services have now become the gateway to the underlying ERP suite. These services are expected to provide 100% coverage to the business functionality of the ERP suite in future.

What does SOA mean to a small business owner?

The long and short of SOA from a SMB perspective is that it enables the ERP vendors to sell their ERP suites in chunks (chunk can be thought of as a logical grouping of services) on an as needed basis. Therefore, the monloithic ERP suites can now be broken down into much smaller pieces.

The above is where the ERP world is headed. Baby steps have already been taken in this direction. A lot more is yet to come.

Fundamental Shift
Adoption of SOA by ERP vendors fundamentally impacts how ERP software is built, sold and positioned to the customers. It opens up new, hitherto unreachable, markets for the ERP vendors. On the same token, it brings ERP closer to home for the large number of SMB.


Sunday, July 8, 2007

SMB market is different than the big business market in a number of different ways. Their paying capacity is limited, there software needs are limited, they don't need all the functionality that is embedded in the huge ERP suites that are in the marketplace today... .

The one big challange for any ERP vendor then has been

"how to carve out the needed functionality from their ERP suites that meets the needs of their new customer?".

The answer lies in something called "Service Oriented Architecture (SOA)"...

The cash registers will have to ring; there is no other option for the ERP vendors. As we argued before, the large business market is no longer the cash cow it once used to be. So, arguably the SMB (small-to-medium business) market is the only other option for these vendors. The question is how do they make it happen?

As we start discussing this in the next posts, we will also delve into what the newbie customers stand to gain from the "revolution".


Saturday, July 7, 2007

The success of on demand delivery model as demonstrated largely by the success (so far) of Sales Force (http://www.salesforce.com/) shows that complex business software offerings can be made to businesses without having to ever visit the customer site. In other words, you can almost do away with the IT infrastructure in terms of man, machine resources that are traditionally required for on-premise installations. Of course, there are downsides. The biggest being the reluctance of businesses to host their data offsite.

However, sales force has started a trend that offers a viable deployment model. A model that is attracting hordes of NEW customers.

Are the cash registers ringing again for business software vendors with the new customer base that is up for grabs? Does this sound like a new growth market that ERP vendors have been looking for?

A note of caution: Sales Force offers a small piece of functionality as compared to the ERP. Does then the Sale Force model scale to the ERP world?


Monday, June 18, 2007

Drivers of Change...

Back to the basics...

The basic fundamentals which drive all businesses are also driving this change - the search for sustainable growth. The large ERP vendors that have traditionally served the large corporations are seeing a slow down in their revenue streams. It doesnt take much analysis to say that this market segment cannot ensure sustainable growth over the next decade. New markets must be found.

Arguably, two factors are enabling the ERP vendors to offer their products to the SMB sector and thereby helping them define the new markets:
  • Service Oriented Architecture (lovingly called SOA), and
  • an increasing acceptance of on-demand delivery models.

The together can potentially prove to be the holy grail for the customers and the ERP vendors alike.

The race for market share [of small and medium sized businesses] is on.

For now, the target is midmarket but is small business far behind?


Saturday, June 16, 2007

Watershed decade of the 21st century...

... So many questions and so few (and disparate) answers.

The theme for small business software landscape has been - DIVERSITY. Desktop applications , homegrown software applications, excel and such dot the small business landscape. What this means is that the small business software landscape is NOT as organized or well defined as that for large corporations. For large corporations the theme has (typically) been ERP.

Rarely do small businesses have a "strategy" or even a well thought out plan for their software needs. This is understandable becasue they are busy running their day to day operations and making sure that things run smoothly. They do not have the manpower & other resources to dedicate to such analysis & planning. Forget the classic implementation for the moment. In contrast large organizations have scores of people examining every aspect of its software needs including the CIO and (implicitly) the CFO.

What are the small business people missing that large corporation are gaining upon? What can a small business do? Is this a case of missed opportunities for a small business? You bet it is...and we will show how things are changing to the advantage of a small business...and also what the software vendors must do to help the small business in this first decade of the 21st century...


Thursday, June 7, 2007

Business Fundementals...

Cash generation, growth, margin, velocity, and customers are all key parameters that determine the performance of a business. Dr. Ram Charan discusses these extensively in his book “What does the CEO want you to know” (http://www.ramcharan.com/).

All of the metrics described above are measurable and they provide a ton of information about the health of a company. The question is: Is your small businesses able to measure these accurately and derive inferences that can lead to short term and strategic benefits?

Keeping a close tab on what dollars are coming in and going out is one of key tenets of maintaining a good cash flow. Synchronizing accounts payable and receivable, identifying late paying customer and promoting and retaining profitable customers are some ways in which cash generation can be improved to healthy levels. What is the inventory position, how quickly the inventory is turning-over, are the margins too high or too low. What are the fast moving products. How are we doing with respect to customer retention? Are we acquiring new customers and increasing our market share? Or are we stagnating?

A small business must be able to answer these basic questions for itself. And this is just the tip of the iceberg...


Saturday, May 19, 2007

Vendor Dilema...

In the previous blog entry, I asserted that no single business (/application) software vendor dominates the SMB market. It goes without saying that the race for market share is on. Established and new vendors are trying hard to find the right business model to serve this market sector. So the interesting question at this point is:

What should a software vendor do in order to maximize their market share?

One way to approach to this will be to ask the SMB owners what they want from their business software. If any SMB owners are listenting pl pitch in. Otherwise,

In my estimation, one sure thing is that the requirements will differ across verticals and perhaps also across geographical regions (!). The other thing that is also sure is that there is functionality that is common across all SMBs.

Is this a good assumption to start? Any takers.

In the next few blog entries, I will focus on what I think is important for a SMB.


Thursday, May 17, 2007

Theme: "Trends in Business Software for Small Businesses"

No single software vendor dominates the business software market for the small to medium businesses (SMBs). There are many vendors serving this market. This is in stark contrast to the same market for the large corporations. The market of large corporations is dominated by a handful of companies. This is especially so after the market consolidation initiated by Oracle.

In this blog, we discuss questions, issues surrounding the business software market for the SMB. Numerous questions come to mind:

  • What would it take for a software vendor to gain entry and dominate the lucarative market of business software for SMB?
  • What are the characteristics and demographics of the SMB market?
  • What are the functional needs of this SMB market?
  • What are the needs of a SMB owner?
  • What are the pain points for a SMB owner?
  • Which delivery model will be successful - desktop based, Saas, or something entirely different like the open source model?
  • Which vendors will gain prominence in this market?
  • What should be the game plan for new vendors entering this market?
  • Should the vendor have a solution per vertical or is it possible to provide a lowest common denominator solution?
  • Would the market segment be ever dominated by a few vendors or will it always be served by a fragmented set of vendors?
  • ...

We invite small business owners, recognized SMB experts, and all others interested in the topic to participate and shed light on the dynamics of this multi-billion dollar market segment that is only beginning to gain prominence among the elite of the business software vendor community.


Who links to me?