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...

-amit

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.


Bottomline
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

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.

-amit

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.

-amit

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.

Caution
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.

-amit

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)"...

-amit

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".

-amit