The response to our article series where we solicited vendors' input on a number of market trends has received much attention and reaction from readers and vendors alike. Infor and IFS were the first two to respond (see Two Stalwart Vendors Discuss Market Trends), followed by Progress Software (see Open Platform Provider Answers Questions about the State of the Market).
Now another prominent market player has joined the discussion: Sage, a world leader in accounting and midmarket ERP. The Sage Group, PLC (www.sage.com) is a $2.55 billion (USD) organization and arguably the third largest business software vendor worldwide. It is the leading supplier of business management software and services with over 5.8 million customers worldwide. Globally, Sage has over 14,500 employees and a global network of over 25,000 reseller partners and 40,000 accountants that recommend its products. The vendor handles over 36,000 customer support service calls daily and over 1.7 million support service contracts. Sage also represents a strong cash generating business, which has consistently delivered strong operating margins earnings before interest, taxes, depreciation and amortization (EBITDA) of 23 percent and organic growth of 6 percent (excluding Sage Healthcare Division) for the financial year ending September 30, 2008. For details go to http://www.investors.sage.com/reports_presentations/results_presentations/.
With North American operations located near Pittsburgh, Pennsylvania (US), Sage offers Sage ERP X3 (formerly Adonix X3, www.sageERPx3.us), an international enterprise resource planning (ERP) solution for midsized companies. The product targets midsized, competitive, and progressive companies that face the same business challenges as (and similar complexities to) Fortune 1000 ones, but that need more flexible and cost-effective, modern solutions to support their operations and growth. To that end, the Sage ERP X3 software suite integrates manufacturing, distribution, warehousing, customer relationship management (CRM), and finance functionality, while remaining competitive in terms of cost-effectiveness, implementation speed, and ease of use.
Espousing an International Offering
Sage ERP X3 is sold and implemented both directly by Sage and through a network of 150 value-added resellers (VARs). The product is also distributed by Sage branches and its international network of resellers throughout Europe, China, South East Asia, the Middle East, and Africa. With over 2,000 worldwide customers—ranging from 10 to more than 1,000 ERP users and representing over 5,000 sites—Sage ERP X3 has established itself as one of the fastest-growing enterprise systems for midsized companies.
The latest product's version was recently released by the Sage Group under the new brand name, Sage ERP X3, to better reflect its potentially unique position within the vast Sage portfolio of ERP products. Namely, while Sage has traditionally offered well-attuned local and regional products, Sage ERP X3 might be Sage's first notable foray in offering a globally available enterprise-level product. A multi-audit and regulatory compliant system, Sage ERP X3 meets multisite, multicompany, and multicountry business requirements. It is available in eight languages and legislations, including the United States (US), France, Spain, Portugal, Italy, Germany, United Kingdom (UK), and China.
In 2008, Sage issued a controlled-release Sage ERP X3, version, unveiling it in 35 countries across Europe, the Americas, Asia, Africa, and the Middle East. The system is represented in the US through Sage North America, a dedicated North American ERP mid-market player. Prior to version 5, Sage ERP X3 was distributed under different brand names depending on the country (Adonix X3 in the US, Canada, and Argentina; Diapason X in Italy; and Sage X3 Enterprise in other countries).
Sage has reportedly invested 20 percent of X3's product line annual revenues into research and development (R&D), ensuring customers benefit from an ongoing release schedule and assuring them a return on investment (ROI) over the life of their Sage ERP X3 implementations.
Zooming Into Sage ERP X3?
Sage ERP X3 is an extended-ERP software suite designed to meet mid-to-large companies' deep manufacturing and distribution functional requirements in a relatively simple and cost-effective manner. The system offers integrated functionality in the areas of finance, sales, CRM, inventory management, purchasing, and manufacturing. The typical customer for Sage ERP X3 is a company of 50 to 2,000 employees with $20 million to $500 million (USD) in revenue.
The versatile system comes in three configured offerings aimed at meeting the needs of 1) process manufacturers, 2) discrete manufacturers, and 3) wholesale distributors with a limited need for customization (due to a tight functional fit). In the US, Sage ERP X3's core industry targets include chemicals (see So What's the Big Deal with Chemicals?), food and beverage (see Food and Beverage "Delights"), life sciences, hard goods manufacturing, wholesale trade, and multichannel retail and direct marketing (see The Challenge of Fulfillment).
Sage ERP X3 complements the existing Sage ERP portfolio in North America by providing the upper mid-market with mid-range to high-end ERP software capable of meeting more elaborate business processes. Scaling up to more than 1,000 concurrent users, it also provides current Sage customers in the lower end of the market with a viable path for growth for the future, and provides an opening to global expansion. In other words, Sage is positioning Sage ERP X3 into the Sage ERP family, which excludes stand-alone CRM packages, such as SalesLogix (which is another globally available product by Sage).
Within that family, Sage ERP X3 tops the product line by targeting a worldwide upper mid-market, as the "high-end" Sage ERP solution (accommodating up to 1,500 users). Other ERP products in North America are Sage MAS 500 ERP, Sage MAS 200 ERP, Sage MAS 90 ERP, Sage PFW ERP, and Sage Accpac ERP, covering companies of 1 to 1,000 employees. Select Sage products can be found within the TEC Vendor Showcase. The full Sage ERP family—including Sage ERP X3—is listed on the Sage North American Web Site; www.sagenorthamerica.com.
In North America, Sage MAS 500 and Sage ERP X3 may overlap in some cases, although Sage ERP X3 should be viewed as an upper-market product. Whether a business should evaluate one or the other product depends several organization-specific elements:
prospective growth (X3 has high scalability);
activity worldwide (only X3 includes multi-audit functionality and may fit global business needs);
industry (X3 focuses on distribution and manufacturing in chemicals, life sciences, food and beverage, and hard goods); and
level of complexity and the agility of its business processes (X3 may be more easily customizable).
There are also similar, potential overlaps with Accpac ERP, which has a good presence in several English-speaking markets (see Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions?) Organizations considering Accpac ERP should also perform a similar exercise to help pinpoint their needs.
Asserting Technology Prowess
To put the things into perspective, prior to being acquired by Sage in 2005, the privately held French vendor Adonix, had a number of its own acquisitions (see Adonix Expands X3 and Its "French Connection"). These products (e.g., Prodstar, CGI, etc.) were first integrated with the Adonix V3 product, the predecessor of Adonix X3, and have been rewritten in a Java-like and Unicode-compliant engine. As a result, a modern Adonix X3 product was first launched in France in 1999, and later in the US in 2000.
First introduced in 2000 as Adonix X3, and now in its fifth major incarnation as Sage ERP X3, Sage ERP X3 was built on the Sage Application Framework for the Enterprise X3 platform (SAFE X3), a framework shared by a full set of Sage applications for mid-to-large enterprises (human resources [HR] and payroll, warehouse management system [WMS], etc.). This service oriented architecture (SOA)/Web-native platform provides users with collaboration capabilities in either client/server or Web mode, as well as an integrated business intelligence (BI) engine by Business Objects (an SAP company). It also provides a flexible second-generation workflow engine.
Early in 2008 Adonix announced the availability of the latest version of its enterprise software suite Sage ERP X3. The latest Sage ERP X3, release, v5, focuses on
new ergonomics, making complex operations simpler for users;
improved communication capabilities, leveraging the SOA and open architecture of the product; and
enriched functionality in the areas of finance, distribution, and manufacturing.
In addition to this BI engine, which provides users with "drag and drop" analytical capabilities and an enhanced view of key performance indicators (KPIs), new features include
in-depth integration with Microsoft Office, which enables ERP users to create and edit Office documents within the context of the ERP software operation (attaching a Word document to a customer entry, for example), storing any Office document in the ERP secured database, as part of the enterprise data
enhanced integration with Microsoft Outlook, which allows two-way synchronization of contacts, calendars, and tasks
improved traceability and security, and an extended workflow including a multilevel signature circuit, externalized management of recipients and absences, strong workbench management, signature automation by clicking inside an e-mail message, and batch workflow events creation;
new core engine and administration tools speeds up installation and parameterization, which simplifies extensible markup language (XML) import/export, and supports radio frequency (RF) terminals as standard ERP client.
The product also includes a Java-based fourth-generation language (4GL) development environment for custom vertical applications by VARs. Namely, Sage ERP X3 offers the possibility of integrating custom developments without altering the standard functions' ability to evolve. Realized through the aid of a development tool set, these developments can be integrated into the standard product and activated or deactivated at will. They are reusable and permanent, even when the software package version changes. The development tool set for customer or third-party developers preserves custom developments from standard system upgrades or updates, and is part of the core Sage ERP X3 offering.
The product's multi-tier architecture benchmarks up to 1,500 users and the system runs equally well on Microsoft Windows, Unix (IBM AIX), or Linux (Red Hat) operating systems with either Oracle 10g or Microsoft SQL Server 2005 databases.
Before providing its answers, Sage wanted to set the stage by pointing out Sage ERP X3's customer value proposition: simplicity for users, and extended functionality. Given this, the vendor believes a mid-market software vendor must cope with the IT complexities of its customers, instead of the customer bearing this responsibility. SOA and more generally distributed software architectures and application integration (not to mention cloud computing) are complex. And Sage Adonix intends to tame this complexity via its products and services by offering simplicity and choice to its customers.
To this end, the vendor designed its SAFE X3 platform strategy to protect the investments of its partners and customers by remaining independent from fads and short term trends and by leveraging established standards to maximize interoperability with other applications and legacy applications at customers' sites. Sage wants to minimize the risks associated with software architecture choices and implementation for both its customers and partners.
The vendor also believes ERP's evolution earlier in this decade created extended-ERP solutions, encompassing supplier relationship management (SRM) and CRM for instance. ERP solutions are now evolving to user-centric solutions to accommodate more users in the enterprise. Through this, user-centric ERP solutions will embed SOA (and possibly even Web-oriented architecture [WOA]), and seamlessly integrate with Web 2.0 collaborative tools. Some of these types of solutions already embed Web 2.0 functionality through really simple syndication (RSS) feeds and portals. Doing so better embraces all potential users in the enterprise, far beyond pure transaction-based processes extending to extensive collaborative ones.
User experience is predominant in customer's choice, time to deployment, and actual user ERP appropriation. Thus, Sage Adonix is making a large investment for Sage ERP X3 in order to make it quick to implement, simple to use, and cost-effective.
TEC's Questions and Sage's Answers
Q1. Are SOA stack approaches (wars) converging to virtually the same thing or might there still be some differentiation?
A1 Sage: From an enterprise application vendors' point of view, neither stacks (Java or Microsoft .NET Framework) can be ignored, as we know that we will encounter customers [that have] one or the other deployed, [or] even both in the largest accounts. We do not believe one will "win" over the other, but rather that customers will impose or demand more interoperability between Java and .NET.
That being said, the overarching claim [is that] SOA stands for … functional interoperability. Our strategy is driven by customer benefits and freedom of choice. In the short term, for instance, the question for us is whether to support both REST (Representational State Transfer) and SOAP (Simple Object Access Protocol) as Web services interface protocol. SOAP prevails today, but REST is more efficient. To protect customers' independency towards these SOA architectures, Sage ERP X3 implements SOAP in the available release of our Sage ERP X3 and will add REST to the coming release, code name Beryl. We intend to offer, via our consulting practice and our partners' expertise, support to our customers in their software architecture decisions to their best interest (for example, low total cost of ownership [TCO], freedom of choice, and widest interoperability).
To the user, the issue is totally different. Our view is that the "Webtop" metaphor will prevail overtime versus the "Microsoft Desktop" metaphor. Users are now hugely comfortable with [the] Web-based applications they use at home and are expecting to find that kind of simplicity at work within mission-critical enterprise applications. Users are now expecting user interfaces (UI) to be open to extended customizations, beyond just menu entries and colors, combining mashups, widgets, and RSS feeds themselves as you would typically do in the iGoogle, my Yahoo, or Netvibes personalized portals (start pages) for instance.
Information will come to the user (Webtop) versus choosing which application to use to manipulate information (Desktop). Let's keep in mind as well that the Web [is going] mobile (over 1.2 billion Web-enabled mobile devices today versus 980 million PCs worldwide) and grows fast (5 million new Internet users worldwide, per week). To that end, and in order for chief information officers (CIOs) to keep the freedom of choice, Sage ERP X3 implements a Web 2.0 portal supporting RSS feeds and widgets and at the same time reinforces [seamless integration with] Microsoft Office.
Sage ERP X3's major differentiating factor lies in the comprehensive R&D effort we're putting behind ease of use and low TCO. As an example, we've introduced a breakthrough innovation in the available release with Sage Visual Processes ™ (see picture below), presenting the user with explicit and graphical business processes. This helps reduce user-training efforts, dramatically improves the ease of use, and effectively supports change management. We all know [that] training and user reluctance to widely use applications [account] for nearly 50 percent of an ERP system's operating expenses.
Sage Visual Processes™
At the end of the day, users will demand Web-based applications coming from the cloud to be mixed with the enterprise application stack, thus focusing on the seamless integration between their PC environment and the Web as an application platform (one of the Web 2.0 foundation principles according to Tim O'Reilly ). In terms of platform choice, this will be the prevailing criterion.
Our target market is clearly the mid-market where the main requirements are ease of use, low TCO, and quick implementations. We are therefore working to expand user's appropriation and … recently developed a process graphics library that allows for a faster implementation and also makes access to the application much more "user-friendly." The early customer feedback is very encouraging, as it is perceived as a real differentiation. On the other hand, we are aware that Web technology will take precedence. Our goal is to work with standards, as companies in the mid-market should be able to choose technology market and evolve with them.
Still today, the question is, what is at stake in SOA for companies in the mid-market? Let's not forget that IT resources are limited in mid-market companies. Our primary objective remains to make our solutions, including Sage ERP X3, easy to use and quick to implement. We also see today that many customers do not use 100 percent of the solution's available functionality. SOA could be of interest to mid-market companies if it can improve the use and easy access to a dedicated application to complete a task or a job beyond the initial application portfolio offered with the ERP system.
Q2. Any comment regarding pro-et-contras for both the platform choice and rationalization (lock-in, and constantly waiting for the moving parts to be in synch)?
A2 Sage: This is typical of software vendors' point of view. Enterprises are looking for low TCO and try avoiding lock-in. Selecting a fully integrated stack helps reduce TCO, but increases lock-in. CIOs do need to find the right balance here, and that largely depends on the available IT investments they can engage (IT staff and budget). We've always privileged our independency regarding this by developing a metadata engine and staying away from stored queries [and] procedures, for instance, when it gets down to a database independent solution. Thus Sage ERP X3 can easily switch from Oracle to Microsoft SQL Server databases, for instance. We'll remain platform-independent to the benefit of our customers and will support integration with popular stacks, whether database or BI, as our track record of supported platforms shows.
We are continuously investing to make our platform the most open and flexible as possible to protect our customers' freedom of choice. By becoming one of the critical parts of their information system, we must not confine them, but allow them to be open to other applications while providing processes, traceability, history, and especially flexibility. In mid-market companies, there is no time to re-architect the IT system, which requires a long process, time, and money, and yet may not meet the established deadline. At the same time, we must also learn to ignore some of the existing outdated technologies and not wanting to integrate all existing components: it would run counter to the need for simplification. The ultimate goal of an SOA investment must be profitability, because of the potential application modules' reuse and its flexibility claim. It is, therefore, the trading partners and users who need it eventually, regardless of the technologies used: Web services or Microsoft Message Queuing (MSMQ), IBM WebSphere, XML, and so on.
Q3. What are your views regarding the "wrap-around versus rewrite" dilemma? Will any products in your family be completely rewritten in managed code?
A3 Sage: We've seen a number of software vendors drown in this big-bang approach (rewrite the entire application to an SOA-based one). This is definitely not a safe journey for independent software vendors (ISVs) or user enterprises, and the ROI is not attractive. The customer benefit must be very important to embark in this kind of transition. Moving to SOA is a long journey and a multiyear project. In our view, it should be approached with phasing and prioritization regarding what application portfolio should be transitioned and when, in a more Darwinian approach, i.e., rewriting or integrating SOA applications portfolio progressively.
Where to start depends highly on the application of critical importance and the attached customer benefit (addressing users beyond the enterprise boundaries, combining applications in a single user job centric portal view, etc.). The ability of a software vendor to support and partner with the customer is a critical vendor choice element for CIOs. The IT industry needs to standardize on one standard (Business Process Execution Language [BPEL], for instance) to reassure enterprises that [the] time has come to go for a full SOA-based application infrastructure. We're not there yet, albeit WOA, cloud computing, and mashups infrastructure might reshuffle the IT landscape once more.
Sage ERP X3 follows this strategy: we've implemented an SOA architecture (SOAP and REST protocols available in Beryl) and we will progressively expose our Web services to interoperability, depending on customers' priorities and projects. We're pragmatic and are focusing on customer value. At the same time, we are investing to make our ERP system increasingly flexible to use. We try to remain clairvoyant—i.e., mainly large companies, at first, will need an SOA approach. We're in infancy in terms of approach and a major portion of IT budgets remains assigned to maintenance of the existing ones.
Q4. Vendors are deemphasizing major upgrades, turning rather to vertically oriented and optional value/service packs. Any development on your side about that matter? What will be the "quantum leap" versions of your products?
A4 Sage: Integration costs are central to this. As our focus is to lower TCO, we offer fully integrated ERP releases to best serve our customers' interests. We're preparing for vertical editions of our ERP software that will offer integrated add-ons (industry specific processes for instance) that would be soft leap upgrades on top of Sage ERP X3. These vertical applications will be made available to partners and customers to help them build specialized applications, specific to their business or industry. The "pick and choose" approach is still dependant on an industry standard as discussed in the question 3 and is not yet mature enough to be deployed in midsized enterprises.
That is why we are working to open our SAFE X3 platform to accommodate more and more complementary solutions, adhering to our standards. On the other hand, it is reasonable to think that we have to offer services to plug and play packages or updates as standard. From our point of view, this will be done gradually to match our customers' and mid-market companies' capacity and needs. SOA will contribute without discussion, but we should not force our customers, so far, to embark in this journey if they have no clear benefits attached. What remains important to us is that our customers continue to see value in the use of the solution for their business. We therefore remain pragmatic.
Q5. Regarding Microsoft's Desktop Supremacy—do you see Microsoft going solo or staying in a Duet with SAP? Or is there room for many to sing at the show?
A5 Sage: Our abovementioned Web 2.0 portal user interface and Sage Visual Processes™ are paramount in Sage ERP X3. Thanks to these important R&D investments, we are able to provide role-tailored personalization today.
As discussed previously, we believe the Web metaphor will prevail over the desktop one and we are already largely engaged in this. Microsoft will have to unveil more of its Office architecture and ease Duet-style efforts without being directly involved. Thanks to our strategic alliance with Microsoft we were able to significantly improve Microsoft Office integration in Sage ERP X3, no Microsoft royalties attached. In this sense, our strategy is to make ERP a real "plug-and-play" solution for users [and] therefore almost transparent in its use, and role-oriented.
Q6. Incidentally, what about partners (ISVs and VARs)? Anything similar (more impressive) on your side, with regard to the above?
A6 Sage: Sage already enjoys a large partner network around the world, with over 25,000 Sage partners worldwide. We want to invite more ISVs and VARs to leverage the SAFE X3 stack in their applications. We are building a community where trust, transparency, peering, and being open and global are the founding principles. You'll see more announcements of alliances moving forward as ISVs will be recruited [through] our strong commitment to a community-based relationship versus a customer/supplier one [that] most of our competitors are managing.
As we have mentioned, having a platform of integration encourages many ISVs to invest in our solutions. Furthermore, let's not forget that we are truly a leader in the mid-market space, given the interest for our solutions and also thanks to our customers' demand. Last but not least, we have a partner network that is long invested in our solutions and in particular in Sage ERP X3 verticalization.
Q7. Going mid-market versus defending it—what, in your mind, will be the key success factors (KSFs) in this market, and what have you been additionally doing in this regard?
A7 Sage: Key success factors are simplicity (application ease of use and ease of integration), customer's business understanding and proximity, and solution cost effectiveness. As our DNA comes from our long experience [with] small enterprises, we believe we're better equipped than any large-account software vendors to go after this market (as Sage ERP X3's growth demonstrates). Our partner network coverage, even if not the largest in the world, combined with our focus on application ease of use and low TCO, will make a strong, if not definitive impact.
What remains essential is the ability to support our customers and to be close to them both in terms of business understanding and [geography]. [This] is precisely the main strength of our network today. At the same time, we must always be able to listen to their feedback. In this regard, the support that we provide is an essential factor in this market: each client has the right to equal attention. Mid-market companies might not get the same level of importance when dealing with vendors achieving most of their revenue in large accounts.
Q8. "SureStep," "QuickStep," "Accelerate"—Are they breakthrough implementation methodologies or just "baby steps"? Are we missing something earth-shattering in your offering there?
A8 Sage: We've introduced Sage ERP X3 Standard Edition in this regard, primarily in Europe, for now. It packages 15 predefined roles, over 100 predefined business processes via Sage Visual Processes™, over 300 ready-to-use reports, and a fully scripted Sage ERP X3 methodology, including a customer questionnaire to better scope and prepare their implementation. Thanks to this significant investment, customers are able to install a full-blown ERP system within 30 to 50 man-days compared with our competitors' several hundred man-days. As this newly introduced edition is showing … increasing success in Europe and our partners are widely embracing our methodology, we will consider expanding Sage ERP X3 Standard Edition worldwide in the near future.
We continue to increase the reports and processes library. This saves a lot of time in terms of implementation to our customers. Associated [with it] is … an [increasingly packaged] implementation methodology.
Q9. At the end of the day, who do you think is in a better position to ultimately win in the market? Maybe no one or simply, will everyone remain at the current, equidistant positions?
A9 Sage: We believe that customer loyalty and satisfaction ultimately leads to more market shares and more revenue [for] any vendor. Therefore, we're focusing on [satisfying] our customer install base … to better embrace new customers.
That being said, customer lock-in is bad; freedom of choice is good. So we believe application vendors should focus on business applications and middleware vendors on architecture. Mixing these two activities started this "architecture war" [among] software vendors [such] as SAP, Oracle, and Microsoft, [and] will inevitably lead to proprietary and non-interoperable solutions. Then most certainly customers will be potential losers in this game. We need to avoid it and, as a business application vendor, stay independent and weigh in the IT industry choices with our 5.5 million customers worldwide.
We believe that the mid-market business software industry will continue to concentrate dramatically in the coming years. The winners will be vendors that combine a large customer base and partner network[s], while providing customers with the largest technology choice (open architecture), robust and extended functionality, as well as a solid international presence to help them take advantage of global growth. With respect to these criteria, we see a great future for Sage ERP X3.
Further Readings on Sage and Adonix
For more on Sage and Adonix' genesis and thought process, see Adonix' Mid-market FORMULA Adopting Best of Both "Organic Growers" and "Aggressive Consolidators" Worlds and Global versus Local Channel Approach, Who Will Win?.