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Agresso Bucks the Slump (and Fights the “ERP Madness”) - Part 1

Written By: Predrag Jakovljevic
Published On: January 20 2009

Sadly, it is not difficult for so many of us to concede that, except for maybe the historic elections in the US and the successful Olympic Games in Beijing, 2008 was a terrible and somber year. It felt long-drawn-out, and many of us will have trouble sinking it easily into oblivion.

Without even talking about our retirement funds and investments being slashed by about 40 percent (as part of a potentially more far-reaching financial crisis) or about 2.6 million jobs lost in the US only, just look at mushrooming late 2008 layoffs news at even the biggest and typically impervious enterprise applications vendors. For example, both Bruce Richardson of AMR Research and Frank Scavo of Enterprise Systems Spectator have reported in their respective December 2008 blog posts about Infor’s deliberate preparations for a downturn.

Along similar lines (although about some vendors there have been rumors rather than a public acknowledgement by the vendor) were the recent cost-cutting and restructuring moves by Sage, Consona, Lawson Software, Oracle, and Epicor Software. The market leader SAP has not yet been plagued by major layoffs per se, although there have been rumors/reports about the recently enacted stringent internal corporate-wide cost-cutting policies, such as restricted traveling, training, events, and so on.

I am indeed aware of the fact that there was no traditional SAP Influencer/Analyst Summit this past fall/winter, after several years of being a major winter event solely for industry analysts and media. Thus, trying to think positively, I am happy to report about coming across at least one vendor with upbeat news and upright posture in these dreary days.

In fact, how often have we heard about a mid-market enterprise resource planning (ERP) provider’s quarterly global results in late 2008 revealing a 37 percent increase in revenue and sales (with 30 percent growth in North America), with the company claiming many significant new orders worth over US$ 1 million?

These results would be even more impressive against the backdrop of its major rivals’ results; for instance, SAP reported a 9 percent year-over-year decline in new license revenues over the same period.

So, Who's Above the Fray?

The vendor in case is Unit 4 Agresso, an international provider of business software headquartered in Sliedrecht, the Netherlands. The company has over 3,500 employees in offices in 12 European countries and 9 countries outside Europe, with sales activities in several other countries.  Depending on the ever-fluctuating exchange rates, Unit 4 Agresso’s revenues for 2008 are expected to be between US$500 million and US$600 million.

Unit 4 Agresso’s major subsidiary is Agresso, a mid-market ERP company and one of the top five providers of solutions for professional services and public sector organizations. With over 10,000 deployments and 1.5 million users in 100 countries, Agresso is also lauded as the sixth largest mid-market ERP provider worldwide in a recent market share report by IDC. Besides, the vendor is the undisputed top provider for public sectors in the United Kingdom (UK), Norway, and Sweden.

Many previous TEC articles and blog posts have talked about Agresso’s go-to-market strategy that starts with targeting Businesses Living IN Change (BLINC) with the business advantage of post-implementation agility. Namely, service organizations with 500 to 5,000 employees in market segments like government, higher education, not-for-profits, utilities, architecture, engineering & construction (A/E/C), information technology (IT) services, real estate, business services, marketing/communications, etc. continually experience a number of change drivers.

These drivers range from frequent reorganizations/restructuring, change of business models, mergers & acquisitions (M&A’s), government reforms and/or regulations, organic growth, change of customer base, competitive pressures, and so on. Such BLINC firms appreciate the underlying ERP system’s vast amount of ongoing, post-implementation changes without the typical external IT costs and intervention.

Yet, those ongoing (and possibly gratuitous) professional services still net billions of dollars in revenue for the market leaders and tier-one ERP providers. As the market differentiating post-implementation agility enabler Agresso states its VITA Architecture with natively integrated data, process, and presentation (reporting and analytics) delivery.  This architectural framework underlies the flagship Agresso Business World (ABW) 5.5 suite [evaluate this product].

Going On-demand in Force

Agresso’s results are even more impressive since the revenues from recently acquired CODA have not had a serious impact yet in terms of total revenues (other than to perhaps slightly improve profitability).. The acquisition deal was only consummated in mid-summer 2008 so there is barely a quarter of CODA’s revenue on Unit 4 Agresso’s books.

For now, CODA remains fairly autonomous, with a “business as usual” mantra. To that end, the brand new and first on-demand enterprise accounting system build entirely on Salesforce.com’s Force.com platform, CODA2goseems to be progressing well. This strategic endeavor promises a win/win situation for both Salesforce.com and Agresso.

Namely, Salesforce.com needs major applications on the Force.com platform to validate and endorse its lofty platform as a service (PaaS) strategy. Having a renowned financials/accounting provider like CODA in its ecosystem helps Salesforce.com compete with traditional on-premise tier-one providers like SAP, Oracle, Microsoft Dynamics, or Lawson. In the on-demand/software as a service (SaaS) world, the alliance helps Salesforce.com to compete with NetSuite’s counterpart SuiteFlex platform.

For its part, Agresso/CODA could enjoy major benefits from being an early adopter (with no obvious fierce competitors likely to develop on the on-demand platform any time soon) and from a truly close relationship with Salesforce.com (spanning from development teams via marketing/sales to the chief executive officer [CEO] level). In fact, the joint development work has heavily influenced the direction of the product; for example, CODA has redesigned its multi-currency handling capability. CODA2go’s progress and CODA’s positioning within Agresso deserve a blog post on its own, so look for something like that down the track.

Functional Footprint Expansion

Coming back to Agresso, for a long time, the flagship ABW suite has natively supported the following functional capabilities: Financial Management; Procurement Management; Human Resources (HR) & Payroll; Business Process Automation (BPA); Reporting & Analytics; and Project Costing & Billing. More recently, Field Service Management was added as an in-house developed product.

Moreover, via selected acquisitions Agresso has lately added the modules for customer relationship management (CRM), human capital management (HCM), and governance, risk management & compliance (GRC). These products, many of which can be deployed on-demand, were not written in the VITA architecture and have to be integrated into native ABW modules via a service oriented architecture (SOA) manner. They are thus referred to as BLINC Plug-ins.

Most recently, the vendor announced Agresso Talent Management as a BLINC Plug-in Web-based software suite for appraisals, course administration and competence management. This new add-on product to ABW’s HR module (and non-Agresso applications as required) is the result of the mid-2007 acquisition of Nextlearn.  The formerly independent company was introduced to the market in 2001, and currently has over 40 global customers and 250.000 users.

The product targets HR directors, line of business (LoB) managers, and service managers within medium to large organizations (with over 1,000 full-time employees [FTEs] to even over 50,000 FTEs) of two kinds. One group are enterprises with a distributed (global) organization such as TeliaSonera, Saab, ITT, Vattenfall, and Odfjell Drilling. The others are retail organizations with a global partner network such as Volvo Cars, Volvo Trucks, Atlas Copco, and Coop Stuff.

Like its typical peer talent management solutions, Agresso’s software helps the aforementioned managers to

  • optimize workforce coverage for public/private services sector;

  • manage the skills, careers, and required training;

  • predict/plan for competence gaps;

  • meet professional and statutory requirements/qualifications; and

  • provide change-oriented platform for skills demands.


Are Price and Timing Right for the Change of Guard?

Given its sharp focus on service industries and well-attuned product and service offerings, Agresso legitimately has the “Big Few ERP” players on the run, and has been winning a disproportionate set of the new deals it competes on with these competitors in those markets. As for Agresso’s revenue growth, all of the sales reports and financial analyst coverage point to larger deal sizes, larger companies/organization sizes, and new deals (versus just re-, cross- and/or up-selling into existing install bases like its competitors have to resort to).

The desire for lower “Total Cost of Change (TCC)” is the top cited reason in customer debriefs why Agresso gets selected in new sales situations at this point. Sure, Agresso’s play in the public sector is a positive one with regards to the vendor’s results. Public sector (which hardly ever runs out of tax money and/or printed money by governments) was up big time in 2008, thereby making up for a decline in the private sector.

But regardless of market ups/downs, it is of course the differentiation of lower TCC within Total Cost of Ownership (TCO) that is crucial these days. Moreover, Ray Wang of Forrester Research rates Agresso’s licensing and pricing highly in his recent report, which is worth noting, given Ray’s close attention to customers' bill of rights and reputation when it comes to the issues of TCO.

Agresso believes that the ERP market has (at long last) seen its first significant change in buying habits for 15 years, as companies look for a quicker return on investment (ROI)  during the current economic crisis. Hence, the vendor thinks the time is right to turn up the heat and address the biggest problem it has long had: getting people to replace something that works (more or less) but does not necessarily excel.

This is analogous to people lately trading in their petrol/gas guzzling sport utility vehicles (SUV’s) such as Hummers to buy more economic and environment-friendly Honda Fit or Toyota Prius hybrid cars. Namely, the SUVs still run (and run quite well) and feel comfortable. But, the cost of gasoline (if not at the moment, it will come back over and over again) and “non-green” sentiments are killing them.

By the same token, Part 2 of this blog series will explore Agresso’s similar metaphor. Namely, it will analyze how Agresso intends to keep reminding people that it is too painful to stick with their rigid old ERP solutions that keep bleeding them and injuring them. Like many folks that are stuck in bad relationships and marriages that think they are in love and that the pain is worth it – but is it really?

Your comments and opinions about post-implementation agility and Agresso’ growth strategy are welcome in the meantime. To be more precise, how crucial is a system’s inherent agility and TCC in your evaluation efforts?
 
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