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Ambitious Plans and Promises: How Will the Market Respond to One Enterprise Software Provider’s Offerings?

Written By: Predrag Jakovljevic
Published On: July 7 2008

Infor has accomplished much recently in terms of laying the foundation for and developing a product portfolio that meets the needs of customers old and new, as well as those inherited from the vendor's recent acquisitions. Behind Infor's success lies its open SOA strategy, based on the Software Fortress Model (please see part two of this series, Ambitious Plans and Promises: An Enterprise Software Vendor's Course of Action ). For a general overview on Infor's recent developments, please see part one of this series, Ambitious Plans and Promises: An Enterprise Software Provider Keeps Its Word.

While skepticism is understandable from some—especially the over-promised and disillusioned Baan customers, as well as some market observers—most of the market should actually be pleased to hear what Infor is pledging. "Doubtful Thomases" might question whether the former SSA Global, MAPICS, etc. were really killing these products and if Infor is just making itself look good by paying lip service to the promise of improvements. Certainly, only time will tell whether Infor will make good on these promises, or if it will just repeat the sins of the solutions' predecessors.

To be sure, this decision does not come from the goodness of Infor's heart. Rather, it is based on sound economic (i.e., the great revenue potential from the several thousand existing Baan IV and V customers worldwide) and strategic reasons (i.e., Infor envisions Baan and LN as "platform" rather than "mature" enterprise resource planning (ERP) products, having viable future road maps, including SOA bus and enhancements), as well as to create goodwill (press relations).

At first, Infor may have been tempted to enable migrations to Infor ERP LN 6.1, but it is likely the vendor has realized that the migration paths for Baan IV and V customers, their systems significantly customized, would be prohibitive and daunting. Possibly then, it is more feasible and justifiable to keep all three product releases on their own SOA-enablement and functional enhancements paths. Sure, the research and development (R&D) cost for Infor will increase to a degree (given their monolithic structures, Baan IV, V, and LN will have to be divided into separate fortresses), but that is certainly a lesser price to pay than losing those customers outright to the competition.

Therefore, given three different product road maps, the details are currently sketchy about what customers can hope for in terms of functionality, as well as how useful these products will be in light of some customers having modified the product to a level where it is hardly recognizable.

In any case, if Infor will indeed be adding features, that can only be good. There have been broad indications of enhancements being made to financial management, supplier relationship management (SRM), human capital management (HCM), servicing, warehousing, and manufacturing functions. Moreover, this might even be more about Infor Open SOA and Infor's need to cross sell products to these customers, since Infor's revenue model is based on keeping the maintenance stream going and cross selling products. To that end, via the Open SOA approach, Infor will likely offer the Baan install base extended-ERP systems from other Infor point solutions, particularly in the areas of corporate performance management (CPM)/analytics, supply chain management, (SCM), business-to-consumer (B2C) and business-to-business (B2B) e-commerce capabilities, mobile applications, and so on.

Some skeptics may also point out that the initial additions planned for Baan IV and V are mostly what we would call regular upgrades and extensions. However, for those Baan users whose product instance is not that badly modified, the price of becoming compliant and up-to-date on their own (i.e., using their own regulatory and IT experts) might be much higher than the price of being reinstated into the service and maintenance contract (see What Is the Value Proposition of Support and Maintenance?).

Further, the details on IBM's current Baan and LN capabilities and its success in reselling these Infor products are also sketchy at this time, and we will have to wait and see if the two companies actually sell some of these solutions. IBM used to be a major Baan implementer in the 1990s, but like almost all other leading systems integrators (SIs), it has since all but disbanded the Baan practice. These experts have moved on to implementing other ERP products, and it is questionable how easily one can ramp up the competencies of Baan and LN once again.

Furthermore, IBM resells many mutually competing enterprise applications products; while the total number of deals for IBM is certainly significant, deals for each individual ERP vendor are very rare. Yet, vendors like Infor or Lawson Software like the fact that IBM resells their product, due to the added credibility IBM's name gives these products in the marketplace, but it is questionable how much revenues they can actually expect.

In any case, while skepticism is understandable in light of the past, the fact is that 22 percent of Infor's employees (about 2,400) work in the R&D department. Looking at this from another angle, Infor's R&D expense last year was about $400 million (USD), which represents 18 percent of its total revenues—an amount significantly higher than the software industry's average of 14 percent. Such numbers are indications of a vendor that "means business" and that wants to be in for the long haul—and the vendor certainly has no illusions that this will be a "cakewalk" (easy).

User Recommendations

The market should certainly appreciate Infor for attempting to combine the best of both worlds—i.e. business-specific solutions that can be scaled, from a global, stable partner. When one adds to this the vendor's ability to provide both integrated and best-in-class offerings, Infor becomes a viable alternative to the SAPs and Oracles of the world. Further, the users of once written-off products like Baan should be intrigued by the fact that their investment will be developed and furthered under the new owners. While the new SOA-based components make sense for both Infor and existing Baan customers, when it comes to future built-in functional enhancements, users need to demand proof that this will really happen (for example, they should ask to see designs, project plans, etc.).

If some users find that Baan IV, XA ERP, etc. will still not serve their business needs, then Infor's enhancements will not do much to help them; they should look to change systems. Even if Infor suggests these enterprises can get a deal on another Infor product, the amount of money a user pays for discounted or credited new license fees is only a small part of the entire cost of changing an ERP system. Professional services specifically often cost a much bigger chunk of money, but the cost of disruption and internal resources represents the bulk of the dollars.

Users also need to remember that Infor is promising to provide maintenance as long as it is demanded, but it is not committing to the price of that maintenance for every product in its portfolio. Users cannot expect the vendor to provide maintenance and support for a product without making a fair profit. Therefore, users can expect that the cost of maintenance and support will increase as the number of customers using that service dwindles. To be fair, Infor has yet to increase maintenance rates across the board like SAP and Oracle have recently done. Infor customers using highly outdated ERP products that Infor cannot justify SOA-rejuvenating might want to consider forming an interest group and a fund that would contribute toward Infor's interest and incentive to include that product into Infor Open SOA road map too.

On a general note, if support for an older release of a product is merited, users should communicate this need to their vendor and be prepared to talk about what they are willing to commit to, for how much, and for how long. If they are off the maintenance contract, the question is whether new service options would be of value to them (for more info, see The Old ERP Dilemma: How Long Should You Pay Maintenance?What Are the Support and Maintenance Options?). If so, they should certainly communicate with their vendor.

On the other hand, we still see some vendors that steadfastly hold on to their past policies on support, which now look autistic (out of touch with the realities of the market). Indeed, times have changed, and so has the industry—should these vendors reconsider their policies? We understand they are running a business and need to make a profit. This is something most customers also want from their vendors, and vendors should not be afraid of having open conversations on the subject. They should candidly explain to customers that this is a business decision, that the vendor needs to make a profit, and that the cost of support may increase as the number of customers for that support decreases. It can be good business for both the vendor and for the customers: the vendor can still make a profit, and the customer can continue to use the product it is comfortable with, even though the product might be refurbished.

This concludes the three-part series Ambitious Plans and Promises: An Enterprise Software Provider Keeps Its Word.

 
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