An ERP Vendor, with its Powerful Parent Backing, Tackles Software as a Service

Glovia International has created a software-as-a-service solution that is the first full-fledged, on-demand, enterprise resource planning application aimed specifically at small and medium businesses manufacturers.

A Veteran Enterprise Resource Planning Vendor Makes a SaaS-y Statement.

A Glimpse of 9 Glovia International, a subsidiary of Fujitsu Limited (TSE:6702 [Tokyo Stock Exchange listing]), recently released 9, an on-premise suite that attempts to solve some traditional usability drawbacks rather than deliver any new functional modules. Thus, Glovia is the first full-fledged and versatile manufacturing-oriented, on demand enterprise resource planning (ERP) vendor to offer a software-as-a-service (SaaS) solution. The foundation of this solution includes the acquisition of the intellectual property rights to Northgate's PRO-IV highly scalable development platform's kernel. The extension of this kernel's capabilities is such that the two development environments, PRO-IV and 7, are no longer fully compatible.

For background information on SaaS, see SaaS-ing the Manufacturing Opportunity. For background information on Glovia, see A Veteran Enterprise Resource Planning Vendor Makes a SaaS-y Statement.

Hence, the new name for the application's development platform is Glovia VM (with VM standing for "virtual machine"), which is somewhat similar to the frameworks of Progress Software OpenEdge, IBM WebSphere, SAP NetWeaver, or Microsoft .NET. The vendor has used this opportunity to ensure that the product's source code never changes, while the migration or upgrade paths between virtually all product releases (and customers' customized instances) are preserved via metadata (which is in tune with the above depicted SaaS principles). This also creates more platform independence, since Glovia has long supported a wide range of platforms covering UNIX, Linux, and Microsoft Windows, but only supports the Oracle database, which is a possible downside (and becomes moot in the SaaS model).

The only third-party products that Glovia resells are those of Interstage, which is a Fujitsu infrastructure suite that provides a workflow management module, a high-volume application server, and other Internet technologies. Wisely, Glovia decided not to write the application itself. Fujitsu's Interstage Suite provides a collaborative business integration platform that enables user companies to share and exchange information relatively easily across disparate systems—whether internal or external. Fujitsu's Interstage Suite is one of the world's broadest families of application infrastructure software products for designing, developing, and managing scalable, customized, mission-critical applications. The application suite is used by more than 8,000 companies in over 83,000 installations worldwide. Other than that, Glovia resells Visual-ARMS from Edibar, Glovia's partner for automotive electronic document interchange (EDI) message processing. Cognos remains the only embedded business intelligence (BI) solution provider, since today Glovia has standardized on Cognos and has done all the data mapping to add value and speed up implementation for its customers.

However, on the downside, has not traditionally been strong in distribution and transportation modules (that is, the "ship and deliver" business process), in enterprise asset management (EAM), or in so-called "white-collar" corporate functionality, such as global financial consolidation or human resources (HR). Its "not invented here" and do-it-yourself (DIY) attitude has to that end been both a blessing and a curse. Recently though, Glovia has begun to be more open to partnering and has added much-needed functionality in its above financial management module to help increase its win rate within enterprises with complex organization (that is, beyond its stronghold of the four walls of a single plant that has to collaborate with its sister plants or trading partners). Specifically, functionality has been increased in the areas of budgeting and financial reporting and consolidation (through Glovia's alliance with Cognos).

Glovia Mindset Change

This has been quite a mindset change for Glovia, who had until lately been a market follower in respect to product technology. The vendor has belatedly tackled delivery of support for Windows NT, Internet enablement, and product componentization of its core ERP system. Moreover, it had been remiss in opening the product and delivering application programming interfaces (APIs). Glovia has nonetheless lately realized that in order to attract customers outside of its limited ERP customer base, the back-office platform agnosticism of its e-business products should be its highest priority. Owing to its recently found flexibility through Java and extensible markup language (XML) enablement, may now function well either as a corporate backbone system, or as a solution that executes operations and planning at the plant or unit level.

With regards to coexistence with other systems in the latter case, the vendor has lately begun to offer integration adapters to link with other enterprise or legacy systems. The best example of this is the 9 product's openness via 105 total XML transactions (which are in turn 105 potential web services) and simple object access protocol (SOAP) connectivity via Microsoft BizTalk Server. Consequently, Glovia hopes to become a manufacturing service platform that will connect and integrate various business systems that a user company might currently use. Customers should hereby be able to get answers to "What? When? How many? How much? How to?" for demand throughout the supply chain via such optimized service platform engines.

While deeper analysis of 9 deserves a separate research article (especially the new supply chain planning [SCP] engine or enhanced factory planner capabilities), the gist of the product's embellishments could be summarized in two aspects. The first is an aesthetically pleasing and easy to use graphical user interface (GUI) that is in tune with the Web 2.0 trends and that should bolster system use, acceptance, and the learning curve for all users. The new GUI metaphor significantly heightens the level of clarity, accelerates the speed of navigation, and controls the flow of information contextually.

The second functional aspect creates major advances in planning, scheduling, and near real time execution capabilities via improved granularity. Namely, lead times can now be expressed in days or hours, fixed lead times can be set in units as little as fifteen minutes, and variable lead times can be calculated and rounded to the quarter hour. All planning documents such as orders, quotes, and requisitions have time fields, thereby adding date and time granularity to planning dates. The item substitution (in lower-level bills of material [BOMs]), the ability to create more than one work order per part number per day, additional order status codes, and hours or minutes sequencing capabilities all vouch for users being able to provide much more accurate promises to their customers and execute plans based on those promises.

Still, both Fujitsu's and Glovia's big league aspirations are rather optimistic at this stage, as both continue to suffer from laid-back and stealth marketing (at least so far), and consequently low market visibility and brand recognition outside Japan and the Far East. The vendor has seemingly long been happy with shoring up the existing install base and expanding within its customers' new divisions. Thus, one cannot help feeling that Glovia's knowledge of its target market has always been deeper than its market visibility and share. Further, both companies' channels have been rather nascent. Glovia has not yet built a reliable and established indirect channel (Fujitsu is certainly its biggest reseller in emerging markets like China and Brazil), and, with around 1,000 customers, its client base remains significantly smaller compared to many ERP vendors.

While the Fujitsu-Glovia relationship has worked well in Japan (a difficult market for many other ERP vendors to penetrate for various cultural and business peculiarities due to established local sales, support organizations, and delivery of product enhancements that support Japanese manufacturing styles), it may prove to be quite a different case in other markets.

Glovia's Software as a Service: Details and Downsides

While Glovia will not become a globally dominant market player any time soon, the abundant finances, a new focus, and a revived spirit could grant a much better future to the vendor. To that end, the GSInnovate SaaS offering might serve a number of purposes. For one, Glovia hereby makes a "raise the bar" statement that should create some commotion in the market. It should at least make the bigger and more powerful competitors scramble to spin their own justifications as to why they do not offer such comprehensive, multi-tenant ERP products at this stage. On the other hand, the offering might be a sign of Glovia's more active pursuit of brand new customers from the lower end of the market, which is a departure from its mainly pursuing the expansion opportunities within its install base (including opportunistic new account pursuits) of midsize and upper midsize companies. Conversely, Glovia Services' primary target is new customers. However, smaller operating units of existing customers will still be considered, if appropriate.

Given that the product has an innate and historical vertical focus for high-tech and electronics (as well as automotive, owing to many similarities between the two), the expectation is that potential customers will use the hosted software "as is," especially since its on-premise "older sibling," the product, has been proven to be a flexible software that can support many manufacturing styles at the same time. One should also anticipate that once GSInnovate customers begin to outgrow the offering, they will switch to the counterpart on-premise solution, thereby safeguarding all previous investment in training and knowledge. The vendor has analyzed the full offering and has selected the functional set that it believes will best fit the target customer. This is not to say that the SaaS offering will stay as it is now; Glovia may decide to extend the functionality using other Glovia modules down the track.

GSInnovate was designed for small to medium business (SMB) manufacturers. It is a broad solution that supports the following essential manufacturing processes: inventory management; bill of material (BOM) and material requirements planning (MRP); order management; procurement; sourcing; and financial and accounting management. What should be appealing to small manufacturers is the solution's relatively low price tag—specifically a low cost of entry, packaged implementation pricing, month-to-month contracts, and low monthly fees. In addition, because the solution features multi-language and currency capabilities, manufacturers have the choice of operating from a single site, from multiple sites in one country, or from multiple sites in countries across the globe. The only disadvantage (and a relatively minor one at that) is that the solution is a comprehensive, functional suite, which means full deployment can take up to three months.

With regards to facilitating faster implementation, the GSInnovate solution offers a knowledge center that houses Glovia Services' extensive experience and processes to provide customers with complete services for implementation and support. The technology service infrastructure of GSInnovate is powered and serviced by two renowned brands in the global technology marketplace—Fujitsu and partner T-Systems, a sister company to T-Mobile and a division of parent company Deutsche Telekom. The solution is being offered at a monthly, per user subscription fee that includes access to the "all you can eat" available functionality. As an illustration, the list price for ten users is $6,500 (USD) a month, while for twenty users the cost is $9,000 (USD) a month. The GSInnovate solution includes a number of best practice templates that aim at a speedy setup and for a onetime setup fee of typically less than $75,000 (USD), although there may be extra charges for larger customers. The target market is manufacturers with up to $50 million [USD] in revenues.

What distinguishes GSInnovate is the solution's "direct sell-direct support" philosophy, which may have short-range benefits, as the business model and value proposition of Glovia's partners have yet to take their place in the market. Also, customers may see the value of a direct sales team that understands the manufacturing market as well as the types of problems specific to small businesses.

However, history has shown that value added resellers (VARs) are critical to penetrating the local markets with their regional touch and knowledge. See The Cha(lle)nging World of Value-added Resellers. Thus, Microsoft has opted for a hybrid subscription hosted model named Service Provider License Agreement (SPLA) program, which is a "monthly rental of ERP" in which Microsoft and its partners are increasing deployment options for customers. Namely, partner VARs and independent software vendors (ISVs) can provide Microsoft Dynamics ERP products (which will remain in a single-tenant architecture for the foreseeable future) as a service and as a monthly fee, with the on-premise switch option if necessary. Time will only tell whether this customer choice will be more important to customers than the above mentioned potential benefits of true multi-tenant SaaS deployments.

User Recommendations

Discrete, "to order" manufacturing companies in the high-tech, electronics, capital equipment, and automotive sectors with annual revenues up to $50 million (USD), and smaller subsidiaries of larger companies, should evaluate GSInnovate as a cost-effective option for up to a few dozen users. Similar manufacturers with fifty or more users should consider, instead, the traditional on-premise ERP system, which should have a lower total cost of ownership (TCO) for these larger organizations that require much deeper and broader functional scope. However, such companies still pondering to use SaaS for the short term because of IT resources or financial constraints might find GSInnovate a practical transitional choice before migrating the on-premise system (since Glovia grants a full credit for what they have spent on the hosting arrangement). is well suited for upper mid-market companies with multiple locations and multiple business units in diverse markets. It is also suitable for organizations with versatile, discrete manufacturing styles (mixed-mode) within the automotive, capital equipment, electronics, telecommunications, and similar industries. Companies needing software to address mixed-mode manufacturing (from engineer-to-order [ETO] and complex projects through to high-volume and repetitive), projects and contracts, and service management may want to include Glovia on an initial list of vendors for a particular ERP software selection. The manufacturers that need to respond to quick changes in product mix, product configurations, delivery dates, or order quantity should leverage Glovia to challenge other vendor participants in the selection. However, due to a relatively fledgling channel worldwide, potential clients should conduct thorough research on available resources and reference sites of a regional Glovia office or an affiliate service provider. Glovia customers with custom systems or products from other vendors should review the affiliate's development capabilities in order to gain data integration between their various systems.

In general, potential customers and competitors alike should consider Glovia's SaaS offering. The concept of paying for software based on usage, quicker deployment, and lower startup costs have serious advantages that cannot be disregarded. Yet customers, concerned with functional scope and vertical focus, still insist on having the reserve option of bringing the entire system in house whenever they choose and for whatever reason. Once the current concerns over Internet security, privacy, and multi-vendor product interfaces are addressed, one should see an increase in the adoption of SaaS by vendors. Customers should study and ascertain which parts of their businesses would benefit most from a SaaS solution, and then test out a suitable application in an isolated section of operation to confirm the application's benefits and to flag problems.

For more general recommendations, see A Veteran Enterprise Resource Planning Vendor Makes a SaaS-y Statement.

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