What SoftBrands Brings into the Picture?
the National Manufacturing Week (NMW) event,
held February 23-26, 2004 in Chicago, Illinois (US), SAP AG
(NYSE: SAP), the leading provider of enterprise applications, announced the
availability of new industry-specific solutions for small and midsize manufacturing
companies, with the aim of extending its leadership as a provider of solutions
for an even broader range of companies, from small enterprises via mid-market
companies to the world's industry leaders.
One and Part
Two of this note details the announcements. Part
Three began a discussion of the market impact by looking at SAP's answer
for small and medium businesses (SMB) and focus on penetrating the US SMB market.
the ride to SAP's SMB success will not go that smoothly, given that managing
three different product lines may go outside of the vendor's forte so far. Also,
in many aspects within the market segment, such as brand recognition, install
base and channel size and so on, SAP is still coming far from behind, which
is quite opposite an mindset and the position for the otherwise undisputed market
leader. SAP has no choice but to painstakingly continue to make the market aware
of its continued presence and of a slowly increasing success in the SMB market
challenge of recruiting new partners and of getting them up to speed with new,
still relatively unknown, albeit simple product, also remains because of the
wait-and-see attitude of some resellers about SAP's true commitment to channel.
Also, how far the product will scale upward as a user's business grows also
remains unclear. With no intermediate solution to grow into, mySAP Business
Suite remains the only alternative, which might often be a too steep an undertaking.
The migration path between mySAP All-in-One and mySAP Business Suite may not
be much clearer in certain cases either, despite the products' architectural
compatibility, given so many changes will have been done by partners to accommodate
the micro-vertical requirements. It is not completely clear how transferable
and necessary these will be in the case of migration to a full-fledged mySAP
Business Suite instance. To be fair, in general, adding capabilities from mySAP
Business Suite (such as mySAP Enterprise Portal, mySAP
CRM, etc.) to a mySAP All-in-One is not much different than adding
those capabilities to any other configured mySAP Business Suite implementation.
In fact, many of the mySAP All-in-One partners already package additional capabilities
like CRM or a portal for later phases with a mySAP All-in-One customer, while
the capabilities delivered in mySAP All-in-One stay with the system as additional
or newer mySAP Business Suite components are implemented.
given a lesser technological similarity between SAP Business One and its two
bigger siblings, we believe the SAP Business One initiatives will still take
a couple years to materialize in earnest. The best near-term opportunity for
SAP is still to sell to existing large customers for deployment in smaller subsidiaries
and divisions, since these products provide viable options for staying with
a single vendor corporate-wide. There are some mid-market vendors with impressive
global reach,localized products, immaculate vertical focus and knowledgeable
channels that offering a very flexible modern product. They are well attuned
for local regulatory requirements of several dozen countries and support well
over thirty languages, such as Scala (see Scala
Shows Far More than a Bit of a Backbone) and Systems Union/SunSystems,
via its recent partnership with MAPICS (see Analyzing
MAPICS' Further Steps After Frontstep) have long devised predatory
strategies at the large company subsidiary market, and SAP will need to move
quickly to shore up its own installed base.
and SoftBrands still have much of outstanding work to do before the SAP Business
One channel partners and both vendors' field organizations can be effective
with this upcoming product. In addition to product training, many unequivocal
decisions about positioning, pricing, contracts, and support are not yet fully
resolved. While we tend to believe in SAP's genuine intentions about this alliance,
SAP nevertheless has a tainted partnership track, often utilizing competing
ISV's as a transient solution while its native capabilities have been developed,
i2 Technologies and Commerce One being some
examples (see Gosh,
They Kill Partnerships, Don't They?).
the other hand, while former Fourth Shift had long grasped its target market's
requirements of competitively priced functionally adequate products, ease of
use and modification, short implementations, and strong service and support,
during the late 1990s, however, it, somewhat painfully like many of its peers,
realized that its target market needed more than an inexpensive and easy-to-use
back-office system. To that end, the company has gradually introduced or incorporated,
in an "embedded approach" OEM fashion, a line of integrated e-business, CRM,
and advanced planning and scheduling (APS) components within its core
ERP solutions. The vendor has been known for adroit blending of third-party
products with its own and delivering the combination as a tightly integrated
unit, transparent to the user, which was likely a major factor in SAP's decision
to partner with.
the original Fourth Shift product version leverages APS, product configuration,
and extended financial functionality through strategic partnerships around the
world. Given SoftBrands intends to continue promoting its own version of Fourth
Shift, the ironic possibility of it competing with its SAP Business One "mutant"
is not that far-fetched. That is at least likely to happen in China, where SoftBrands
has a strong infrastructure, while SAP leverages partners like Han Consulting,
Hand Enterprise Solutions, Sparkice, and Youngsoft,
some of which have their own ERP product, just to further spice up the competition.
least in the upper-end of the mid-market, SAP may compete with another SoftBrands'
extended-ERP (enterprise resource planning) product named evolution (formerly
Aremis Enterprise), which is a highly configurable ERP and
business-to-business (B2B) solution, built on Windows NT and Unix server
and Oracle database platforms, and therefore more amenable to larger mid-size
manufacturers. Its deep functionality embraces applications for the Internet,
information publishing, connectivity, and multisite operations, with core applications
being production, planning, sales, inventory, purchasing, and financials as
a large number of loosely coupled, configurable components. The product is especially
strong in dimensional and converter manufacturing environments such as textiles,
apparel, food and metals, by featuring functionality for dimensional slitting,
cutting and rolling, lot tracking, product configuration, plant maintenance,
engineering change control (ECC), quality management, distribution
and multi-plant planning and project control.
for the time being, the commitment to the alliance remains firm, especially
given the SoftBrand's April 26 announcement of the formation of a new business
unit to pursue global market opportunities which resulted fromits recent announcement
of its intention to enter a partnership with SAP. Thus, the vendor established
the Fourth Shift Manufacturing strategic business unit for SAP Business One
and announced the appointment of long-time industry executive, Phil Moen, to
lead the unit as vice president and general manager. Moen will be responsible
for Fourth Shift's worldwide operations for the Fourth Shift Edition for SAP
Business One, including product launch, sales, services, and the alliance relationship
with SAP America and its global network of channel partners
for SAP Business One.
on SAP Business One side, some work-in-progress is still outstanding such as
a mobile client has long not been available in the US preventing traveling salespeople
from remotely accessing the software. SAP claims a mobile client is being developed
by partners to cover common remote tasks like contact management, warehouse
management, and CRM capabilities, with first remote devices available at the
end of 2003, while remote synchronization is planned for early 2004. In fact,
SAP Business One partner Sybase has already demonstrated this capability at
industry events, like CeBIT, in February 2004. The product does not include
a native payroll application either, and its human resource (HR) module is used
as a collection point for global employee data. The HR module thus offers a
number of interfaces to local popular third party payroll systems, such as Best's
Abra, ADP or Intuit's QuickPay.
Finally, while SAP Business One includes an embedded e-mail server, it had not
initially integrated with large e-mail products such as Microsoft Exchange/Outlook
and Lotus Notes. SAP is well aware of the need for these enhancements,
and integrated e-mail has just become available as of April 2004.
Despite the challenges, with its ever-sharpening focus SAP has raised the bar in providing solutions for smaller enterprises, and tier 2 and tier 3 vendors should be in for a tough battle to defend their turf, especially as they are concurrently trying to expand and modernize their products with ever diminishing resources and disconcerted prospects. SAP has stated that it intends to grow its small and midsize business from the current (approximately) 7 percent of license revenue to 15 percent by 2005, and that means finding and closing thousands of new customers. SAP has acknowledged its competitive situation in the market segment, and it usually does not overstate its expectations. Despite Microsoft and Sage's likely dismissal of the imminent threat, they will watch carefully and will have to make appropriate moves (and concessions to their partners and users) even while putting their brave faces.
is Part Five of a five-part note.
One and Two presented the event summary.
Three and Four discussed the market impact.
This is a positive announcement for both prospective and existing users of SAP and Fourth Shift. Due to products' compatible architectures and the fact that joint development between Fourth Shift and Business One started in December, we expect the integration to materialize quickly, as there are plans for a mid-year release, which will give Fourth Shift Manufacturing a SAP Business One look and feel, while at the end of the year, the combined solution will also utilize SAP Business One CRM and order management functionality.
Given this imminent delivery timeframe and the minimal changes to the existing products, smaller organizations with less than few hundreds employees and less than $200 million (USD) in revenues, and especially divisions of corporations using SAP, which seek core back-office, and CRM functionality with strong discrete manufacturing features may benefit from evaluating the upcoming offerings. US subsidiaries and divisions of larger enterprises that have long formed partnership with SAP and have been yearning for a SAP-centric solution should consider the SAP Business One product. Independent small and medium enterprises with basic manufacturing, distribution, purchasing, opportunity management, banking and financial management requirements, and with fairly standardized sales order process, should evaluate SAP Business One bearing in mind the features of other established SME offerings mentioned earlier. Alternatively, small manufacturing companies and mid-market companies with more complex business processes should evaluate mySAP All-in-One and other equivalent products for the upper-end of the mid-market.
We strongly recommend identifying your clear e-business strategy and conducting thorough comparison-shopping, at least for the sake of information leverage. Consider all options, particularly vigorously weighing the offerings' current and intended functionality and integration. Most importantly identify what needs are "must have" requirements and a timeline for additional components. Once identified, comparison-shop and use the related information to negotiate the best price for the solution. One should note that SAP's experience in the US SMB market remains quite limited at this stage. Also, SMBs should be wary of being ahead of the adoption curve, because product quality issues and unplanned implementation glitches typically come with new products.
On the other hand, businesses that outgrow this low-end product might have to decide in the future whether to migrate to premium-priced, upper-end solutions or switch to another vendor. When evaluating a software application, companies often fall for a snazzy user interface or raw number-crunching power. However, a flexible system should also offer features like tools and templates, cross-reference checks, and many other parameterization utilities that provide significant system changes without changing source code. Make sure that what you select now will keep abreast of the technology changes in the future. It may sometimes be more beneficial to implement the right solution slowly than to rush the wrong one into place.
for SoftBrands' target market, manufacturing and distribution companies in the
$10 - $200 million-a-year (USD) revenue range, which also includes regional
subsidiaries of multinational corporations, should certainly consider the company's
latest value proposition, but being aware of other equivalent products. We generally
recommend including Fourth Shift in a long list of an enterprise application
selection to lower-end of the mid-market repetitive, batch process, MTO, discrete
and mixed-mode manufacturing enterprises, which have limited IT budget and conservative
IT strategy, but have significant manufacturing, CRM, supply chain and collaborative
B2B e-commerce requirements. Although addressing the market horizontally, the
product has a high proportion of its customers in the following industries where
traceability and engineering change management (ECM) are key requirements:
automotive, electronics, computers, machinery, fabricated products, consumer
products, batch process industries, and medical devices.
Meanwhile, the evolution product is more amenable for the upper-end of the above market, serving enterprises requiring a good deal of conversion, multiple dimensions (sizes), and three-dimensional (3D)/attribute-based BOMs, such as textiles, food, paper, mining and pharmaceuticals. It covers MTO, contract-based, and CTO manufacturing environments.
SoftBrands customers should review the above-mentioned enhancements with the
local representative with an eye towards extending the value of existing applications.
New customers evaluating SoftBrands should consider the new modules an essential
part of the company's product offering and insist on reviewing them as part
of their evaluation. As DemandStream is targeted at flexible lean manufacturers,
involving handling of mixed-mode operations, electronic kanbans, and just-in-time
(JIT) at the plant level, and can agnostically interface to most ERP systems;
non-SoftBrands' users may benefit from evaluating it on a stand-alone basis.
Existing users of earlier product releases that face stabilization should react positively to renewed company's activities, as they may benefit from querying the company's future product migration path, service and support, and scalability strategy, and as they may be able to negotiate favorable maintenance re-instatement contracts. As for the new added functionality through partnerships and prospective acquisitions in the future, users are advised to ask for firm assurances on the availability and future upgrades timeframes, and more detailed scope of combined product functionality.