Navision Enhances Its e-Vision And Looks To Expand Vertically - Part 3: Challenges & User Recommendations

Part 3: Challenges & User Recommendations
P.J. Jakovljevic - December 3, 2001

Development Summary 

In November 2001, Navision (CSE: NAVI), a Danish provider of enterprise business solutions for mid-sized companies, extended its business-to-business (B2B) solution, Commerce Gateway, to the Navision Axapta product line, giving Navision Axapta customers the opportunity to save time, lower costs and orchestrate business processes more effectively. With Commerce Gateway, Navision Axapta customers should supposedly be able to work more proactively with customers, partners and vendors. They join the Navision Attain and Navision Financials customers who were introduced to Commerce Gateway earlier this year.

Recent Navision developments discussed in Part One of this note include:

• Navision Axapta Line Extended
  
  
• Navision Financials Expanded
  
  
• Navision/Damgaard Merger Financial Results
  
  
• Other Product Developments

This is Part Three of a three-part note on Navision. Part One detailed the announcements. Part Two discussed the Market Impact.

The Challenges of Expanding Sales Channels 

Moreover, to take advantage of the expanded and enhanced product line, Navision is focused on adding many more resellers in the North American market and establishing the Navision brand in the small- to-medium-size market for ERP solutions. While the company has enjoyed a long and substantial presence among small-to-medium-size organizations in Europe and Asia-Pacific, until recently, however, the company operated relatively quietly in North America. From the mid '90s when the company entered the market, it has focused on signing up a handful of key resellers and establishing a notable customer base.

Nonetheless, it will by no means be easy, as the battlefield for vendors providing enterprise applications to mid-market companies has long been crowded, and one should expect fierce competition to continue.

In the financials and accounting mid-market, Navision has long been competing with vendors such as Sage, Scala, Agresso, and ACCPAC (a division of Computer Associates), which all have wide international coverage. In North America, vendors such as Microsoft Great Plains Software and Epicor Software are entrenched competitors, which make it relatively difficult for non-US applications vendors to find suitable distributors in the largest IT market in the world. The fact that Navision currently has only around 180 resellers in North America speaks volumes in that regard.

Similar moves are to be expected from a plethora of established manufacturing mid-market North American vendors, which will vigorously defend against Navision's intrusion. The Tier 1 applications vendors will be a significant threat too, as they expand their focus to include mid-market companies, partly as a response to the great potential in the this market segment, which has been penetrated far less than the high-end of the market.

Navision will, therefore, have to more effectively leverage its large partner network of over 2,200 resellers called Navision Solution Centers (NSCs) to further promote brand awareness in the global market. Despite the complementary nature and different target markets of the main product lines, the pain in appropriate positioning of these remains. It is also likely that the channel partners will face a conflict in terms of market overlaps, as well as of traditional association with a certain product line regardless whether it is the best fit for a certain opportunity.

Encouraging Vertical Specialization 

Consequently, Navision has realized that encouraging the NSCs' vertical specialization is of key importance for global expansion and penetration of some well-defended markets. The practice of allowing the local representative (NSC) to develop locally endemic functionality, has been proving to be one of Navision's tenets of success. This practice proves particularly useful when product time-to-market is critical. As applications such as financials, HR and manufacturing must be adapted to meet local needs in terms of language, legal requirements and business practices, Navision should combine local autonomy with the need to leverage local best practices across national boundaries.

While NSCs develop new offerings for local vertical markets, there is still no firmly instituted structure for making such new functionality available worldwide. Navision should actively promote the best offerings of their local partners, particularly by certifying the products and providing a repository with centralized information about product availability.

To that end, Navision US operations has recently announced Navision Industry Solutions (NIS) Program in order to support NSCs that are focusing sharply on a narrow industry segment and that consequently better leverage their marketing and R&D expenses, as well as the experience. Further, there has been some level of rigorousness to the vertical solutions qualification procedure that Navision has imposed upon its resellers. An NSC is supposed to provide a sound business plan and marketing strategy, a total industry solution as opposed to an add-on (a specific functionality that is highly desired by a specific industry segment rather than from many different segments), customers willing to be pilot sites, and to have a certified developer on staff and full access to all development tools.

The word "partnership" does not seem to be used loosely in this case - Navision has been showing a congenial approach and true commitment to the success of its channel, although it is still figuring out what more incentives and support it can provide to entice NSCs to make the vertical investment. On top of typical benefits like global sales opportunity, lead generation, and access to Navision's training facilities, product news and web-based seminars (webinars), some NSCs have reportedly been attracted by the exit strategy prospect - they have a much more valuable asset to sell to Navision (the developed solution) rather than only their customer base. Further, the autonomy and freedom to develop a solution independently, as opposed to be constrained by typical rigid and slow R&D policies of other vendors, have reportedly made some companies convert to an NSC and defect from some well-known domestic competitors.

The main differentiator though should be the sharpness of vertical focus that Navision intends to deliver; Granularity of vertical focus will go down to the level of six figures US-SIC (Statistical Industry Classes) codes. This level of vertical focus possibly represents a thought leadership that other vendors may find hard to emulate. As an illustration, the following are already developed and 'in progress' vertical solutions:

• Available: Rental Advantage, Process 800 (Food & Chemical), Apparel Manufacturing, Jewelry Manufacturing, Wineries, Fund Accounting, Fastener Distribution, Retail Supplier Link (for distributors and manufacturers that sell to retail chains), Contractor Distribution (for distributors that sell to general contractors), and FDA BioPharma Solution.
  
  
• Being developed: Municipal Airports, Construction (AIA Billing & Certified PR), Furniture, and Kanban Solution.

Although it will take some doing to institute the global availability of these solutions and to prevent NSCs' duplication of effort and/or product line/market conflicts, the idea of each NSC in the US having its own vertical solution might not be that far fetched some time in the future; therefore, the incumbent vendors should better start thinking about their appropriate responses to the challenge.

User Recommendations 

As the current market trend is towards vendors that can provide well-rounded but vertically focused solutions for medium-sized companies, Navision seems to have positioned itself well by garnering the above arsenal of products. The merger outline was sound, the common groundwork has been identified, and the time for delivery and execution is on.

Potential and existing Navision customers should evaluate the offered product lines, bearing in mind what the competitors have to offer too. As with all new releases, users should employ a critical approach in their evaluation of Navision, and require the local reseller to demonstrate specific technological and functional capabilities.

As a general rule of thumb, consider Navision Attain/ Navision Financials if you are rapidly changing small or medium enterprise with less than $100 million in revenues. The product is open-source and customizable; it features a proprietary integrated development environment, which is very user-friendly and easy to learn. Navision also has great ODBC connectivity features.

On the other hand, Navision Axapta should be evaluated in less agile and changing medium and large enterprises (up to $250 million in revenues) where the traditional product feature-functions and scalability still play very important part of the selection. Although the MorphX Development Suite can be used to customize application components, such as tables, forms, reports, queries and menus, customers should ensure that the system modifications are preserved during the product upgrade. The product is best suitable for manufacturing companies with less than 250 concurrent users within less than 2,500 employees. While the above cited benchmark figures are impressive, users should inform themselves about the real-life system performances at equivalent reference sites rather than to rely on the data produced within laboratory-style experimental conditions.

Potential clients should conduct thorough research on vertical focus, available resources and reference sites of a regional NSC. Current users contemplating a sound CRM solution should be pleased with what is becoming available soon (Siebel Connector) bearing in mind that Navision offers some native CRM functionality too. Existing customers should review the above-mentioned B2B enhancements with the local NSC with an eye towards extending the value of existing applications.

Navision customers with products based on Navision's proprietary technology, custom systems or products from other vendors should review the affiliate's development capabilities in order to gain data integration between their various systems. New customers evaluating Navision should consider the necessary enhancement modules an essential part of the product and insist on reviewing them as part of their evaluation.

Existing Navision XAL and Navision C4/C5 customers should be asking Navision whether and when the above CRM and B2B abilities will be added to their investment. They should also inquire about any possible impact (or benefits) of migrating towards more advanced offering.

More comprehensive recommendations for both current and potential Navision users can be found in Navision Software a/s: Mid-market invasion.