In the first part of this series (please see Quote-to-order: New Ingredients in the Recipe for Success), the emerging quote-to-order (Q2O) sphere was discussed in terms of its history and current developments, as well as how software providers are rising to the challenge of meeting their customers' Q2O needs. The second part, Quote-to-order: Newcomer Causes a Stir in the Market began an in-depth analysis of how the vendor BigMachines has been claiming a space for itself, serving clients in the high tech industry with its Q2O solutions.
BigMachines' Differentiation
BigMachines' differentiation from its competitors, especially from the "old-guard" (with client/server on-premise technologies), comes from many directions. The lean front-end (LFE) moniker is meant to indicate that BigMachines is "leaner" than its old-school competitors, particularly those with much broader enterprise suites, because
Its solution is solely focused on managing the full end-to-end inquiry-to-order process (quoting, configuration, and proposals) executed by customers' sales teams and channels, whereas most competitors stop short of truly empowering sales with one generalist solution that tries, suboptimally, to manage all aspects of the sales order process.
The on-demand technology and implementation methodology takes less time and resources than implementing older technology based on client/server or on-premise technology—in other words, "faster is leaner." Additionally, on-demand administration tools can allow customers the flexibility to maintain and change their solution over time as their businesses change, which is another fundamental shift from older technologies.
Native reporting and analytics come on top of customization via on-demand administration tools and self-administration by customers. The user interface (UI) can be tailored to match distinctive customer quoting processes, which leads to custom implementation (system configuration) rather than custom programming for each customer.
BigMachines' team has process expertise and experience deploying the solution across a variety of industries for the most complex applications, while its management team has experience working for the world's best and leanest companies: McKinsey & Co., Case, Hewlett-Packard (HP), General Electric (GE, with a Six Sigma Black Belt entitlement), Dell (also a Black Belt holder), Accenture, etc.
BigMachines has also made substantial investment in services and support over the past several years. The vendor's press release of July 2008 notes that
[t]he company has expanded its Customer Support program to include a new online Support Center, an interactive customer idea forum called "My BigIdea", and online customer collaboration tools. BigMachines' online Support Center provides the company's global customers with a single point of entry to a repository of support information and tools, as well as an interactive community to share best practices and drive innovation in product design and development. In addition, Web 2.0 community applications have been added, including My BigIdea, an interactive forum where customers can submit their own ideas for product enhancements. Using My BigIdea, other customers can view the suggestions, add their own comments, and vote on the ideas they would like to see implemented. My BigIdea provides a wealth of information to the company's Product Management team as they plan and prioritize product roadmaps.
This is the same type of collaboration platform implemented by both Starbucks ("My Starbucks Idea") and Dell ("Ideastorm").
Other new support features include the following:
an integrated global customer relationship management (CRM) platform to manage customer accounts and contacts
an online support center Web portal to provide a single point of access for customers
a helpdesk with new voice over Internet protocol (VoIP) system integrated with a CRM system to ensure that BigMachines' support agents have relevant customer information at their fingertips
a customer knowledge base to provide access to a comprehensive solutions database online, 24/7, 365 days a year
online customer collaboration tools to share ideas within the customer community and directly with BigMachines staff
dashboards and metrics-reporting tools to track and monitor helpdesk case load, including causes, volume and frequency of issues, and patterns and trends over time, to ensure continuous improvement
Additionally, the July 2008 press release states that "BigMachines has also created a new Customer Success Management team. Customer Success Managers are responsible for proactive communication to customers, sharing best practices, and ensuring that BigMachines['] customers achieve full adoption and value."
Given that the above traits are not necessarily applicable to distinguishing among software-as-a-service (SaaS) Q2O peers (such as Firepond, Webcom Inc., Click Commerce, Sterling Commerce, etc.), BigMachines touts its leadership with more than 100 successful customers. Two enterprise-strength data centers with guaranteed uptime and the product's scalability and internationalization are also advantageous here. As mentioned earlier, BigMachines has also established partnerships with leading global services firms for global implementation services and customer support capability.
Since Statement on Auditing Standards 70 (SAS 70) audits are a big deal for all on-demand applications providers that want to sell into large enterprise clients, BigMachines' hosting partners are SAS 70 Type II–certified, and the vendor is undergoing its own stringent SAS 70 audit, to be completed mid-2008. Compliance with the Sarbanes-Oxley Act (SOX; see Thou Shalt Comply (and More), or Else: Looking at Sarbanes-Oxley) is also important in the sales quoting space, particularly concerning documented approvals for pricing or discounting by representatives and channels, and for customer's contract pricing. BigMachines has also helped many of its customers with these issues.
Complex Industrial Machinery Experts
BigMachines has "ruled" the market segments of complex industrial and process machinery that handles liquid, gaseous, and solid materials, such as pumps, valves, actuators, compressors, mixers, agitators, etc. The vendor's staff is thus well-versed in specifications that include the valve's operating conditions (such as fluid properties, size, desired materials of construction, and connection type), as well as the actuator type and other related accessories.
In the case of mixers and agitators, staff are quite "au fait" (fully competent) with the detailed specifications of things like viscosity, blending times, and volume of the material. It is critical that such information be encapsulated in the software system because it determines specifications such as the motor speed, impeller design, and shaft length of the product. From these specifications, the user can then select such options as end connection, body material, actuator type, seal type, and material, while the online configurator can also dynamically generate figure numbers, bills of materials (BOMs), and drawings to help an engineer complete a plant design.
To be even more attuned to this target market, BigMachines has opted to participate in the initiative of the nonprofit consortium FIATECH AEX. This initiative will eventually include the development of standard Extensible Markup Language (XML) schemas for motors, air coolers, reciprocating compressors, pressure vessels, centrifugal fans, centrifugal compressors, control valves, storage tanks, relief valves, and transmitters.
A 2004 report about the FIATECH AEX initiative notes that "the schemas cover both project and technical information and ‘are designed to be used to support multiparty collaboration work processes for the entire life cycle, including design, procurement, delivery, installation, operations, and maintenance of facility equipment.'" Twenty-five leading companies sponsored this initiative, including Bechtel, DuPont Engineering, and the National Institute of Standards and Technology (NIST).
But, to also expand from these niche industries, BigMachines has lately found and penetrated new markets for expansion and growth, including high tech, software, networking hardware, medical instruments, and services markets. In a dramatic shift, these new high tech and other markets now represent over 70 percent of BigMachines' customers acquired over the last several years. The SaaS CRM market is more heavily dominated by these newer industries, and the faster growth expected of SaaS versus traditional client/server technology will likely continue this trend.
Multi-tenant "SaaS-y" Debates
To get into subtle multi-tenant SaaS nuances, BigMachines has a hybrid SaaS model with a multi-tenant database and dedicated Web front-ends for each customer. The application is delivered as SaaS, and unlike several of its competitors, BigMachines doesn't have a parallel client/server on-premise business, and no off-line technology is required to set up and maintain its software.
Like the rest of its product suite, BigMachines' administration engine (for system setup and maintenance) is fully on-demand and delivered only via the Web. This engine enables flexibility for users to add channel partners (value-added resellers [VARs], distributors, third-party agents, etc.) with or without licenses to other integrated applications. Also, fully on-demand administration tools enable globally disparate administration teams. Some of the competitors, such as Firepond, claim to be "multi-tenant/on-demand," but in reality, they only have a multi-tenant user front end, whereas off-line client technologies required for all product data and rule maintenance with periodic publishing of the off-line client tool to a multi-tenant Web front end.
BigMachines' hybrid (in other words, not completely multi-tenant) architecture has the flexibility to allow customers to upgrade according to their needs and desired schedule, and not necessarily when the vendor decides to upgrade them or another of the customers wants to upgrade. The architecture also has the flexibility to tailor the UI to the unique needs of the sales processes of different customers and industries.
For example, e-commerce and channel scenarios, in which a distributor is guided through the sale process of a gas turbine, are fundamentally different from the way that a software company representative is guided through the modules, number of users, commercial terms, and service fees of a software and services implementation. These different users may require very different layouts of their configuration pages. Despite the single-tenancy of the UI, the solutions allow its customer administrators to change or maintain the product anywhere in the world from a Web browser.
Challenges Spare No One
However, Webcom, a competitor that has the pervasive multi-tenant SaaS solution as well as a traditional on-premise one, cites the customer's choice as an aspect of flexibility as well. In fact, there are indications that many quote-to-order (Q2O) buyers within the complex engineer-to-order (ETO) environment may still prefer the on-premise, behind-the-firewall deployment. That gives lots of maneuvering space to the likes of Cincom Systems and Experlogix. Cincom recently introduced a specific strategy for the SAP ecosystem for customers with product complexity beyond what the SAP Internet Pricing and Configuration (IPC) product can handle, while recently the Cincom Acquire product was certified for Microsoft Dynamics and Microsoft .NET technologies.
Along similar lines, Experlogix is Dynamics-certified and also involved within Infor's ecosystem. Access Commerce too is integrated to QAD and Infor enterprise resource planning (ERP) products, and there is always the traditional single-tenant hosting option provided by these vendors.
The point is taken that BigMachines' customers very much value the flexibility to schedule (and test) their upgrades and interfaces. These companies are running mission-critical systems that process orders; not all enterprise systems are as critical, nor do they need this flexibility. Still, a single-tenant UI for each customer means more costs and less profitability for the vendor (a downside in addition to the distraction of having to track each customer's exact product release). Namely, one of the true benefits of a multi-tenant architecture is lower cost structures for the vendor to maintain (savings that are hopefully passed on to customers). In other words, every single customer gets the same attention when it comes to requirements: the vendor that does not maintain multiple product instances does not have to take resources away from enhancing the product.
After all, despite its impressive growth (Technology Evaluation Centers' [TEC's] estimate of the company's revenues are at about $10 million [USD]) and achievement of its profitability targets, BigMachines is still a small startup into which over $40 million (USD) of venture capital money has been invested, and one may never know how much longer the investors will patiently wait for the true "payday." Also, BigMachines' subscription pricing per user per month is somewhat higher than its SaaS peers.
While the vendor claims that it is good value for its leading product on the market (which also involves embedded reporting and analytics), others might look at it as the company's somewhat desperate need to grow faster and generate more cash flow for its investors. However, BigMachines believes premium products should carry premium prices, and the company must justify its value and high levels of re-investment into future products and services.
One challenge BigMachines must contend with is the competition presented by ERP players in the Q2O market. For one, prospective customers inevitably delay their decision to implement an Q2O system, as they try to validate an incumbent ERP provider's claim that its product can do the Q2O job as well as a system specially designed to handle Q2O processes and issues. Even when the company selects a Q2O specialist like BigMachines, one has to wonder whether it is a strategic decision or a tactical stop-gap measure (while the ERP provider catches up with the functionality).
Also, there are indications that Oracle and IFS are working on (or have completed) a single engine, which, as stated in a report from AMR Research about Oracle Configurator, "can be used for modeling both sales and back-end (engineering) product configuration, eliminating the need to synchronize sales and product configurators."
Thus, some Q2O players have espoused more value proposition by building much broader business-to-business (B2B) supply chain management (SCM) suites for multichannel commerce. The first one is Click Commerce, which was made private by Illinois Tool Works (ITW) two years ago, but remains an independent operating company (see Will a Tool Manufacturer and a Supply Chain Software Vendor 'Click' in Matrimony?). According to AMR research, while sales configuration remains a component of the suite, the company targets companies looking for the broader B2B e-commerce capabilities the suite offers, such as catalog management, guided selling, pricing, partner relationship management (PRM), warehouse management, spare parts optimization, and trade funds management.
Along similar lines, Sterling Commerce (which recently acquired Comergent) has meanwhile combined its configurator and PRM capabilities with other software assets to address broader customer order management. In 2007, Sterling announced an offering called Sterling Selling and Fulfillment Suite, which addresses multichannel distributed order management (DOM) through fulfillment. It is needless to say that these two high-profile companies have no viability issues like their startup SaaS peers do.
Therefore, BigMachines has to continue with its increased investment in development and innovation in terms of fast implementation and maintenance; performance, speed, and security improvements; more Web services to drive easy integration, leveraging the latest Web 2.0 technologies; customer-driven functionality enhancements; and complimentary new modules and partners. There is opportunity and challenge in expanding into new geographic markets (such as Europe and Asia) and new industries (including retail and financial services).
Although BigMachines has been able to broaden out of its traditional "sweet spot" (its solutions having shown success with manufacturers of pumps, valves, and industrial products) to now include high-tech manufacturing (such as office productivity software and hardware, medical devices, and telecommunications equipment), penetrating other niches is not an easy feat. Not many vendors can cover the entire gamut of customer needs, starting with the simplest ship-to-order (STO) products that have, as noted in a Gartner report of November 2007,
little variability within a predetermined set of attributes such as size or color….The role of a configurator is to match customer needs with the product attributes that best serve those needs. In many cases, this problem is solved by using a simple parametric search engine and a relational database.
Then, assemble-to-order (ATO) products are configured in a guided-selling manner from standard components (modules) based on customer needs and inter-component compatibility (due to possible constraints). ATO configurators use attributes whose values can be based on data sets or on formulas (such as dimension calculation or power consumption calculation) and can create BOMs for order creation. Finally, the most complex engineer-to-order (ETO) products are made of both standard and custom-made components. In this case, the Q2O system has to be able to model engineering processes, BOM, computer-aided design (CAD) drawings, three-dimensional (3D) spatial constraints, etc.
From the industry niche in which the Q2O vendor originated come its configurator capabilities and industry savvy, and the one-size-fits-all approach does not really work here. For instance, Webcom "rules" (dominates) the industrial automation market with customers such as Rockwell Automation, Eaton (its electrical division), ABB (its controls division), Danfoss, Yaskawa Regal Beloit, etc.
As noted above, BigMachines' stronghold is complex industrial machinery (but it has recently diversified dramatically into the high tech market), as is Firepond's (aside from its insurance sector), while Cincom's is complex ETO equipment (vehicles, buses, turbines, etc.). All vendors seem to be defending their "turfs" (territories) well. To tackle a new segment, BigMachines will have to aggressively recruit partners (VARs and independent software vendors [ISVs]) with vertical industry experience, brand recognition, and add-on solutions. For more info on the Q2O competitive arena, see Quote-to-order: The Major Players in the Manufacturing Arena.
User Recommendations
Any enterprise that makes customized, configurable, or "to-order" items should benefit from deploying engineering and sales configurators (see CRM for Complex Manufacturers Revolves Around Configuration Software) and proposal-automating software packages.
BigMachines' Web-based software technology can be especially powerful when information must flow between multiple, geographically dispersed parties, as is often the case in specification, purchasing, and distribution of valves, pumps, and similar complex equipment. As the industry becomes increasingly global, with more new projects in Asia and other remote regions, a Web-based Q2O tool is virtually imperative, since industrial machinery users, distributors, and manufacturers can all benefit tremendously from using the Web to collaborate around the globe. With information flowing faster and more efficiently throughout the specification, bidding, ordering, and service processes, users will get the information and equipment they need much more rapidly. On the other hand, manufacturers and distributors will be able to sell their products more effectively while significantly extending their marketing reach.
Generally speaking, the industry and domain expertise of all contesting vendors, as well as their appropriate focus on product complexity, are critical. Prospective customers should ask each vendor to provide references attesting that the vendor remains involved in the success. While the on-premise versus on-demand deployment debate will go on in every prospective customer's case, a SaaS or subscription-based provider at least offers renewals as an additional incentive to customers. For more general recommendations, see Quote-to-order Solutions and Key Performance Indicators.
This concludes the three-part series Quote-to-order: New Ingredients in the Recipe for Success.