Disclosure: my new role at SYSPRO

The bloggers I respect disclose their business-related interests. So I feel it appropriate that I disclose my new business role.

I am joining the ERP vendor SYSPRO. My position will be in Product and Industry Marketing and my responsibilities will include some standard duties like:

- product-based messaging and collateral,
- working with Product Managers to understand and articulate product value,
- assist and communicate with sales to position, articulate and sell product,
- working with Marketing to optimise marketing through all channels and drive demand generation and awareness programs,
- support the company’s analyst relations effort,
- work with User Groups around the world.

In addition I will be able to participate in social media and networking, so what used to be a hobby now is part of my job.

I will also be working with the team on the launch of a new release of SYSPRO in the coming months.

Revisiting the Gartner Tier 2 ERP Magic Quadrant

There are only two Tier 1 ERP vendors – Oracle and SAP – but there are several Tier 2 vendors (and Microsoft is a Tier 2 vendor in the ERP space, despite what some say). If your company is a large or international business, you don’t have much choice and the chances are high that you are a Tier 1 ERP customer. If, however, the business is a small- or medium-size organisation, or if you have de-centralised divisions, you have a much wider choice of ERP vendors.

In June 2009, the analyst group, Gartner, published its “Magic Quadrant for Midmarket and Tier 2-Oriented ERP for Product-Centric Companies”, which is their evaluation of some major Tier 2 ERP vendors based on two criteria – Ability to Execute, and Completeness of Vision. For some consulting research I was asked to do, I had the opportunity to review the Gartner report and some of the comments that were made about it:

Tough to retire in this economy
The One and Only Choice in SMB ERP: Microsoft Dynamics AX
Gartner Mid-Market ERP Magic Quadrant: Should Have Stayed in Retirement
Gartner’s conservative mid-tier ERP Magic Quadrant

Leaving aside the comments about “where are the SaaS vendors?”, it interested me how analysts, all based in northern hemisphere, 1st World countries, were surprised why some vendors were placed where they were. For example, Frank Scavo’s amazement that:

QAD and Syspro show a better "ability to execute" than any SAP or Oracle product

Epicor Vantage shows a better "completeness of vision" than any SAP or Oracle product

The point is that these vendors have dealt with mid-market customers since they started and understand how those organisations operate and think. As I have mentioned in a previous blog, the super-size IT vendors have such a bloat of bureaucracy that they discourage the smaller, more nimble companies. The only way the Tier 1 ERP vendors can approach small- and mid-size companies is via a reseller channel which can communicate with that market in the appropriate way.

Gartner’s report classed only one Tier 2 ERP product as a leader, Microsoft Dynamics AX (Axapta has it used to be called). This surprised a number of bloggers, including me. The problem is that AX does not have a large customer base, and is more complex to implement than some of the other Tier 2 products. There has been a spate of comments on the ITToolbox ERP selection site about AX, for example, here; finding good and experienced AX implementation partners and consultants is not that easy, compared to a number of the other Tier 2 vendors.

Some people think that, because Microsoft is the global leading brand when it comes to desktop and server software, its ERP software must have the same attributes. Except for the CRM product, its ERP products were acquired – GP (formerly Great Plains) because it was strong in the US and UK, and NAV (Navision) and AX because of their presence in Europe. But as Dennis Howlett noted:

The reality is that Microsoft’s acquired products … don’t travel well. When they do, they travel inconsistently.

Another problem with Microsoft’s Dynamics division is the inconsistency of regional management; to some extent Microsoft is still dominated by a desktop and server marketing and sales mentality.

The Tier 2 vendors to watch are the Challengers as they “have broad and mature ERP systems” – SYSPRO, QAD, Oracle’s JD Edwards Enterprise One (formerly JD Edwards OneWorld), and Infor Syteline. I remember being told some time ago that it was the Challengers that have the best chance of becoming leaders, rather than the Visionaries.

Why are ERP consultants needed?

In a blog on the ITtoolbox site, Steve Phillips comments that companies are moving away from using external ERP consultants in favour of using in-house expertise – Why ERP Software Consultants Cannot Save The Day.

His view is:

The ownership philosophy is about controlling your project destiny and built on some fundamental principles. … 1) It is possible to take internal responsibility for project management. 2) It is possible to develop and/or acquire internal software expertise to the point outside application consultants are rarely needed. 3) It is possible to become much more educated and less reliant on the false sense of security an army of consultants can bring. 4) It is possible to realize ERP benefits by developing better software and business process solutions with fewer outside consultants. 5) It is possible for internal personnel to do up to 70% of what many pay consultants to do.

Except for item 4, in my experience, I haven’t found any companies that can do what he suggests. I suspect it is a function of certain factors – a primary one being the size of the organisation. But I also believe that business maturity, and the availability of knowledge and experience play a significant part.

In the South African market, most businesses fall into the small-to-medium (SMB) category. Employees in SMB companies tend to take on more than one role (debtors and creditors, pre-sales technical and sales, production planning and management) which leaves them little time to focus on issues which are not directly relevant to the job they must do. So finding time to acquire software expertise is difficult or requires after-hours learning. In time, and if a person stays in the same job, they might become “more educated and less reliant.” However, given their time constraints, it is highly unlikely that people will have the time or knowledge “to do up to 70%” of what a consultant will do.

Also skills and expertise are in short supply in this country, so someone who develop technical skills may easily find themselves moving out of their business job and into a technical or consulting role. Similarly, project management requires experience and time to spend on it, which senior staff in SMBs (e.g., finance managers and directors) rarely have. Companies will tend to have a less senior person overseeing the project, but all the details and work that goes into project management has to be done by someone with the background and time allocation to do it – in other words, a consultant.

In the South African context, therefore, most average companies (not large ones over 1000 people) do not have the people, skills or time to take on an ERP implementation themselves. The cost of bringing in consultants outweighs the risks of failure in trying to do the project in-house.

The Office gets into ERP

If you enjoyed The Office TV series (the UK version, and even the US one), our SYSPRO colleagues in the UK have created a series of humourous videos about ERP in manufacturing - The quest for the perfect ERP solution.

Does SaaS ERP exist?

There is currently a debate on the ITToolbox site about whether ‘proper’ ERP is available as a Software-as-a-Service (SaaS) offering – Does SaaS ERP really exist?

I don’t believe the debate has been resolved either way, but I found some comments interesting:

“Perhaps there are some ERP vendors that have made the leap to true SaaS, but, keep in mind, in the long run, you will pay more money for a SaaS model. Typical payback times are between 2-2.5 years to where it becomes more expensive to operate with the monthly fees (you never “own” the license), vs. paying up front for a perpetual license. Due to the strategic nature of an ERP investment that may not be changed out for 10+ years, the SaaS model typically does not make much financial sense.”

“One major TCO benefit surfaced right to the top in favor of SaaS. We call it the “Six Year Pinch”. We all agree that the payback for on-premise is within the five year time frame; however, growing enterprises require upgrades to the on-premise applications, infrastructure, and personnel (new hires and training). When you factor these costs into the TCO model, the on-premise ERP became 3x more expensive than the SaaS ERP since the investment for SaaS remained linear whereas the on-premise had a investment requirement every 5 to 6 years. True SaaS ERP vendors have one code base (i.e you are always on the latest and greatest version of software). The SaaS vendor manages the deployments behind the scenes and the customer is responsible for enabling new functionality through switches as necessary. On another note, the companies we interviewed who are using SaaS ERP chose the solution not because it is a SaaS solution, but chose it because the functionality met their requirements – the most important decision in any business system selection. The SaaS model was a secondary benefit.”

The 10,000 hour rule

Time has an article on Malcolm Gladwell’s Outliers book. One of the significant points in his book is the 10,000-Hour Rule. According to TIME, there is a reason for this rule.

Studies suggest that the key to success in any field has nothing to do with talent. It’s simply practice, 10,000 hours of it — 20 hours a week for 10 years.

If that’s correct, I’m probably at or close to my 10,000 hours in ERP. I started working for an ERP company, JD Edwards, at the end of 1998. Apart from a break of seven months during 2003, but I have worked with JD Edwards, Microsoft Dynamics NAV and SYSPRO ERP for just over ten years – in project management, sales and marketing.

I just wonder how soon after the 10,000 hours does success begin

Mid-market ERP is regional

Reading bloggers and analysts reviews on ERP solutions sometimes makes me cringe. Often, these writers are US-based, and they seem to think that their experiences in the ERP industry, especially in the mid-market, can be extrapolated elsewhere in the world. I beg to differ.

An example of regional differences comes from a report by the Panorama Consulting Group, which shows that US and European mid-market companies are comfortable with an implementation period for, and an investment on an ERP system which, from this South African’s view, is extravagant.

One of the reasons that mid-market ERP vendors are regionally strong is because, for the mid-market, relevant customer references and industry knowledge in their specific area is important. A recent set of articles about Mistakes Sales People Make points out that creating credibility and lowering the customer’s view of your riskiness is a critical issue.

Another reason why I believe the ERP mid-market is regionalised is because of the markets and the requirements are different. It’s no point a big US software maker talking about their US or European sites to a South African or Indian business, because the worlds and the cultures are so different. This is where I think the ERP vendors should be taking lessons from the consumer packaged goods (CPG) companies.

The CPG companies often have the same product sold in different countries, but the branding, packaging and marketing is specific for those countries. A CPG company in a region will have its own marketing program – from research through to campaign – which could be quite different to the same company in another region. I have not seen that approach adopted yet by any ERP company – where the marketing plan and decision-making is centralised in one developed country.

In my un-researched opinion, based on personal information, these might be some major regional ERP dominances:

UK -  Dynamics GP, Sage
Northern and Eastern Europe – Dynamics NAV
Sub-Saharan Africa – SYSPRO, Sage
Middle East – Oracle

I am not familiar with India, Asia or Australia, but would be interested to hear what others think are the situations for those regions.

So, my recommendation to:

• the northern analyst organisations – by all means keep up what you are doing but be more explicit about regional differences,
• the major ERP vendors – break out of your centralised marketing mentality and create teams in separate countries/regions who are allowed their own discretion on what to market, how to package (modularise) it, and how to sell and price it.

Which manufacturing ERP?

If your company was looking for an ERP to help manage a manufacturing operation, which ERP vendors would you turn to for a solution? It seems that most large companies would include SAP on their selection list because SAP is the biggest. But biggest is not necessarily the best.

Recently we were called by one of our client’s competitors to discuss some possible custom development for their ERP system. Our client uses SYSPRO, the competitor (which is large) uses SAP. I had an opportunity to get some information on how the competitor was using SAP in their manufacturing environment. This company must be spending millions a year on SAP maintenance fees while not getting anywhere near the benefit that our client gets from SYSPRO.

I was talking with knowledgeable colleagues what reasons a business would choose SAP rather than SYSPRO:

1. If you are in a couple of industry verticals, like financial services, in which SAP specialises.
2. If you are in certain process manufacturing sectors, such as aluminium production, you might also be able to justify selecting SAP.
3. If you are a global company needing to run separate local financial operations, and consolidate to regional and global operations, SAP’s financials are strong.

Apart from these three reasons, and if you are in manufacuting, there is absolutely no reason why SYSPRO shouldn’t be one of your short-listed ERP vendors. It amazes me therefore, in the current economic climate, that so many companies are still using SAP for their ERP and spending so much on SAP maintenance, rather than migrating to a more useful and cost-effective ERP solution.

Microsoft strategic bets – where’s Dynamics?

Mary-Jo Foley has listed Microsoft CEO Steve Ballmer’s strategic bets for 2009, 2008 and 2007. It could be quite eye-opening if you are a Dynamics ERP or CRM customer.

Firstly, Dynamics contributes less than ten percent of Microsoft’s annual revenues, so its unlikely to get much strategic focus.

Secondly, and in my personal opinion, Microsoft doesn’t ‘get’ ERP: it’s seen numerous changes in senior management over the last few years, the development focus seems to be on product integration with other Microsoft products rather than business application functionality.

Only in 2008 is there a vague mention of Dynamics in the Ballmer top bets list:

“He cited Office 2007, Windows Server (especially in the lower-end of the market), Dynamics ERP and CRM as examples of hot products.”

Recently, Vinnie Mirchandani criticised Oracle for lack of technology vision and Dennis Howlett called Oracle Apps an ‘innovation free zone’. I reckon it’s time that someone started to consider whether Microsoft is an ‘ERP dead zone’.

ETO vs Project Manufacturing

In the ERP manufacturing space, the term ‘order fulfillment‘ refers to the process that manufacturers follow to make goods for customers. The options are:

Make-to-Stock (MTS) The product is built against a sales forecast and put into stock, from where it is sold to customer; e.g., the retail sector.

Make-to-Order (MTO) The product is based on a standard design, but component production and manufacture of the final product is linked to a customer’s order specifications; e.g., high-end motor vehicles.

Assemble-to-Order (ATO) Similar to MTO but the product is comprised of modular components and is built  to customer specifications from a stock of existing components; e.g., the Dell approach.

Engineer-to-Order (ETO) The product is designed and built to customer specifications; this approach is most common for large construction projects and one-off products

Accepted practice with these processes is that a material requirements plan is put together using the Bill Of Material (BOM – the components, production operations, inventory and lead times) of the product, following which a master production schedule (MPS) is developed from the order, inventory and production information available.

The company I work has, for a number of years, been growing its experience and expertise in the custom-production areas of the order fulfillment process; what some would call ETO. We have been finding that although ETO-type manufacturers never build the same product twice, and may have many unique orders being built simultaneously, they consider it sacrilege to go against the concept of a BOM; even though a BOM is only really applicable and useful if you can re-use it.

I have encountered manufacturers who think that they have to a BOM to make their products. But when you probe deeper you discover that what they make is unique (ie, project-driven) and therefore requires a new BOM everytime.

A few companies, however, are starting to follow a new practice – what we have called for the moment, Project Manufacturing (PM).

As Frank Scavo pointed out in his blog:

“For organizations that are project-based … there is a great need to integrate project management with ERP … the project schedule is (or should be) the master production schedule. Requirements for material, labor, outside services, and other resources are directly tied to the work breakdown structure. ERP systems based on a traditional MRP approach simply do not work. Project-based organizations are relatively under-served by enterprise system vendors.”

These project-oriented manufacturers follow the PM approach – using project management software applications to do their detailed manufacturing planning, rather than an MPS. The labour and material allocations that conventionally are done via the BOM are managed via the work breakdown structure (WBS) of the project plan. Frank’s comment that these types of manufacturers are ‘under-served’ is an under-statement. None of the standard and well-known ERP vendors provide this type of functionality.

We have had the privilege of working with a few leaders in the PM space in South Africa, and help them to develop the integration of project management and ERP. It can be quite a culture shock for someone coming from a standard manufacturing process to adapt to the PM approach, and in my case it took over a year to develop a deeper understanding of the processes and technology involved.

The purpose of this blog article is to introduce the concept of PM, and find perhaps a better acronym. In later blogs I will go into more detail about how PM differs from the other order fulfillment options, how to allocate labour and materials in the WBS and then link it to the ERP system, how it works from a software and process perspective, and what it involves for project implementation. In the meantime, comments would be most welcome.