I don’t know if it is happening in other countries, but SAP Business One (SBO) is really upsetting the small-medium ERP market in South Africa. How? With its pricing model for software and implementation.
The SBO software licensing price is at a substantial discount, in comparison Microsoft has to discount NAV by 30% or more to be competitive on licence price. SBO implementations seem to be following a stripped down, basic template model, because their implementation costs are so low and the projects are short.
I first came across the SBO pricing over a year ago, and at the time many thought it was a short term campaign to get market share. But SBO is still running with the model, and has knocked many competitors, including local ERP vendors who should be able to give very good pricing.
What this pricing is doing to the local market is that competitors have to come down to the SBO level to compete (so we compete only on price), and small-medium companies get the message that ERP software is cheap. But ERP software is complex stuff, and therefore shouldn’t be just seen as a slightly more fancy accounting system. What this price competition means for the local ERP market we may have to wait a year or two to see, but as other industries have learnt, when all you do is compete on price then other things like quality and functionality get put aside.
Why are small-medium businesses falling for the SBO approach? Because unlike large companies, their concerns are primarily around price, and only next around functionality and longer-term viability. If the price is good, and it’s “good enough” for what they want, then the choice is clear.
What I am waiting to hear is stories of small-medium companies who have to scrap an SBO implementation because the software doesn’t deliver what they wanted in the end. But I think its going to take 2-3 years, and because those companies are usually privately owned, we are unlikely to read about it in the press.