Software packages and car models

A recent blog by Dennis Howlett on ZDnet mentions that Microsoft is adding a small user finance/ERP package, Dynamics Entrepreneur Edition. This package was one of the apps that were acquired when Navision Damgaard was bought; it is not a new app but never got exposure outside of some northern European countries.

This new licence is described as allowing “the opportunity to trade up customers as they grow because a switch to the full blown product will likely involve little more than a flip on the registration key switch.” My question about this approach is – since people who buy entry-level models of cars (eg, Toyota Tazz) do not necessarily upgrade with the same company (eg, to a Corolla), why should we expect companies to do the same with their ERP software?

When people upgrade their car there are other requirements and attitudes beyond the fact they might get a good deal from their current vehicle supplier. For example, a Toyota Tazz owner who wins the Lotto would be more likely to buy a BMW or Mercedes than a Lexus because their are other issues involved.

When companies come to upgrade their ERP, they look at other things than just the licence cost, which anyone who sells and implements ERP can attest. We have opportunities involving companies using entry-level products who are not considering upgrading from, say, Pastel to AccPac or Sage, which are like different car models from the same company.

The software licence price really isn’t an issue, because: 

  1. a competing vendor can and will adjust their licence pricing to be competitive with an incumbent, if the deal warrants it;
  2. the implementation costs can far exceed the licensing costs, even if its upgrading to a different package in the same line; 
  3. each package has its own way of dealing with functionality, so project activities like requirements analysis or training have to done as if this is a brand new implementation;
  4. an incumbent must treat it as a standard sales process because all the normal sales issues have to be addressed, even though its an existing customer;
  5. quite often companies feel their incumbent ERP has let them down are are looking for something that will work better for them.

Until a customer can upgrade from a lower-level ERP product to a higher-level one in the same way people can upgrade from Windows XP to Vista, having different levels of ERP packages will not be a safe guarantee that customers will stay with the same vendor as their ERP needs grow.

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4 thoughts on “Software packages and car models

  1. That’s an interesting take and given they’re looking at the single user market for the new offering, one can assume they would want to upgrade the customer as the company’s needs change. However, Microsoft has shown itself to be very good at holding onto its customers – especially in the US.

    The last Convergence conference I attended, I could not find a single customer who was wildly annoyed with them. The roadmap is much clearer today than it was 3 years ago and that makes a difference.

    They’ve also done exceedingly well pinching Sage customers. Coherence in the upgrade path does matter IMO and you can be sure MSFT will do everything they can to incetivize the channel.

    BUT – right now, they don’t have a channel that can do this so your point about future upgrade makes a lot of sense.

    One thing I’ve learned – never under-estimate MSFT. They continue to pull rabbits out of the hat.

  2. I think you miss the point of this strategy. Yes, price is not the issue, or Sage and it’s “never lose on price” attitide would dominate the market and eke out something better than low single digit organic revenue growth. The biggest reason to stay with the same ERP vendor as you grow is the potential ability to continue using a very similar system. Sage struggles to move customers up from Pastel because other than the name of the box, it bears no resemblance to Accpac.

    In the US market Sage actually delivers a Peachtree (think of this product as the US Pastel) branded version of MAS 90. MAS 90 itself is nothing like Peachtree, but because it’s the next step Sage can offer they have taken pains to make certain aspects of the product work the same as Peachtree. Windows and fields get the same names, navigation is similar, etc. This is a big key to an upgrade strategy.

    Intuit is a shining example of how this can work. QuickBooks Enterprise, though functionally inferior (by a long shot) to traditional midmarket products, is adding 4000 customers every quarter. Why? For the company outgrowing base level Quickbooks this next step requires very little, if any, training for the users. They are productive from day 1. That is a very big deal. If they had a voice in the selection process they no doubt influence the business toward staying in the QuickBooks family.

    You are mistaken to suggest that Entrepreneur was an aquired product. This is a packaging strategy around Dynamics NAV (formerly Navision, formerly Attain), a product that is currenlty seeing wild success in many regions outside of Northern Europe. It’s a great strategy as it taps into what is driving success for Intuit. Microsoft has seen only mild success or outright failure from previous attempts to tackle this part of the market. I sense a different result this time around.

  3. I assumed Entreprenuer was acquired because I thought it was the single user version of NAV, I think called C5 (?), from Navision, which had only been sold in northern Europe.
    As for the upgrade issue – for SAP to go from Business One to All-in-One is a complete re-implementation. For MSFT here in SA, I have heard them say that NAV is for up to 50-70 users, thereafter they recommend going to GP or AX, and that is a re-implementation. To say that NAV, GP and AX are similar systems would IMO be incorrect.
    What you say Intuit is doing sounds like the easy upgrade path I mentioned at the end of my post.

  4. It’s not C5, but a simplified version of NAV, which scales a fair bit higher than what yo usay you heard from Microsoft SA. A customer would be able to get a one user version of Entreprenier edition, and scale to a couple hundred users without changing products, they are on NAV the whole time. This is exactly like the Intuit strategy and nothing like the SAP strategy which as you note requires the complete re-implementation from B1 to All-in-One.

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