The Progressive SMB: Customer Stories are Worth 1,000 Analyst Words

I attended SAP’s SAPPHIRE NOW 2012 several weeks ago and am finally getting a chance to share my thoughts on the customer meetings I had with Big Byte Corporation and KEEN Footwear at the event. These two customers are very “real” SMBs. BigByte has 52 employees; KEEN has 130. Neither is a Silicon Valley venture capital startup, which let’s face it, is a very different breed. Why did they choose SAP, which, after all, is best known for its footprint in large companies? Their perspectives about this are quite interesting because they personify what we at the SMB Group call “Progressive SMBs.”

The Progressive SMB Class–What is it, and Why is it Important?

Our 2011 SMB Routes to Market Study indicated that many SMBs are tightening their tech wallets for 2012 as compared to 2011 (Figure 1). But the study also showed a distinct segment of SMBs that we call “Progressive SMBs.” Despite economic uncertainties, Progressive SMBs plan to increase IT investments. They see IT as a tool for business transformation, and a way to create market advantage and level the playing field against bigger companies. Although while price is a factor, they rate other criteria–such as the ability to customize solutions, strong vendor reputation, and local support and service–higher than other SMBs when making technology purchase decisions. Figure 1: SMB IT Spending Plans and Revenue Expectations More important, Progressive SMBs have higher revenues expectations than their peers. For instance, 75% of the Progressive medium businesses (who are increasing technology spending) anticipate revenue gains in 2012, compared to just 17% of medium businesses that plan to decrease IT spending. BigByte and KEEN Footwear have both adopted a Progressive strategy. They illuminate how Progressive SMBs think about IT, and how their businesses have benefitted by making a bigger investment in IT than most of their SMB peers.

BigByte’s SAP Story

Founded twenty years ago, BigByte provides annual global warranty services, after-sales tech support, product repair and refurbishment and reverse logistics services to large companies such as Apple, Cisco and Panasonic. BigByte had used a combination of entry-level financials, homegrown apps, spreadsheets and manual processes for a long time. But keeping track of the significant inventory on consignment from its customers became more challenging over time. And, since every manufacturer has its own, unique set of processes to handle warranty service, BigByte was struggling to accommodate each company’s individual workflow. By 2009, BigByte’s resources were stretched thin. It didn’t have the inventory controls it needed, and was spending too much time pulling data together for reports. At the same time, the company’s owner wanted to prepare the business for growth and/or acquisition. He realized that to accomplish this, the business had to become more efficient. Michael Franklin, who I spoke with at SAPPHIRE NOW, was hired as COO to fix the problem. Initially, Mike hadn’t considered SAP; he had a couple of other ERP solutions he was vetting for the job. But the company’s owner spotted an SAP ad in Golf Magazine, and thought, why not get information? Mike went to SAP’s web site and was connected to Softengine, an SAP Business One partner. Why did BigByte decide to buy SAP Business One? The other solutions Mike was looking at promised many of the same things, such as a unified management for core business functions and embedded analytics. What sold the company on SAP Business One echoes what we heard in our survey about what Progressive SMBs are looking for:

  • Good value and no pricing surprises. Soft Engine offered a fixed price for implementation, and fixed monthly price per user, per month pricing for everything else (hosting management, 24×7 support, upgrades, etc.).
  • Fast time to value. As part of the fixed scope implementation BigByte got the software and 21 users up and running in less than 6 months via Softengine’s hosting program for Business One.
  • The ability to customize. BigByte needed to tailor return authorization functionality tailored for each of its customers–and be able to customize for future ones too.
  • Trust in and credibility. Softengine had a strong mix of SAP credentials and competencies, along with managed services and cloud infrastructure design and deployment.

Interestingly, although debating what isn’t and isn’t really a “true” cloud solution has become the most popular past time for many of us in the industry, this was not an issue for BigByte. Mike wanted the best ERP solution for BigByte, but didn’t want to manage the IT infrastructure needed to support it. Two years later, Mike says that Business One has given the company what it needs: automated processes and efficiencies; reliable, unified and real-time data; dashboards, tools and reporting for better decision-making. BigByte also uses Business One mobile apps for things such as approving purchase orders. Net-net, Mike estimates the company cut labor costs by about 15%, and cut IT costs by about 80%, because it now outsources hardware maintenance. IT now helps power the business, instead of just supporting it. BigByte can adjust to different customers’ processes and requirements, giving the company the agility to replace shrinking customer demand in the optical disk drive sector with the new customers in the growing LCD market. And, with its business processes in order, BigByte is also much more credible to potential buyers.

KEEN Footwear

If you’re an outdoor enthusiast, you know (and probably love) KEEN Footwear, a Portland, Oregon-based footwear designer and distributor. KEEN’s founders went into business to invent sandals that protect the toes with a signature protective “toe bumper.” Today the company offers shoes, bags and socks for many outdoor activities and for casual wear. I had the opportunity to talk to David Boeschenstein, KEEN’s COO about their SAP story. When Dave came to KEEN from Adidas in 2008, the company had outgrown its ERP system. Dave’s charge was to select a scalable solution that could adapt as the company continues to grow. He looked at a few options–including SAP Business All-in-One (BAiO) for apparel and footwear, which is used by several others in the outdoor and specialty footwear sectors. After extensive evaluation involving multiple users from each department, KEEN decided SAP BAiO–along with SAP Business Objects and Business Warehouse–would be the best fit for the company. Now remember, KEEN has only just over 130 employees! But they are another prime example of a Progressive SMB. KEEN views IT as an essential enabler to drive business growth, and wanted solutions that will scale to support the initiatives they have planned for the next 5 years and beyond. According to Dave, Keen’s motivation for installing SAP solutions was “to ensure we provide our customers with excellent service. Our business operations mandate is to make it easy for customers to do business with KEEN wherever in the world they interact with our products and our fans.”. SAP partner Gravity Pro helped KEEN deploy BAiO (using Rapid Deployment Solutions, or RDS), Business Objects and Business Warehouse in July 2011. KEEN is now live in the U.S., Canada, and The Netherlands.

Customer Stories are Worth 1,000 Analyst Words (or more!)

Much has already been written about the details of the new products, strategies and solutions that SAP announced at Sapphire, and this is, of course, very valuable to understand. But sometimes not enough is discussed from the customer’s point of view–and some of the most important things–namely the business outcomes from technology–can get lost in translation. The BigByte and KEEN experiences help put the SAP into perspective for SMBs, and illustrate how Progressive SMBs are making their decisions about business solutions. They also highlight why it is so important to be–or become–a Progressive SMB.

SAP Business One, Chapter Two: Raising the Small Business Bar

In the world of SAP enterprise resource planning (ERP) solutions for small and medium businesses (SMBs), SAP Business One is sometimes overshadowed by SAP Business All-in-One (BAiO), which has SAP’s large enterprise ERP at its core, and by and SAP Business ByDesign, which is SAP’s first software-as-a-service (SaaS) ERP entry.

But Business One, which is designed from the ground up to meet the needs of small businesses with fewer than 100 employees, has quietly kept growing both its capabilities and in new customer acquisition. During the past year or so, SAP has also made some significant new investments in three key areas: mobile, on demand and big data.

Taken together, these developments could open a new chapter for Business One–and for small businesses that want to use IT to transform their businesses.

Chapter One–A Brief History

Business One has its roots in SAP’s acquisition of TopManage Financial Systems in 2002. SAP made the acquisition to provide small businesses (and subsidiaries in larger companies) with an affordable way to move up from entry-level accounting solutions to a single, integrated business management offering.

The solution is designed for small businesses that have little or no IT resources. It provides a unified suite of financials, sales, customer relationship management, inventory and operations capabilities, along with embedded analytics and reporting capabilities.

Over the years, SAP has continued to invest in Business One to keep pace with changing market requirements and global demands. Business One is now available in 27 languages and 40 localizations. To help partners more easily extend solution functionality, SAP built an integration platform for Business One that has since attracted over 550 add-on solutions. Today, Business One has over 35,000 customers in over 80 countries. At its current pace, SAP estimates that it is on track to add about 5,000 new customers per year.

Chapter Two–Mobile, On Demand and Big Data

Fast forward to today. SAP is infusing Business One with the new mobile, on demand and big data capabilities it needs to take the solution to the next level.

On the mobile front, SAP launched Version 1.5 of its Business One mobile app in February 2012. The mobile app gives customers access to key Business One functionality, such as alerts and approvals, real-time Crystal Reports, customer and supplier data and inventory information via mobile devices. The app is available for the iPhone and iPad via SAP, and for Android devices through its partners. Looking ahead, SAP plans to add new mobile functionality for as sales document creation so that sales reps can do more on the go. SAP is also updating the user interface (UI) so that mobile users can have multiple windows open the same time so they can more easily view the information they need.

In March, SAP introduced Business One OnDemand to offer Business One in a cloud-based, subscription model. The OnDemand version has and will maintain the same functionality and interface as the on premise version. SAP is certifying partners to host the solution to ensure that they meet security, performance and quality standards. In most cases, these hosting partners provide the back-end infrastructure, and team with SAP VARs who sell and implement the solution. SAP has also created a Cloud Control Center that supplies partners with automated tools to manage Business One OnDemand throughout the solution lifecycle.

Some pundits have claimed that Business One OnDemand is not a true, multi-tenant, software-as-a-service (SaaS) solution. So I asked SAP for clarification on some of the technicalities and learned that users do need a remote desktop solution (such as those from Citrix or Microsoft) to access Business One OnDemand. And, while the solution is multi-tenant in that users share the same instance of the application and SQL server, each user has its own database schema.

Since Business One OnDemand requires a remote desktop solution and customers don’t share a database schema, cloud purists are likely to discount it. However, these details are much less likely to create issues issue for actual small business customers–and may work in SAP’s favor.

The fact that SAP’s on premise and on demand versions share the same interface and database structure means that existing customers can move to the cloud without complex data conversions or additional user training. Meanwhile, SAP Business One can now get into consideration among prospects that are only considering a cloud solution. And, some of these prospects may prefer to have their own dedicated database schema, along with access to the 550+ partner apps that are in Business One arsenal. Finally, NetSuite, arguably the leading SaaS ERP vendor, has been moving away from its original small business focus to concentrate more on the mid-market and departments of large enterprises, ironically paving the way for SAP to make inroads here.

SAP also announced Analytics powered by SAP HANA for SAP Business One, which will be generally available in late 2012. HANA is SAP’s “big data” solution. It’s a column-based, in-memory database that allows applications to zip through calculations for millions of records in just fractions of a second. SAP HANA for SAP Business One is scaled for the needs of small companies. It combines the SAP HANA-based application with SAP Crystal Reports software so small businesses can get the benefits of speedy data crunching and use the tools that they are already comfortable with to analyze this data. The solution includes a set of predefined, ready-to-run dashboards and reports.

While some small businesses may not require this added horsepower, the offering is relevant for those that need to more effectively analyze more and more complex content–including audio, video, and text–to compete effectively in their markets. These customers will be able to create interactive reports and run ad-hoc analysis much faster than they could before; navigate through various business objects from one screen; and use free-style search to access information more quickly.

The Rest of the Story

SAP Business One isn’t for all small businesses. After all, although the price tag is low compared to other SAP offerings, Business One still represents a significant expenditure compared to the typical small business accounting solutions.

But, even amidst–or maybe because of–economic uncertainties, our SMB Group 2011 Small and Medium Businesses Routes to Market Study indicates that there is sizeable segment of the small business market that plans to increase IT investments. These “progressive” small businesses see IT as a means to create market advantage and achieve their business goals. While price is a factor, they rate other criteria–such as the ability to customize solutions, strong vendor reputation and local support and service–higher than other SMBs when making technology purchase decisions. Business One hits the mark on these criteria, and consequently, is likely to enjoy continued good growth in this segment.

However, this progressive segment is demanding and will expect SAP to stay ahead of the curve. To do so, SAP will need to address a couple of additional areas in this new chapter, including:

  • Collaboration and social. One of the biggest trends in social-collaboration space is to connect collaborative activities with business processes. SAP has already merged its Streamwork team with its newly acquired SuccessFactors’ Jam team, and the combined entity is hammering out SAP’s future direction in this area. SAP needs to add social and collaboration capabilities to Business One sooner, rather than later, to ensure that Business One customers can take advantage of integrating collaborative and business processes.
  • Mobile applications for external users. Business One has a solid solution and game plan for internal (employee) mobile apps, but what’s the plan to extend access to selected functions to external customers, partners and suppliers? The SMB Group’s 2012 SMB Mobile Solutions Study indicates strong plans among small businesses to provide mobile apps for external users for activities such as appointment scheduling, payments, marketing offers and service. Over the long-term, partners should probably be responsible for developing most of these apps, but SAP needs to seed the area to jump-start partner app development.

Overall however, SAP Business One, Chapter Two is off to a good start. The mobile app has already been downloaded more than 34,700 times; about 60 partners are preparing to come on board to offer Business One OnDemand; and over 30 customers are in ramp up with Analytics powered by SAP HANA for SAP Business One.

In addition, while large enterprise solutions will continue to dominate SAP news, SAP’s commitment to and investment in small business solutions is growing. For instance, the vendor recently announced that it is sponsoring a global competition with Ashoka Changemakers, The Power of Small: Entrepreneurs Strengthening Local Economies.  The contest is designed to identify innovative strategies that can help small businesses grow and thrive in underserved communities.

The bottom line? SAP clearly takes small business seriously–and small businesses that are ready to move up from stand-alone accounting solutions should take SAP Business One seriously too.

Tech Tidbits for SMBs: PaySimple and BizSlate

I’m back to serve up the second edition of Tech Tidbits, with a new sampling of SMB solutions that you might not know about, but could provide just what you’re looking for.

On the menu this time are PaySimple and BizSlate. If you use or try either of these solutions, please let me know what you think!

PaySimple. Our SMB Group studies consistently indicate that improving cash flow is a top SMB business challenge. But many small businesses still collect payments the old-fashioned way–handwriting invoices or using word processing or spreadsheet apps to create invoices. This can slow down receivables cycles, or worse, make it easy to forget to invoice or follow-up on overdue payments.

PaySimple’s solution automates and simplifies billing and collections with a cloud-based (aka software-as-a-service) solution so you can manage everything from one place. The all-in-one service integrates multiple payment types (credit card, ACH and eCheck), multiple payment channels (virtual terminal, recurring billing, email invoicing, web payments and mobile payments). PaySimple is great for service businesses that are built around repeat customers, offering capabilities for things such as subscription billing and automated communications.

If you don’t have a merchant account yet, PaySimple will get you up and running. PaySimple also provides an import/export function that can map custom fields for integration with most small business accounting solutions, and offers a mobile app so that you can use it when you’re on the go. With this type of solution, SMBs can cut the time they spend on billing and collection, save money and get paid faster. PaySimple is available direct and through private label partners such as American Express Open, Chase, Western Union, among others. Pricing direct from PaySimple is $34.95/month, plus transaction fees.

BizSlate. It’s not too often that customers guide product development from inception, but BizSlate, which provides cloud-based ERP for small businesses, took exactly this approach.  In his prior role as CEO of eZCom Software Inc., a cloud-based EDI (Electronic Data Interchange) provider for SMBs, BizSlate founder Marc Kalman saw that many customers needed to move beyond entry-level accounting software to an ERP solution, but hadn’t found a solution to fit their needs and budgets. So Kalman left eZCom to start BizSlate–convincing over a dozen of his eZCom customers to kick an average of $18,000 each into the venture and join a steering committee to guide product development.

He conducted extensive interviews with each, asking them to throw out their old ideas about software and focus instead on helping him better understand what they really needed to solve their business problems. What he came up with is BizSlate, an ERP system that spans areas such as customer management, vendor management, order management, product management, multiple warehouse and inventory management, receiving from vendors and shipping to customers.

Interestingly, BizSlate doesn’t aim to create another accounting system, so you can, for instance, strap QuickBooks right onto it. BizSlate’s initial focus is on manufacturing, wholesale and distribution industries, but the company plans to extend into the services verticals also. The original 12 customers/investors are using BizSlate now, and the public beta starts this week–so check it out if you’ve been searching for this type of solution.

Acumatica’s Best of Both Worlds ERP Story

Just want to let you know that we are publishing highlights from recent vendor briefings on the SMB Group web site. As time permits, we discuss our takeaways from the more interesting briefings. I’ll try to remember to post them here as well. There are several up there already, here is the most recent one.

4-23-10

Highlights:

Acumatica is a relatively new player on the SMB ERP scene. It delivers its web-based ERP solution both on premise, and via a software-as-a-service (SaaS) model. Targeting companies with 5–1,000 employees (or roughly $5M – $500M in annual revenues), Acumatica provides accounting, CRM and distribution capabilities, and worldwide currency and language customization.

Acumatica offers customers a choice to run its solutions on-premise or via the SaaS model, providing the benefits of cloud technology and social media capabilities in both delivery models. Subscription pricing for the SaaS version of the accounting module starts at $12,000 annually, while on-premise licenses start at $15,000.  On-premise pricing is CPU-based, not per-user based, enabling customers to maximize the ERP user base without incurring added costs. The company has more than 50 customers using its solutions to-date. About 30% use Acumatica via the SaaS modes, and the other 70% have deployed it on-premise.

Acumatica has a 100% indirect sales model, which provides an attractive and neutral compensation model to motivate value-added resellers (VARs) to sell the solution that will work best for the end-user customer. The vendor has signed up more than 40 VARs to date—mostly from the ranks of Microsoft Dynamics and Sage.

Quick Take:

Acumatica intends to capitalize on key trends and requirements in the traditional VAR community and it the SMB market.  First, as I’ve written many times, SaaS vendors have yet to crack the code on creating a VAR-friendly model. Customer demand for SaaS is on the rise, and  many VARs want to add a SaaS offering to their line-up. But, they worry that SaaS vendors (who often sell both direct and through channels) will disintermediate them once the partner has brought in the business. VARs searching for a SaaS option are likely to find Acumatica’s 100% indirect model, combined with a choice of delivery options and a Microsoft-centric approach, quite attractive. The fact that VARs can sell the same solution via either delivery model is also a plus—most VARs don’t want to be evangelists, they want to sell the solution that best fits the customer’s needs.

Acumatica offers customers a distinct value proposition as well. Customers can either self-select what model (SaaS or on-premise) will work best for them, or Acumatica and its partners can help them decide what will work best. In contrast, other major vendors in the mid-market space—including Intacct, NetSuite, Microsoft, Sage, etc.—have a pre-determined agenda.  Acumatica also offers customers that want to switch from one delivery mode to the other discounts that take into account their prior investments.

As a relative newcomer, Acumatica will have to work harder than more established rivals to prove that it has both the product capabilities and corporate viability to be a “safe” choice. However, if Acumatica can keep pulling in VARs, and broadcast its best of both worlds story out to the market, it should be able to cross this chasm.

NetSuite’s SP 100 Program: An Offer VARs Can’t Refuse?

In a bold move to get traditional value-added resellers(VARs) off the SaaS fence, NetSuite announced its new Solution Provider (SP) 100 Program, which gives business application VARs 100% margin on the first year of license subscriptions they sell. The program requires a 2-year minimum license commitment from the customer, and after the first year, NetSuite pays VARs 10% margin on recurring annual license fees. Prior to this program, NetSuite had offered VARs 30% of annual license sales.

NetSuite’s SP 100 Program targets established mid-market and enterprise ERP and CRM VAR’s and consultants, including VARs selling Microsoft Dynamics, SAP, Sage, Epicor, Deltek, and others. The program is not exclusive—VARs can continue to sell their packaged business software offerings as well. NetSuite is also extending the program to it’s current solution provider partners, and it includes all other SP program perks, including sales and technical training, sales cycle assistance, and marketing support.

Background:

Since the model got off the ground over 10 years ago, SaaS vendors have argued that SaaS can open the door for VARs to create a recurring revenue stream, and free them up from low margin IT service chores to focus on generating higher value business.

But the case has evidently not been strong enough to entice the masses, for a few key reasons. First, the recurring revenue model is radically different to the conventional business applications model, where VARs earn a large upfront commission for selling a business solution, hardware and infrastructure software. Second, VARs have balked at not being able to generate income from services necessary to deploy and maintain business applications on customer premises. Third, whether real or perceived, many VARs don’t trust SaaS vendors. Deep down, they think that after they make the sale, SaaS vendors will take control of the account and soon disintermediate them entirely.

Quick Take:

NetSuite’s SP 100 Program supplies VARs with the big upfront payment that they are accustomed to. NetSuite’s own side-by-side VAR revenue comparison to Microsoft Dynamics favors NetSuite of course, but VARs can try it and do their own math to see how it proves out without having to give up selling competitive packaged software. It’s an opportunity to get up to speed on SaaS, the cloud and recurring revenue models and develop their business consulting skills.

As important, it comes at a time when the SaaS model has proved its maturity and staying power, many VARs have lost deals to a SaaS vendor, and many customers are trying to avoid big upfront capital outlays. While some VARs will remain skittish, distrustful, or even just lethargic about adding a SaaS solution to their business management portfolio, I think NetSuite’s SP 100 will be big wake-up call for many VARs.

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