Acumatica estimates that tens of thousands of SMBs are still using on-premise accounting and ERP—and that now is the perfect time to woo them to its cloud-based ERP platform. At Acumatica’s Analyst Day event last week, CEO Jon Roskill made the case that adoption of cloud ERP has lagged in comparison to other areas because businesses have been hesitant to trust cloud vendors with core transactional systems. Looking ahead, however, he estimates that the cloud switch is flipping in the SMB market to favor cloud-based ERP implementations.
SMB Group forecasts a similar trajectory (Figure 1), for a couple of key reasons.
Figure 1: SMB Cloud Deployment Trajectory
First, SMB use of and satisfaction with cloud solutions in other areas is sparking adoption and consideration of cloud ERP. Second, more SMBs are realizing that their legacy solutions won’t give them the headroom they need to grow their businesses. Finally, many SMBs lack the resources and/or desire to manage a new system in-house.
But why should these SMBs choose to use Acumatica’s ERP solution? Buyers have many choices for cloud ERP deployment, including software-as-a-service (SaaS) public cloud, private cloud, and hybrid cloud model, and many vendors offer ERP solutions tailored to SMB needs and budgets. Furthermore, vendors with deep pockets have snapped up SMB cloud ERP pioneers: Oracle acquired NetSuite last fall for $9.3 billion, and Sage Group purchased Intacct for $850 million in July.
Given this situation, how does Acumatica—which has about $30 million in funding, 3,000 customers and roughly 200 people—plan to bring new cloud customers into its fold? At the event, Roskill and team discussed Acumatica’s plan to get its fair share of the growing cloud ERP market.
Target SMBs with 50-1,000 employees that are fed up with legacy on-premise systems.
While Acumatica targets very small businesses—aka QuickBooks users—it’s main focus is on companies with 50-1000 employees who are frustrated with legacy systems and rising maintenance fees. The company estimates that almost 200,000 SMBs are running legacy Sage or Microsoft Dynamics solutions, providing it with a pretty large target. Competitively, Acumatica sees the Oracle acquisition as pulling NetSuite upstream into larger accounts. I also believes that it will take Sage and Intacct some time to align marketing, sales and channel resources to the market.
Push ahead with it’s open platform connected cloud play.
Acumatica’s open APIs and platform enables partners to create and integrate solutions that connect Acumatica to other clouds to help streamline customer workflows (Figure 2). Partners can embed their apps directly into the Acumatica app, or create a loosely coupled integration. Acumatica has enhanced its REST APIs, and announced the availability of Open API 2.0 specification (formerly known as Swagger Specification) for Acumatica Contract Based APIs to speed integration and data exchange with other applications. The vendor now has over 100 ISV partners, announcing two new ones at the event: Adobe Sign for eSignature, and Smartsheet for project management and visual scheduling. It tracks and manages all third-party solutions in its ISV Solution Repository, to ensure compatibility. Acumatica also shares code on GitHub, and engages with developers on its LinkedIn and other portals.
Deepen its industry focus.
Following on the heels of announcing new edition for Commerce and Field Service in January, Acumatica aannounced a new Manufacturing edition at the event. It’s also making a name for itself in the medical marijuana industry (it’s the top solution for Canada’s medical marijuana firms), which has in turn, opened the door for its first pharmaceutical customer.
Grow market share with partners.
All of Acumatica’s sales are through partners. VARs account for 95% of Acumatica’s North American business, and about 55% of its overall revenues. OEMs account for about 45% of total sales, predominantly overseas.
Of note on the VAR side:
- Acumatica has added 45 new partners in the past year, bringing it’s total up to over 250 partners worldwide, with a goal of 80 more in the coming year.
- It’s VAR program has no fees, but Acumatica is picky: it does reference checks on potential partners, and looks for VARs with a vertical focus that want to grow.
- Inside telesales focuses on qualifying leads, with a goal to move them to a 1 in 3 chance to close before handing them over to partners.
- Acumatica also co-deploys with partners to help them get up to speed, and conducts quarterly review sessions to ensure everyone is aligned.
- In addition to product training, Acumatica provides VARs with financial education on annuity and subscription model, as well as sales, presales and marketing enablement programs.
Meanwhile, Acumatica’s six OEM partners (Figure 3) are broadening its geographical coverage, providing localization in 15 countries and languages. Combined, Acumatica’s six OEM partners have an installed base of two million customers on legacy or entry-level accounting solutions—providing Acumatica with plenty of headroom. Acumatica likes this model so much that it plans to add a few more strategically place OEMs to fill in coverage in other regions.
A unique ERP pricing model.
Acumatica’s pricing model (link to https://www.acumatica.com/cloud-erp-software/product-editions/) is unlike those of its competitors. Instead of pricing based on the number of users, Acumatica pricing is consumption-based so customers can add resources and not limit user access. In a nutshell, Acumatica’s pricing is based on the features and resources that customers use, with small, medium, large and extra large options.
Focused technology investments.
Acumatica announced Acumatica 2017 R2, featuring a redesigned, more flexible user interface to improve productivity, along with product enhancements across Acumatica’s customer relationship, finance, accounting, distribution and field services solutions.
Looking ahead, Acumatica plans to:
- Continue to simplify implementation, configuration, and provide low code/no code customization options.
- Improve more in run time intelligence and health monitoring to ensure optimal performance for users and to help protect them from errors.
- Strengthen its unified front-end architecture, browsers and rendering systems.
- Invest in machine learning, AI, voice recognition, IoT and other new technologies to help customers make better use of their data to spot anomalies, identify trends and automate mundane tasks. Acumatica will take advantage of key core technologies from vendors such as Microsoft, IBM, Amazon and others, and focus its efforts on practical scenarios such as route optimization for field service, and invoice categorization and processing.
Summary and Perspective
Acumatica is in the right place, at the right time. While many SMBs have dragged their feet when it comes to modernizing financials and ERP systems, they increasingly risk having their businesses dragged down if they continue to rely on outdated, inflexible systems that simply can’t keep pace with the rising expectations of customers, partners and suppliers.
The Acumatica brand still may be flying below the radar in comparison to some of its competitors, but the vendor’s messaging is clearly articulated and ready for marketing to ramp up awareness. In addition, Acumatica’s industry editions, vertical partner focus, and success in both old (manufacturing) and new (medical marijuana) verticals should not only help it grow its footholds in these markets, but also to identify new vertical opportunities. Acumatica can probably also get a lot more mileage out of its distinctive and potentially disruptive pricing model than it has to date.
However, Acumatica is competing against players with a lot more money and muscle. In addition to raising its brand profile, the vendor also needs to apply it’s more limited resources to make the right technology investments for the future. So far, Acumatica has done a good job of keeping pace with and sometimes exceeding the capabilities of other players. But, so many emerging technologies are poised to dramatically alter the way companies run their businesses. Acumatica’s ability to place its bets wisely may be the most important variable in determining its long-term growth potential.