Posts Tagged ‘two-tier ERP’

Research Report: Constellation’s Research Outlook For 2011

Organizations Seek Measurable Results In Disruptive Tech, Next Gen Business, And Legacy Optimization Projects For 2011

Credits: Hugh MacLeod

Enterprise leaders seek pragmatic, creative, and disruptive solutions that achieve both profitability and market differentiation.  Cutting through the hype and buzz of the latest consumer tech innovations and disruptive technologies, Constellation Research expects business value to reemerge as the common operating principle that resonates among leading marketing, technology, operations, human resource, and finance executives.  As a result, Constellation expects organizations to face three main challenges: (see Figure 1.):

  • Navigating disruptive technologies. Innovative leaders must quickly assess which disruptive technologies show promise for their organizations.  The link back to business strategy will drive what to adopt, when to adopt, why to adopt, and how to adopt.  Expect leading organizations to reinvest in research budgets and internal processes that inform, disseminate, and prepare their organizations for an increasing pace in technology adoption.
  • Designing next generation business models. Disruptive technologies on their own will not provide the market leading advantages required for success. Leaders must identify where these technologies can create differentiation through new business models, grow new profit pools via new experiences, and deliver market efficiencies that save money and time.  Organizations will also have to learn how to fail fast, and move on to the next set of emerging ideas.
  • Funding innovation through legacy optimization. Leaders can expect budgets to remain from flat to incremental growth in 2011. As a result, much of the disruptive technology and next generation business models must be funded through optimizing existing investments. Leaders not only must reduce the cost of existing investments, but also, leverage existing infrastructure to achieve the greatest amount of business value.

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Research Summary: Software Insider’s Top 25 Posts For 2010

Themes In 2010 Reflected The Buy Side Demand For Both Optimization and Innovation

Technology buyers in 2010 focused most of their priorities on finding cost savings through legacy optimization, navigating a flurry of disruptive technologies, and designing/experimenting with new business model innovations.  Consequently, the top 25 posts for 2010 reflected these 3 major themes:

Legacy Optimization

Disruptive Technology

Business Innovation

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Quarterly Financial Tracker: Q3 CY 2010 Enterprise Software Vendors Solidify Performance Turnaround

The super majority (26 of 27) of publicly traded software vendors in the Software Insider Index® delivered turnaround stories for Q3 Cy 2010 year-over-year (YoY) performance.  SaaS vendors and middleware vendors led the charge with solid double digit gains against tough comps.  Performance of on-premises apps vendors reflected the easy comps from a dismal 2009 downturn.  An analysis of the 2010 CY Q2 2010 results show:

SaaS Vendors Continue To Crush All Expectations In Subscriber Growth (Figure 1.)

  • SaaS vendors showed massive gains in subscription revenue at on-premises vendor expense.  SuccessFactors (33.22%) continued the lead in quarterly revenue gains followed by a record breaking Salesforce.com quarter (29.81%).  Kenexa (25.97%) and RightNow (25.46%) also demonstrated above 25% YoY quarterly gains.
  • Subscription license growth has become the norm for both SaaS and On-Premises vendors looking at SaaS revenue.
  • On premises vendors w/ subscriptions showed traction.  SAP reported $101M of subscription revenue and JDA software reported $5.758M in subscription revenues.
  • Of note, Saba (3.89%) and Kenexa (25.97%) were added to the Software Insider Index® this quarter

Figure 1.  SaaS Vendors Continue To Crush All Expectations In Subscriber Growth (Right click to view full image)


Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Traditionally On Premises Apps Vendors Fare Well As Technology Spending Picks Up

  • JDA Software (65.29%) continues to benefit from retail and supply chain vendor consolidation.  However, JDA’s growth came from maintenance revenue, not new license gains.  In fact, the ratio of maintenance to license revenues remains dangerously high at 3.94.  The good news – focused efforts around SaaS options also grew.   Meanwhile, rival Manhattan Associates saw gains with (13.35%) YoY quarterly growth with respectable new license gains.
  • SAP (19.74%) showed a huge turnaround with significant gains.  However, new license growth came mostly from analytics revenues and not from core apps such as ERP, CRM, SCM.
  • Traditional bellwethers CA (17.21%) and Oracle (15.82%) showed above 15%, healthy YoY quarterly gains.
  • SMB vendors showed mixed results with Epicor (16.28%) leading the pack through gains in Epicor 9 and significant new license growth of 47.07%.  Epicor and Microsoft Dynamics (not listed) have been beneficiaries of the two-tier apps strategy movement.  On the other hand, IFS (5.34%), Lawson (3.35%), and Deltek (1.74%) barely moved the needle in revenues.  Deltek’s 21.38% new license growth reflected a structural shift in the business as new license gains make up maintenance losses.
  • Four vendors continue to enter dangerous trends with maintenance to license revenue ratios above 3: Manhattan (4.42), JDA (3.94) Lawson (3.86), Oracle (3.24)

Figure 2. On Premises Apps Vendors Fare Well As Technology Spending Picks Up (Right click to view full image)


Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Middleware Vendors Benefit From Optimization Mandates (Figure 3.)

  • VMware (45.84%), Informatica (30.68%), and Software AG (28.89%) crush numbers as demand for middleware, virtualization, and integration continue to gain traction.
  • All middleware vendors maintain healthy maintenance to license revenue ratios below 2.0:  SoftwareAG (.65), VMware (1.08), Informatica (1.31), Progress (1.82).

Figure 3. Middleware Vendors Benefit From Optimization Mandates


(Right click to view full image)  Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.
The Bottom Line – Enterprise Software Is Back

Refresh cycles, demanding business requirements, and shift to hybrid deployment options fuel growth for this quarter.  Organizations continue to free up budget to support legacy apps optimization to fund innovation projects.  SaaS will be the predominant entry point for new innovation while organizations seek two-tier approaches to consolidate legacy apps.  The theme for enterprise software customers remains “Show us the business value!”

Your POV.

Are you increasing your spending on enterprise software?  Want to know more about a specific vendor’s financial health? Can we help you work with a specific vendor?  Please post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.  Further, let us know if you need help with your next gen apps strategy, overall apps strategy, and contract negotiations projects.  Here’s how we can help:

  • Designing a next gen apps strategy
  • Providing contract negotiations and software licensing support
  • Demystifying software licensing
  • Assessing SaaS and cloud
  • Evaluating Cloud integration strategies
  • Assisting with legacy ERP migration
  • Planning upgrades and migration
  • Performing vendor selection
  • Renegotiating maintenance

Disclaimers* Not responsible for any math errors or erroneous revenue information.

1. Calendar year estimates based on the quarter nearest the calendar year.

2. Why these vendors than others?  Easy – because I cover them.

3. Exchange rates as of February 25th, 2010 for vendors who have not published quarterly conversions.  Not responsible for currency flux.

4. Estimates created for privately held vendors, when listed.

Not sure? Please read the quarterly filings yourself =)

Related resources and links

2010 Calendar Year Q2

2010 Calendar Year Q1

Software Insider Index™ (SII): 2009 SII Top 35 Enterprise Business Apps Vendors™

2009 Calendar Year Q4

2009 Calendar Year Q3

2009 Calendar Year Q2

2009 Calendar Year Q1

Software Insider Index™ (SII): 2008Software Insider IndexTM (SII): SII Top 30 Enterprise Business Apps VendorsTM & SII Top SaaS Business Apps VendorsTM SII Top 30 Enterprise Business Apps Vendors™

2008 Calendar Year Q4

2008 Calendar Year Q3

2008 Calendar Year Q2

2008 Calendar Year Q1

Reprints

Reprints can be purchased through the Software Insider brand or Constellation Research, Inc.  To request official reprints in PDF format, please contact r@softwareinsider.org.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us.  A full disclosure listing will be provided soon on the Constellation Research site.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Tuesday’s Tip: 10 SaaS/Cloud Strategies For Legacy Apps Environments

Legacy Apps Customers Seek Practical Advice

Organizations determining when and how to make the move to SaaS and Cloud face realistic challenges in gaining buy-in and realizing the apparent and hidden benefits of SaaS/Cloud.  In a recent survey of over 300 companies, 73 respondents who were wary of SaaS/Cloud were asked to list the top 3 reasons they did not plan to deploy a SaaS/Cloud solution in the next 12 months (see Figure 1).  The top 3 reasons related to legacy environments, org structure, and governance include:

  • Legacy apps CIO’s. CIO’s vested in protecting the existing investments may often proceed with caution for SaaS and Cloud solutions.  In some cases, sunk cost mentality takes hold and the goal of being 100% pure with a single vendor clouds the vision to meet needed business requirements.
  • Burden of legacy apps. Legacy apps maintenance and upkeep represents a key barrier to SaaS and Cloud adoption.  Organizations often remain complacent about maintenance and upgrades, preferring to avoid substantial changes and risk.   Becuase the money and resources to support legacy apps consume most of the budget, organizations have little funds for innovation and experimentation.  Eventually, business decision makers procure SaaS/Cloud solutions to by-pass IT.
  • No IT team buy in.  Many constrained IT teams have not taken the time to understand the requirements to support SaaS and Cloud apps in a hybrid mode.  SaaS requires organizations to revisit SOA strategies, integration requirements, and master data management.  Business leaders and decision makers often overlook these dependencies at the organization’s long term expense.

Figure 1.  Legacy Issues Hamper SaaS/Cloud Adoption


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Tuesday’s Tip: How To Compare Total Ownership Costs

Apps Strategy Options Abound And Organizations Need Accurate Comparison Methodologies

Recent inquiries from blog readers and client engagements highlight a growing need to compare the cost of apps strategies.  Common comparison scenarios often include:

  • SaaS versus on-premise
  • Upgrade versus customization
  • Single instance versus two-tier
  • Vendor maintenance versus third party options
  • Custom apps versus packaged apps

Cost Comparisons Should Encompass The Software Ownership Lifecycle

An inventory of costs should comprise the phases of application ownership (see Figure 1).  License fees, implementation, and maintenance often define the most common costs.  However, additional factors by phase should include:

  • Phase 1 – Selection. Costs include services such as requirements gathering, vendor selection services, contract negotiation fees, and program management.
  • Phase 2 – Implementation. Costs include projects such as change management, business process reengineering, integration, customization, and testing.
  • Phase 3 – Adoption. Costs include, training, testing, configuration, report creation, and customizations.
  • Phase 4 – Optimization. Costs include upgrade, testing, custom development, and other integration fees.
  • Phase 5 – Renewal. Costs include third party maintenance, management, and vendor selection.

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Friday’s Feature: Workday Release 10 Moves Users One Step Closer To ERP Replacement

Workday Continues To Pioneer SaaS Success In The Enterprise

Founded by Dave Duffield and Aneel Bhusri in March 2005, Workday has grown the company to over 135 customers with 80+ companies in production, 17 enterprise payroll companies, and over 400 employees in 50 countries worldwide.  Key industries include services, technology, financial services, manufacturing, healthcare, and others.  Unlike other ERP pure play True SaaS vendors (e.g. NetSuite, Intacct, and Ultimate Software), Workday uniquely serves the mid-size to very large enterprise clients.  Large production clients range from 26,000 employees at Chiquita to 200,000 employees at Flextronics.  Workday’s roots began with HR but Release 10 bolsters key financial and spend management capabilities, highlighting aspirations to be the SaaS option for Oracle, PeopleSoft, and SAP ERP replacements over the next 3 to 5 years.

Design Points Reflect The Principles Of Social Enterprise Apps

With the business user in mind, Workday incorporates 8 of the 10 essential elements for social enterprise apps.  These include (see Figure 1):

  1. Role-based design. Software designed around how users perform work including applicable security models.
  2. Consistent experience across channels & deployment options. Software that is agnostic to where or how that software is deployed and accessed.
  3. Contextual & relevant delivery of information. Software which understands what information to provide users at a point in time
  4. Configurable & adaptive. Software that can be modified to meet changing conditions.
  5. Outcome-focused & results-oriented. Software that tracks key metrics across an end to end process.
  6. Proactive, predictive, & actionable. Software that anticipates requests and supports decision making.
  7. Engaging for all stakeholders. Software that opens up the system to new types of users, collaborators, networks, and communities.
  8. Secure & safe. Software that meets security and disaster recovery thresholds.

Figure 1.  Workday’s Design Incorporates 8 Of The 10 Elements of Social Enterprise Apps

Software Insiders Point of View Photo Stream (click image for details)

(Source: Workday)

Release 10 Features Move Users Closer To An ERP Suite

  • HCM adds Succession Planning and expands geographic reach. HR managers gain new functionality with succession planning by candidate names and positions.  Succession profiles track potential, achievable levels, and retention risk.  Improved enhancements touch absence, benefits, compensation, performance management, and staffing.  Cuba and Guernsey are added as 2 new countries.   Global personal data already supports 297 countries and all UN member nations.   Employee contracts now support Chinese and EMEA requirements.
  • Financials expands horizontal capabilities. Key updates include improved customer contracts, scheduled billing, revenue recognition, and milestone recognition.  New financial reporting features allow cost center and regional managers to run reports.  Users receive new project billing, basic VAT, sales tax, and customer statement capability.
  • Payroll augments existing capability.  New features include new off cycle calculations, worker history enhancements, gross-up, and off cycle billing.  Payroll remains focused on primary processing.  Multiple job processing is not available yet but planned for future releases.
  • Spend management adds a supplier invoice workbench. Additional enhancements span procure to pay, contingent worker procurement, resource tracking, and purchase order review.
  • User experience focuses on role based designs. Worker and talent profiles receive new looks that build off of the design elements in the “All About Me” and “My Team” pages in Release 9.   Multi-currency display for compensation now displays local and preferred currencies.
  • Analytics and reporting simplify data creation and consumption. Simple enhancements such as default values for report inputs, report tags for categorizing and search, and data creation from any source accessible by the user improve the ability to turn data into information.  Export now supports CSV, XML, and GData formats.
  • Ecosystem integration expands to new partners. New linkages include MrTed TalentLink, 15 new providers to the Workday Benefits Network (WBN), and improved integration security in the Enterprise Interface Builder

The Bottom Line – Consider Workday In Shortlists For HCM Upgrade/Replacement And Two Tier ERP

With the bulk of most HCM solutions deployed prior to Y2K, many organizations now actively consider upgrade/replacement strategies.   Most users expect upgrades to result in expensive replacement scenarios.  Hence, organizations must determine whether or not to continue with incumbent vendors or pursue a two-tier ERP apps strategies using SaaS deployment.  For mid-sized to large enterprises, Workday provides a unique option to take a phased approach with HCM and grow into the full suite as the product matures.

Your POV

Are you considering an ERP replacement? Will Workday 10′s new features compel you to migrate from your existing apps?  If you are a Workday customer, how’s your experience been with the SaaS vendor?  Add your comments to the discussion or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity. Please let us know if you need help with your apps strategies.  Here’s how we can help:

  • SaaS/Cloud strategies
  • Crafting your next gen apps strategy
  • Short listing and vendor selection
  • Contract negotiations support
  • Market evaluation

Related resources and links

20100316 The Enterprise System Spectator – Frank Scavo “Workday pushing high-end SaaS for the enterprise”

20100324 InformationWeek – Doug Henschen “Workday 10 boosts HR capabilities”

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Tuesday’s Tip: When To Go With A Two-Tier ERP Strategy

Single Instance ERP Harder And Harder To Justify

The holy grail of an ERP implementation used to be the single instance deployment.  However, market forces, a move to adopt new disruptive technologies, slow pace of innovation from incumbent vendors, and high maintenance fees have changed many organization’s perspectives.  Add a slew of rapidly changing business requirements battling rigid legacy infrastructures and next gen CIO’s have been forced to depart from the standard apps strategies.  In fact, improved integration, web services, and SaaS deployments have now improved the success rates and ROI for Two-Tier ERP apps strategies.

Purpose Built Capabilities And Cost Savings Drive Push For Two-Tier Apps Strategies

Recent Software Insider data surveys of next gen IT leaders in Q3 2009 and Q1 2010 show a 10% increase among organizations considering a Two-Tier ERP apps strategy (see Figure 1).  Key drivers behind moving to a Two-Tier ERP approach stem from:

  • Purpose built or industry requirements (89.61%). Next gen IT leaders remain frustrated by the lack of innovation and progress in completing out promised functional footprints.  As market competition intensifies, industry specific, purpose built solutions provide the competitive advantage needed for survival and success.
  • Existing systems too expensive (70.13%). ROI calculations on existing ERP systems often show high cost factors.  The culprits – overruns in implementation, customization of reports, maintenance payments on shelfware, increasing costs to staff, and rigidity of system.
  • Upgrade too expensive (45.45%). Many customers face upgrade costs equivalent to reimplementation.  Cost factors could equal up to 85% of the original implementation cost.
  • Need to innovate (35.06%). Some organizations find that their vendors have not innovated fast enough. Social channels have not been accounted for.  User experiences seem dated.  Reporting and analytics require experts to deliver.  Paucity in mobile solutions hinder productivity.
  • Regulatory compliance (24.68%). The need to meet industry specific regulatory compliance drive organizations to choose purpose built solutions.  Many choose SaaS to mitigate the costs of legislative and regulatory updates.
  • Geographic requirements (19.48%). Country or region specific requirements may require two-tier strategies based on geography.  Some ERP systems lack the language or tax requirements and a separate instance will prove cheaper to run than customizing a monolithic large ERP solution.
  • Existing systems too rigid (15.58%). Rigidity may lead to the inability to integrate and work with other systems, new channels, and emerging stakeholders.  Integration solutions can assist, but long term, next gen IT leaders will begin to surround legacy solutions with newer technologies.

Figure 1. Two Tier ERP Strategies Gain Favor In Next Gen IT Leader Apps Strategies

screen-shot-2010-03-02-at-53732-pm

Figure 2.  Industry Requirements And Cost Drive Push To Two-Tier Apps Strategies

screen-shot-2010-03-02-at-53724-pm

The Bottom Line – Users Should Consider Scenarios Based On Business Models And Geographic Needs

Detailed apps strategy conversations highlight 3 scenarios where Two-Tier ERP strategies make sense.  A number of vendors have proven to be strong partners in enabling Two-Tier ERP (see Figure 3).

  1. Different business models. Organizations with very different lines of businesses often consider hub and spoke implementations.  The drive to standardize on a single ERP system makes little sense when one subsidiary delivers services and the other manufactures goods.  Several large multi-national conglomerates leverage more than two-tiers of ERP to handle a warranty business, financial services, and power generation manufacturing.
  2. Country specific deployments. Deploying a full scale ERP solution makes little sense for new subsidiaries when options exist at lower operating costs and higher ROI.  One large Japanese manufacturer found cost savings with local based systems in North America and EMEA.
  3. Phased modernization efforts. Organizations looking to upgrade and modernize their systems may keep some legacy systems in place as they upgrade to more modern systems.  One large entertainment concern has kept their financials systems and updated their retail systems with a more modern, web services based, SOA architected product.

Figure 3. Vendors To Watch In Two-Tier ERP Apps Strategies

screen-shot-2010-03-02-at-71143-pm

Your POV.

Have you deployed a Two-Tier ERP strategy? How has it gone?  What’s worked? What’s not?  You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

Please let us know if you need help with your enterprise apps strategy by:

  • Developing your enterprise apps strategy?
  • Addressing disruptive technologies like Social CRM, Cloud Computing, SaaS deployment, and Two-Tier ERP?
  • Assessing the ROI of a Two-Tier ERP strategy?

* Not responsible for any factual errors or omissions.  However, happy to correct any errors upon email receipt.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Related Resources

20091203  Strategy: 5 Lessons Learned From A Decade Of Naught

20091222 Tuesday’s Tip: 10 Cloud And SaaS Apps Strategies For 2010

20091208 Tuesday’s Tip: 2010 Apps Strategies Should Start With Business Value

20091102 Best Practices: Lessons Learned In What SMB’s Want From Their ERP Provider

20091006 Tuesday’s Tip: Why Free Software Ain’t Really Free