If the Internet is the fuel for the global economy, the mid-market is the engine that makes it work from a growth, stability, and innovation perspective. Traditional enterprises have typically built and deployed systems used exclusively by employees, with a focus on internal processes, improving efficiencies, decreasing costs across all functional business areas. With the proliferation of the cloud and The Internet of Things (IoT), businesses are now being forced to deploy solutions that focus on business models that revolve around interactions with a myriad of disparate constituents from; customers, suppliers, partners, employees, and now remote assets/devices.
Software companies like:
- Traditional Enterprise Applications Vendors: IFS AB, Infor, Microsoft Corporation, Oracle Corporation, PTC Inc., QAD Inc., Sage Group plc, SAP SE, SYSPRO, TOTVS (Brazil), and Yonyou (China)
- Born-in-the-cloud Applications Vendors: Acumatica, Epicor Software Corporation, Kenandy Inc., NetSuite Inc., Ramco Systems, SYSPRO, and Workday Inc.; develop mid-market solutions to help their customers take advantage of these new market realities.
In today’s hyper competitive marketplace, the mid-market has many of the same complications and challenges the Fortune 500 take on every day. Each company has its own and unique supply chain, their own business processes, scare resources, and the need to drive ROI and TCO from their enterprise systems.
IFS World 2015 (Credit: Christopher Wilder, Moor Insights & Strategy)
Five years ago, ERP systems were, in many cases, a very expensive yet, necessary cost, that took a long time to implement. Lengthy implementation cycles forced vendors into a no-win situation: build for today and get it done quicker or guess where your organization would be in five years and build towards that. With the explosion of the cloud, today’s midmarket executives can not only implement enterprise systems in a fraction of the time and cost, but they can exploit new external channels and media to find and retain more customers, link external systems with existing internal systems to increase efficiencies, and consider opportunities to simultaneously decrease costs and increase revenue.
We see several high-level enterprise systems trends that are helping mid-market companies to be more efficient and to interact with all aspects of their operations, supply chains, and customers:
- Configuration over Customization. The days of long implementation cycles and a laser focus on systems of record are gone. Today’s mid-market companies are deploying horizontally integrated systems that incorporate vertical or domain specific functionality. They want an integrated Supply Chain where they can have real-time visibility across the entire network. Consolidating contextually relevant information into a single, customizable, dashboard has become vital. User Interfaces are becoming clean and easy to use and customize to fit the way each user interacts with the system. Executives and employees no longer want to search through files, tables, and systems to find the information relevant to their role. Real-time intelligence and data analytics are helping companies to make better, faster and well informed decisions. While I have not seen all of the most recent updates in the industry; IFS AB, Epicor Software Corporation, Oracle Corporation, Microsoft Corporation, SAP SE, and Workday Inc. have demonstrated leadership when deploying highly customizable and integrated solutions with easy to use dashboards and real-time analytics.
Implementation partners and consultants must reevaluate their value within the ERP ecosystem, especially as many vendors adopt a vertical approach. Many partners and consultants cannot follow suit and lack the skills to execute. Other vendors, like Infor, have launched micro-vertical partner programs to allow partners to develop and deploy industry-specific applications. Vendors will need to examine the skills and expertise of their partners and in some cases reevaluate their own partner certification, training, and channel route-to-market programs.
- Mobile, Social, and Collaboration are mainstays. In the world we live, there are few people who consider mobility, social networks, cloud, and collaboration to be disruptive factors – with the exception of the some in the midmarket. These disruptions have forced midmarket companies to embrace perpetual change. Where in the past it could take days, companies must now immediately respond to interruptions in their supply chain. Mobile and social capabilities allow companies to better track and manage customer interactions or operational disruptions. Most enterprise application vendors have incorporated mobility, collaboration and notification systems that help to facilitate improved communications and process between lines of business, customers, and employees.
Real-time collaboration across functional business areas reduces risk, improves application usage and adherence, faster response times, and streamlined workflow. Further, by leveraging structured data on parts, suppliers, components, etc. with unstructured data from social networks on pricing trends, quantities, and global intelligence are helping companies to better manage its supply chain and overall operations. Firms like Jabil Circuits are helping its customers to improve their procurement process through a vast unified network, real-time monitoring of supply chains, and analyzing social and other data sources (sensors, weather, traffic, news/events, etc.) to bring significant efficiencies and price competitiveness.
- Cloud is the ultimate business enabler. Unless you’ve been under a rock for the last couple of years, you know that cloud has become the ultimate business enabler. It is crucial for both vendors and midmarket companies to ensure they choose the right cloud provider with the right delivery model. Not all applications and functionality belong in the cloud. Moreover, web enabled does not necessarily mean cloud enabled. There are many factors midmarket companies need to consider when evaluating cloud providers:
- Midmarket Companies need to decide what goes into the cloud and what doesn’t. Larger companies are hesitant to move mission critical data into the cloud, midsize companies tend to be more willing to move everything. Most organizations egregiously underestimate the costs, data & bandwidth, time, compatibility, and integration requirements with cloud migration. Choosing a cloud provider that can make the migration process easier and will help reduce overall costs, improve TCO and ROI – while lowering blood pressure.
- Geographical footprint, security controls (see my article on Cloud Security), and data sovereignty & governance compliance needs to be a major part of the planning process. It is important for vendors to understand where their data will physically reside (or at rest), especially if multiple countries are involved. Many countries have very strict data sovereignty and security laws that cover; data & the customer’s personally identifiable information (PII), payment/credit card handling, and how/where data transmission can occur across borders. It is important to choose a provider that can accommodate data at rest geographical challenges from a customer and enterprise perspective.
- Service Level Agreements (SLAs) and performance guarantees need to be consistent and cover all layers of performance in the stack from; applications, security, data, etc.
- Born-in-the-cloud (BIC) versus cloud enabled. If you do not have a legacy or on premise environment, BIC is a good option. However, as complexity and integration across applications and domains increase, it might makes sense to rely on the industry stalwarts like IFS AB, Microsoft Corporation, Oracle Corporation, Sage Group plc, or SAP SE to provide their history, legacy, domain expertise, and relevant skills to provide a tailored reference architecture for moving to the cloud – whether it’s a Private, Public or a Hybrid approach.
We do expect to see some consolidation in this marketplace over the next few business cycles, especially from Oracle Corporation, Microsoft Corporation, IFS AB, and even some of the BIC providers. From a consolidation perspective, vendors like; Epicor Software Corporation, Kenandy Inc., Ramco Systems, Salesforce.com, ServiceNow, ServiceMax makes for interesting bar talk – curious to see where the chips fall.
Each model has its strengths and weaknesses, but all have the ability to deploy from a cloud environment (if they don’t, they will join the dust-bin of dead companies). SAP SE has been the most agnostic when it comes to deploying in the cloud by partnering with multiple public and hybrid providers, IFS AB on Microsoft Azure, while Oracle Corporation and Microsoft have made significant investments in their own data center infrastructures.
- Cloud Brokers and Connectors are the new systems integrators in the midmarket. This is one of the most fascinating trends in the space, especially from a cloud migration and integration point-of-view. It seems nearly all of the major cloud service providers (CSPs) have a Docker Container strategy to automate cloud migration and data integration (reminds me of the COM and CORBA initiatives in Object Oriented computing in the late 1990s). Cloud brokers and connectors have made significant acquisitions in the API/Middleware space such as; Dell’s acquisition of SaaS application integration platform Boomi, Cisco Systems acquisition of API aggregator Tropo, and the rise of application aggregators like Temboo in databases & devices, and Telestax in telecoms/communications integration, and Golgi in IoT and Mobility.
Cloud brokers and connectors are providing the glue to tie disparate applications and services between cloud providers. This will no doubt displace much of the work of mid-market ERP implementation providers, but with the demise of long implementation cycles comes a more efficient, better integrated, and faster ROI from enterprise systems. Consultants will need to adjust their business models to not just thrive, but survive.
- The Internet of Things (IoT) and Wearables will change how midmarket companies better serve their customers. The mid-market stands to benefit from IoT and wearables more so than larger organizations. This is especially true in Field Service Automation and Enterprise Asset Management where many of the companies in this space, especially those on the ground, are mid-market contractor organizations. From HVAC repair, Oil Field Maintenance, Cable/Phone Repair, etc. nearly all are small to mid-market contractors.
IoT and wearables will allow on the ground technicians to interact in real-time with devices and other technicians to improve Mean time to Repair (MTTR), alerts and monitoring of devices, improve dispatch and remote fix, monitoring and status of assets for warranty, audit, and maintenance information. By reducing the time a technician is on-site, or even worse returning to a previous fix will improve service cost optimization and improve overall efficiency.
The midmarket has the same nuances and challenges of many larger companies. Each wants to have an integrated supply chain, end-to-end real-time visibility into all aspects of their business, ease of use with existing and new enterprise systems, and the ability to improve and extend interactions with their customers and business partners. Many vendors in this space have recognized that providing better; intelligence, integration, and interactions with their customers will drive revenue and customer satisfaction. Companies like; IFS AB, SAGE, SAP SE, Oracle Corporation, Epicor Software Corporation, Workday inc., and Infor have established a strong focus and presence in this space that will help prime the engine while brokering the next generation of enterprise applications for the midmarket.
Over the next few months we will be publishing more research and comparative analysis of enterprise software vendors in the midmarket and beyond. Highlighting innovation, use cases, and got-to-market strategies. Please feel free to reach out to me via email at email@example.com if you have any questions or would like to set-up a briefing.