Big-name vendors rush the mid-market

When it comes to software vendors and the push into the mid-market, the strategy, particularly around the hosted or application service provider model, may have evolved, but the goal remains the same.

Heavyweights such as SAP AG, IBM Corp., Microsoft Corp. and PeopleSoft Inc. continue to circle around the lucrative small to mid-sized business (SMB) space — which make up the vast majority of Canadian companies — with the hope of capturing their IT spending dollars.

Case in point: SAP recently announced that it is expanding its SMB offerings, launching its Business One integrated solution geared specifically to that market. According to the company, it now has a comprehensive two-tiered strategy for the SMB sector in the form of mySAP All-in-One and SAP Business One.

PeopleSoft has also announced its World Express suite, which is designed to let SMB customers deploy the company’s software quickly. The software will provide pre-defined business process templates for PeopleSoft World Financials, PeopleSoft World Distribution, PeopleSoft World Manufacturing, PeopleSoft World Human Resources, and PeopleSoft World Project Management.

Microsoft’s Business Solutions unit (MBS) is also slated to launch its Great Plains ERP software version 8.0 later this year. Microsoft said SMB customers can expect more than 120 product enhancements focused around manufacturing, distribution and project accounting capabilities.

The application service provider (ASP) model introduced amid much fanfare to the Canadian mid-market during the late ‘90s wasn’t quite ready for prime time, industry experts say. But that’s not to say the ASP model has been a bust, said Warren Shiau, a software analyst for IDC Canada Ltd. in Toronto. According to an IDC study, “soft” benefits of ASPs include a customer’s increased ability to focus on the core business, and an improved work environment. Since 2000, when CGI and SAP Canada announced the signing of an ASP alliance agreement, the SMB environment has evolved. “There has been a lot of learning of what works and what doesn’t,” said Anthony Upward, Toronto-based director of business architecture for CGI.

Today there is opportunity for the out-tasking of IT work on a project-by-project basis, Upward noted. According to Jeff Watts, senior vice-president, marketing and alliances for SAP Canada, users often will use staff from partners to manage and maintain their services at the customer site on a part-time or scheduled basis. Watts noted that SMBs are shifting toward “best-in suite” versus “best-of-breed” solutions. In term of Web-enabled technologies, while the market hasn’t evolved quite the way vendors expected, there is still room for growth.

Stephan Scholl, regional vice-president, PeopleSoft Global Services, said there’s no question that the hosting market has changed, particularly as Web-enabled apps come into play. “It’s the second go-around…we’ve moved from the early adopter stage,” Scholl said, adding that options such as remote hosting and outsourced hosting give SMBs a lot more flexibility and ubiquitous access. Adding up all the costs of ERP, it’s the upgrading costs that are major pain points for SMBs, Scholl said. It’s analogous to buying an automobile, Shiau said. “Canadians tend to spend less on their cars than Americans and keep them longer. So if that’s my buying pattern, it’s going to be hard to get me to splash out on a new car while I still think the car I have is perfectly fine for another four years.

“Even though the ASP model is going to take care of many of the issues involved in upgrading my software, I’m still more than likely incurring expense by moving.”

Regardless, SMBs are spending on IT, albeit cautiously. That’s because their IT requirements aren’t generally as complex as large users’ are, and there’s less scope within IT for smaller firms to be spending on, Shiau said

“That’s why we still don’t see big enterprise application suites being adopted by SMBs and why vendors know the real spending in our market, at least for now, starts when we get into upper mid-market and larger accounts.”

Simply put, if Canadian SMBs had relatively quick upgrade and technology adoption patterns compared to the U.S., more users would shift to ASP, he added.

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