The midmarket may very well be the last remaining battleground for large enterprise resource planning (ERP) vendors, analysts say.
However, success in this space will depend largely on how effectively ERP companies are able to forge and take advantage of new channel partnerships.
Tapping into the midmarket will require reaching out to small to medium enterprises (SMEs) through independent software vendors, says Mauricio Rodriguez, senior research analyst with Info-Tech Research in London, Ont.
He said “SMEs need a vendor who is accessible and who understands their needs.”
Rodriguez said with few opportunities for new license sales in the top tier of the enterprise software market, the major vendors – including SAP AG and Oracle Corp. – are aggressively targeting the midmarket.
The focus, he said, will be on companies that, in the past, couldn’t afford to implement ERP applications.
While establishing a partner base ranks top of the list, success will also depend on ease of deployment, whether hosted ERP or software-as-a-service (SaaS) is offered as an option, and the relative merits of the various vendors’ SaaS offerings.
Therefore, successful ERP vendors will present “many flavours” that cater to many different types of SME customers, says Rodriguez.
For example, he says, smaller companies may prefer the SaaS option because it’s affordable, and they avoid software license and hardware costs, as well as the expense, labour and IT resources required to support an in-house installation.
Relatively larger companies may prefer to implement the application on site, but can take advantage of a pre-configured tool that doesn’t require much customization, the Info-Tech analyst says.
Examples are applications with industry-specific functionality – that can also be implemented within specific verticals – such as SAP Best Practices, Oracle Special Edition, and Microsoft Dynamic AX.
SAP’s dual approach of building many flavours of products and partner channels will serve them well in the midmarket, says Joshua Greenbaum, analyst and principal with Enterprise Applications Consulting in Berkeley, Calif.
Those “flavours” include the recent release of SAP All-in-One, an enterprise service-oriented architecture product, and very recently, hosted and on-demand offerings.
“I think they’ve got the products. The next challenge is to build on partner channels,” says Greenbaum.
Rodriguez too believes that SAP – and Oracle – would benefit a great deal by expanding channel partnerships, given that they already have an SME presence.
He says the focus of the duo has long been on large enterprises, and it’s only in the past few years that they have consciously focused on the midmarket.
This wasn’t lost on everyone, says Rodriguez.
Microsoft Corp. and some smaller ERP companies, such as Sage Software Inc. and Net Suite Inc., have already made considerable inroads in the SME space.
Another Canadian analyst agrees a strong partner network is an essential success pre-requisite in the ERP midmarket.
“Partners can help [ERP software vendors] reach the thousands of companies out there,” says Joel Martin, vice-president of software at analyst firm IDC Canada in Toronto.
He notes that while Oracle and SAP have “strong” midmarket partners, their partner base is considerably smaller than that of Microsoft.
“It really comes down to how well large companies such as SAP and Oracle [use] their partner network.”
The SME space is and continues to be a growth area, says Conrad Mandala, vice-president of SME with SAP Canada Inc. “I think a strong partner base is going to be crucial to the long-term viability and strength of SAP in this space.”
SAP recently announced SAP PartnerEdge Channel Partner Program, designed to help partners adopt new SAP technology and provide incentives to develop their own micro-verticals.
As for Microsoft, while the company has a broad and strong partner network, Greenbaum says those partners will have to be closely managed in light of channel conflicts over the last year.
He says product-wise, the functionality that has served Microsoft well in the top-tier market may render the appearance of complexity in the midmarket.
“They’re enhancing products to make them more accessible to top-tier enterprises; however, their challenge is to ensure they don’t lose the momentum they’ve had in the midmarket.”
In an attempt to retain that momentum, Microsoft, like SAP, is actively rolling out on-demand products.
Oracle was “an early pioneer” in software-as-a-service offerings and has various “legitimate” products out there, says Greenbaum. But he said a focus on acquisitions in recent years caused Oracle’s midmarket hold to languish.
Greenbaum notes that of the other big players in this space, Atlanta-based Infor Global Solutions Inc. has a broad offering, covering more than 50 products scattered over a dozen industries. However, he believes the company “has less to offer in terms of a single concise midmarket offering.”
There seems to be a consensus among analysts that success in the ERP midmarket hinges as much on expanding channel partnerships, as it does on having versatile products and service offerings.