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Mid-Size Enterprise Resource Management Applications

Vendors are rushing to get into this market, but industry analysts say they're not ready yetrn



This will be a busy month for vendors and resellers of enterprise resource management applications aimed at medium-sized companies.

At press time, following a frantic summer, PeopleSoft Inc. finalized its purchase of mid-size ERP specialist J.D.Edwards & Co. and was set to announce its newly

merged product lines.

With the purchase, PeopleSoft gains not only product it lacked for companies smaller than its traditional market, but a large reseller channel as well.

Oracle Corp. and its eBusiness Suite, which most analysts feel has been pushed to No. 3 among ERP vendors by that deal, is apparently still pursuing its hostile takeover of PeopleSoft.

Meanwhile, the Canadian division of SAP AG, the top dog in ERP, has been quietly spending the summer choosing 12 new channel partners for the imminent debut of its Business One suite for firms with up to 250 employees or $1 million in annual revenue. It’s a compliment to SAP’s All-In-One suite, a fixed-price “”lite”” version of its main application for mid-sized companies with up to $250 million in annual sales.

SAP also plans to increase the number of All-In-One resellers in this country from three to six before the end of the year.

Why the hullabaloo? With sales of ERP systems to large corporations drying up, software companies have been turning their eyes on the next tier of potential customers to keep revenues flowing.

Industry analysts say to be successful, ERP systems for this market have to be easy to implement, customized for some markets and be able to show a fast return on investment or demonstrable cost-benefit.

Of course, a mid-size American company is not a mid-size Canadian business, either in size or IT budget. Which begs a question: Should Canadian resellers be jumping on the mid-size ERP bandwagon now?

“”There’s not a lot of companies in the last three years that are spending on new software,”” observes Jason Mausberg, president of Plaut Canada, a Toronto-based reseller of SAP All-In-One, “”and I don’t see in the next year or two a lot of companies spending when they’re faced with economic uncertainty and a changing currency vis-a-vis the U.S. dollar.””

On the other hand, he hopes to sell 10 All-In-One solutions a year, which average $500,000 an installation for about 45 users. That would mean for him annual revenue of $5 million, which some resellers wouldn’t complain about.

Gilles Chalifour, president of O.T.O Global solutions Inc. of Montreal, an Oracle mid-market ERP specialist with about 35 customers, says “”there’s plenty of growth in Quebec and Ontario to support a $50 million business in implementations”” — which, he adds, his company hopes to hit within five years.

O.T.O., which won’t look at a company with less than $50 million in annual sales, has 30 employees, an office in Ontario and is in the middle of hiring five more staff.

“”It’s been very good the past three years and we see it only getting better for the next three,”” he said.

IDC Canada, however, is extremely cautious. It estimates in 2002 spending on mid-sized ERP applications in this country totalled $325 million, which will grow to a mere $389 million by 2007.

“”The opportunity isn’t entirely indicated by our numbers because they’re biased towards the conservative, until we see numbers from vendors that they are starting to sell,”” explained software senior analyst Warren Shiau.

The fact is, says Shiau and colleague Paul Edwards, director of partner and channel programs, major ERP vendors are only beginning to attack the mid-market here. PeopleSoft is dealing with absorbing JDE; Oracle sells its applications direct and emphasizes its outsourcing services, they note.

Few vendors have comprehensive channel strategies, said Edwards. “”There’s going to be great expectations from resellers that vendors will pull up their practice capabilities,”” he added.

There are also two wild cards: Microsoft and Linux. Microsoft has an assortment of ERP-related applications — Axapta, Navision, Great Plains and Solomon. It hopes to have a common .Net platform for them, but not for several years. That gives competitors an opportunity, for if and when that platform emerges, Microsoft could be a powerhouse.

As for Linux, it too has the possibility of developing into a powerful platform, said Edwards, but only if business logic is built into the operating system.

VARs and independent software vendors should also note there are ample opportunities to customize solutions for mid-size ERP applications.

But Robert Anderson, research director at Gartner Research for ERP small and medium businesses, warned resellers in this market might be squeezed into that niche if Microsoft makes mid-ERP a commodity.

“”Make some bets on which ERP vendors are going to be there in the end,”” he advised. “”If you’re dealing with a small ERP provider, thoroughly understand their vision.”” And have a back-up plan.