Managing Automation - December 2007 - (Page 18) joshua greenbaum NOTES With the recent focus on SAP’s new mid-market, on-demand ERP offering, Business ByDesign, inquiring minds are wondering how well on-demand ERP can work for mid-market manufacturers. The question stems mostly from the fact that there’s little precedent: The main on-demand contenders, Salesforce.com and Netsuite, don’t support the manufacturing side of the business, though both sell on-demand to manufacturing customers. While it seems like a no-brainer that the main attributes of on-demand — no implementation costs, no ongoing maintenance and support infrastructure, no upgrades, etc. — will appeal to mid-market manufacturers, it’s theoretical until proven in the market. As it turns out, one precedent for offering ondemand to mid-market manufacturers reveals the potential, as well as some of the pitfalls, that SAP and others will face. The company is Arena Software, and it offers a product lifecycle management (PLM) product for mid-market manufacturers. It’s interesting that privately held Arena, still a relatively young company, can claim success in the PLM market; most of the companies that pioneered this market — Agile, UGS, MatrixOne, for example — have done quite poorly over the years and have been rolled up into much larger companies. Part of the reason Arena is doing well is that it’s avoiding some of the mistakes of the previous generation of PLM companies — which fought the PLM battle largely at the engineering/design level, instead of the more strategic collaboration level. Indeed, it’s at the collaborative level that Arena’s vision for on-demand, mid-market PLM works best. Its customers recognize that they need sophisticated product-related processes across the enterprise, not only in engineering and design, to 2007 On-Demand, Ready or Not josh@eaconsult.com As SAP launches an on-demand ERP offering into the mid-market, a look at precedents may indicate whether that market is even interested. compete against low-cost, overseas manufacturers. At the same time, two key aspects of Arena’s ondemand business show that having an on-demand manufacturing solution like Business ByDesign does not necessarily mean easy pickings for SAP. First, many of Arena’s customers don’t even have an ERP system (are you listening, SAP?). Arena is happy to build and maintain a bill of material on their behalf, along with managing compliance, documentation, and, perhaps most important, driving a lot of the information about the product lifecycle up to the executive level. Second — as if the lack of an ERP system weren’t already too much to bear — very few Arena customers with ERP software use SAP or Oracle. Most use products from Infor and Sage, both poohpoohed as unworthy competitors to SAP, but clearly they’re entrenched in this market. So, with all the vision that a dataset of one can provide, we can say that on-demand can work for mid-market manufacturing. Whether it can work for a big vendor such as SAP or Oracle, however, is called into question by the Arena example, which shows success despite SAP. Which highlights SAP’s challenge — and opportunity: If a little company like Arena can sell ondemand successfully, there must be (pardon the pun) some real demand. But if that demand eschews ERP systems in general, and SAP and Oracle in particular, then Business ByDesign may have a harder row to hoe than anyone expects. How SAP finesses this challenge — if it can — promises to be one of the more interesting sideshows in mid-market manufacturing for some time to come. ■ Joshua Greenbaum is principal of Enterprise Applications Consulting, based in Berkeley, CA. maonline managingautomation.com For more of Joshua Greenbaum’s views, visit: ❑ On-Demand, SaaS Get Real www.managingautomation .com/notes44 ❑ Reaping BPM’s Rewards www.managingautomation .com/notes43 ❑ Regulate This www.managingautomation .com/notes42 ma 18 December Photo: David Toerge http://Salesforce.com http://managingautomation.com http://www.managingautomation.com/notes44 http://www.managingautomation.com/notes43 http://www.managingautomation.com/notes42
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