COST ACCOUNTING

Enterprise software selection is a big decision for any organization. Licensing fees are costly, and choosing the software that matches the company’s business model can be a daunting decision. If the enterprise decides to go with a particular vendor, and the vendor does not deliver, the company will incur a large financial loss. Thus, when selecting an enterprise software solution, there are many factors that need to be considered in the decision. These include the quality of the product or solution; customer service; the purchasing price of the software or license; and other cost factors involved in the process of procurement.

In purchasing an enterprise software solution, there are three types of costs:

* direct costs (related to purchase, implementation, and other immediate costs arising from purchase);
* opportunity costs (the costs arising from forgoing the benefits of an alternative solution); and
* indirect costs (the costs that are not directly calculable, but that impact the business once the solution is implemented).

To curb the dilemma of unwanted costs of any kind, one way an enterprise can evaluate vendors is by examining their technical support plans. This article will examine the implicit costs behind the support plans, and help users avoid losing revenue due to inefficient or unresponsive technical support.

Cost Analysis

The following sections deal with the three different types of costs. To make an educated decision on the software solution and support plan, enterprises should consider these costs as a way of minimizing the risk of having poor technical support response times from vendors. The consideration of these costs can be used as criteria for an informed decision.

Anatomy of Direct Costs

In order to give a basis for the analysis of costs relating to enterprise software, the general formula should be noted:
total cost of solution = cost of actual software or licensing fee + cost of support + cost of implementation + cost of maintenance

The weights assigned to each component in the model are assigned as a rule of thumb, based on data from typical implementations:

1. cost of actual software or licensing fee = 50%
2. cost of support = 20%
3. cost of implementation = 30%
4. cost of maintenance = 10%

Note that although some companies consider maintenance and support to be a single factor, for proper analysis they must be viewed as two different components.

This formula is the foundation on which analysis can be started, and the weights should give the individual or team searching for an enterprise solution a basis on which to proceed.

A second criterion for software selection is the service-level agreement (SLA). Decision makers should obviously be cognizant of the terms and conditions in the SLA. Since support represents 20 percent of the total cost of the solution, the type of support negotiated between the enterprise and vendor is critical to minimizing the risk of having a bad technical support plan.

Anatomy of Opportunity Costs

Now that the direct costs have been established, the second type of cost in selecting the support plan is the opportunity cost. As mentioned above, opportunity cost is defined as the foregone opportunity of having one benefit over another.

For instance, consider an individual with particular skills and a certain level of education, who receives a job offer. This individual can either accept the position and earn the salary which is offered, or forgo the opportunity by pursuing further education or training. The total opportunity cost of choosing the second option is the cost of education, plus the foregone income that would have been earned had the original position been accepted.

We can now apply this concept to the selection of support plans from vendors. The power of this idea lies in comparing vendors side by side. Let’s say there are two vendors in the enterprise resource planning (ERP) market, selling identical enterprise software solutions, with the only difference lying in their technical support plans. The organization purchasing the enterprise application looks at both these vendors, and does a comparison. Let’s say that vendor 1 has a 50 percent better response time than vendor 2 in terms of responding to any technical problem (ranging from a simple workstation problem, to the entire system crashing); thus, vendor 1 delivers support when the enterprise needs it. The opportunity cost that the organization incurs by purchasing the product from vendor 2 is the amount of support paid to vendor 2, plus the revenue lost due to the solution being down.

To be clear, since vendor 1 is 50 percent more responsive, had the firm gone with vendor 2, the opportunity cost of purchasing this solution would have been the cost of licensing, plus all the implicit costs (explained below). This solution is 50 percent more costly than that of vendor 1 in terms of the associated downtime and loss of production.

Anatomy of Indirect Costs

As mentioned above, indirect costs may not be evident in the initial purchase of the solution. They are not directly quantifiable and cannot be measured in the accounting sense. However, they can be measured by other means. They include the costs for the additional pieces of equipment and labor that have to be resourced in order for production to continue without loss of time when the solution is down.

The most important indirect cost (and by far the largest) is the revenue lost when the solution is down. In other words, as long as the solution is down, the enterprise cannot be productive, and is thus losing money during every minute of downtime.

Other general indirect costs are incurred when an enterprise solution is down:

*

Wages
People who are working on solving the problem are losing the opportunity to be productive elsewhere, and are thus costing the enterprise the wages lost in trying to solve the problem.
*

Additional human capital
Additional people may need to be allocated in the IT department or in the production environment in order to prevent production stoppage or slowdown.
*

Rental costs
The enterprise may need to rent additional software, hardware, or equipment in order to prevent production stoppage.
*

Time
Although time is not generally measured as cost, it is the most essential resource lost when a solution is down. Time is directly linked to productivity, revenue, and every other variable of operation. If the software application is down, time (for both equipment and human capital) is devoted to finding a solution.

Other examples of indirect costs include the average shift time of the people working to get the solution working again; rollback time; the number of phone calls or e-mails made to the vendor’s technical support department; and length of time it takes to resolve the problem. These costs, all directly related to time (in different measurable forms) thus create a framework for enterprises to evaluate vendors in a side-by-side comparison.

Depending on the industry and type of application, other types of costs may also be incurred. However, the above is a general guideline to assist enterprises in the selection of their technical support plans.

Leaning toward a Methodological Approach to Curbing Lost Revenue

To avoid the cost traps that organizations can fall into, there are a number of options that they can implement in order to streamline their productivity and minimize lost revenue.

One way organizations can do this is by investing in a solution support methodology. In resource terms, the concept of investment is that when individuals or firms put forth money to leverage equipment or human capital, they expect to gain revenue in return.

When an enterprise needs a solution, one way it can invest into the business in order to cut lost revenue is by taking a best practices approach to its support plan. One such approach is put forth by the Information Technology Infrastructure Library (ITIL). This framework stipulates how a company can manage each process, and thus eliminate the indirect and opportunity costs mentioned above. Applying the idea of investment to this methodology, by investing in the future, companies can minimize the confusion that ensues when a solution is down. In other words, investing in this type of methodology will help everybody use the current enterprise solution, and help the organization to develop processes for when the solution is in trouble.

There are also a number of software applications that a company can use along with the methodology to complement organizational processes in order to minimize the risk of having poor and inefficient technical support. These might include a service management application (SMA) or a business activity model (BAM). An SMA or BAM will be able to detect a technical problem when it occurs, and report it to the IT manager responsible for the application. Large-scale vendors will usually have these types of tools already integrated into their software, but when considering a solution, it’s a good idea to verify that an SMA or BAM is in place.

The Final Word

In terms of technical support, organizations may not necessarily follow a formalized process for technical support selection and evaluation. However, as noted above, technical support is an extremely vital component to any organization running enterprise software. The financial impacts of poor technical support can affect the total cost of ownership (TCO) and return on investment (ROI). The impact is even more severe if the solution is not a proper match for the business. Poor technical support impacts the life cycle of the solution, and also causes frustration for the people actually using the solution—this can translate to increased stress in the workplace, which is another indirect cost that nobody wants.

To reiterate, when an enterprise is searching for a solution, they want to look at the following factors for each vendor:

1. What type of service does the vendor offer? (One example would be three-tiered support.)
2. Does the vendor have some form of SMA or BAM in its solution?
3. Is it possible to obtain recommendations from other users that have selected the vendor, and to get a general view of how responsive the vendor was in solving the problem?
4. How does the vendor fare in terms of the quality of the answers it gives to users?
5. What is written in the SLA? For instance, does the vendor stipulate how it will deal with downtime and how fast it will deal with the issue?

As for the users, they can curtail risk by adopting an ITIL methodology (or similar) in order to minimize confusion when downtime occurs and increase speed to uptime when something of this nature arises.

SOURCE :http://www.technologyevaluation.com/research/articles/minimizing-the-total-cost-of-technical-support-for-enterprise-applications-19949/

Introduction

This second part of an extended note on e-procurement examines the necessary steps after a business decision to go with e-procurement has been made based on the information and criteria covered in Part I.

E-procurement is an integrated system of services and technologies that provides a seamless bridge between buying and selling businesses. The e-procurement process begins at the planning stages within the buying company and extends through to the delivery and collections services of the selling company and the receipt and payment services of the buying company. E-procurement shatters walls, enhances controls, and eliminates time delays in the requisition to receipt process.

About This Note

This Technology Note covering the e-procurement is presented in two parts. The first part covers:

1. The Promise of E-Procurement

2. E-Procurement Myths and Reality

3. Preparing for an E-Procurement Initiative

The second part covers:

4. E-Procurement Architecture

5. Selecting an E-Procurement Partner(s)

6. Implementing E-Procurement

E-Procurement Architecture

Procurement automation begins with budgeting and ends with the retirement of capital assets or consumption of raw materials. Failure (or choosing) not to include any of the following dimensions of the process de-optimizes the investment at best and opens the process for subversion at worst. Following are features found in product offerings and customer requests with examples of what each function addresses.

1.

Budgeting - is the basis for Automated Expenditure Authorization for Cost Center-based controls and accounting. When a Requisition is either initiated by an authorized individual or authorized by one, the Procurement Engine should compare the Requisition against Budget Levels and other Authorization Rules then forward it to the supplier for fulfillment.

Budgeting services include:

* Expense items

* Capital items

*

Cost Allocation Rules

2.

Project Structure - is the source of Automated Expenditure Authorization project-related controls and accounting. It establishes approval and authorization routings that override or clarify normal budgeting processes. Where Project Accounting is employed, it also establishes the hierarchy of accounts that will be used to capture project costs.

Project Structure services include:
*

Expense items
*

Capital items
*

Cost Allocation Rules

3.

Purchase Contracting - establishes commitments and agreements between suppliers and buyers. Requisitions, Receipts, and Payments leverage Purchase Contract data to set up Purchase Orders and Validate Billing. Goods Receipt and Payments post attainment of purchase commitments and consumption of sale commitments.

Purchase Contracting deals with:
*

Quantity minimums
*

Commitment levels
*

Expiration dates

4.

Bid Management - involves a series of steps from Request for Information to Purchase and Post-Acquisition activities. These steps leading up to a Purchase Order are time consuming and highly prone to contention. Bid Management is concerned with:

* Request for Bid posting (Open and Directed)

* Supplier response posting

* Standard Terms & Conditions

5.

Approval & Automated Authorization - are two distinct process steps. Approval is a statement of concurrence that no known conditions exist to prevent authorization. Authorization empowers action. A combination of automated and manual intervention steps leads to commitment of a purchase order.

Approval services include:
*

Budget comparison rules
*

Authorization Rules
*

Approval Rules
*

Workflow
*

Escalation Rules
*

Bypass Rules
*

Exception Handling Rules

6.

Requisitioning - initiates the procurement process. The more simple and comprehensive this process is, the more useable and less subverted the entire process will be.

Requisitioning services include:
*

Catalog of standard goods, services and information
*

Standard kits
*

Alternative product selection assistance
*

Order amendment
*

Custom routing
*

Shipping, handling and delivery instructions
*

Price variance allowance
*

Delivery variance allowance
*

Cost allocation
*

Order consolidation and contingency


7.

Purchasing - establishes procurement sources and coordinates standard product selection, supplier qualification and financial controls. There is a tendency to automate the traditional Purchasing function rather than re-defining it with an e-procurement system. E-procurement systems are designed to eliminate most of the traditional Purchasing department work and enhance the value of the rest.

Purchasing services include:
*

Catalog management
*

Purchase contract management
*

Service contracts
*

Order release
*

Communication of specifications, terms and conditions
*

Expediting
*

Supplier interaction
*

Request for Information, Request for Proposal and Proposal Analysis

8.

Receiving - must match packages and other modes of product receipt to the Purchase Orders that authorized their delivery. Delays occur in this process when goods received cannot be matched to expected deliveries. Often this is caused by differences in product identifiers between the purchasing and sales systems.

Receiving support services include:
*

Under-shipment and over-shipment
*

Substitute products
*

Returns
*

Recipient locator
*

Forward view of expected deliveries

9.

Inventory Management - establishes replenishment rules for stocked goods as well as for supplier-held inventory such as forms and personalized promotional materials.

Inventory Management features include:
*

Maximum / Minimum and Economic Order Quantity rules
*

Associated goods relationships
*

ECO cut-in for manufacturing and engineering materials
*

Phase-in and Phase-out rules for non-manufacturing / engineering materials
*

Alternate products
*

Stocking location identification
*

Drop-ship

10.

Accounts Payable - must match receipts to purchase orders and process payments. Accounts Payable delays can bring the process to a halt when a supplier places a Credit-Hold on the account.

Accounts Payable services include:
*

Automated invoice / receipt matching
*

Batch vouching of payments by time-period and / or payment amount
*

Automated invoice exception authorization

11.

Interfaces - provide links to other operational and planning systems. Robust interfaces assure audibility of financial and inventory systems. They also assure that notification and workflow systems keep procurement-related transaction flowing.

Interface services include:
*

Reference links between functions allow one function to collect data from another.
*

Requisitioning copies price and delivery data from a catalog.
*

Workflow selects 'next step' from Approval and Automated Authorization.
*

Update links between functions map progress.
*

Payment posts Actual Cost to Project Control
*

Receipt posts order fulfillment to Purchasing and Accounts Payable
*

Application System links connect e-procurement to other systems.
*

Procurement obtains engineering drawings from Product Data Management
*

Workflow sends messages through e-mail
*

External System links connect e-procurement to trading partners.
*

Local e-procurement and external Marketplace
*

Workflow to logistics companies

12.

Exception Processing - is essential to the efficiency and value of an e-procurement system. The vast majority of transactions should flow through the system without human interaction. When an exception (workflow delay, budget exceeded, approval declined, shipment error, invoice error) is detected, notification must take place promptly and resolution must be automatically expedited.

13.

Analytical Processing - is essential to process improvement and supplier management. Process measures and reporting that identify the source of delays and exceptions will allow processes to be improved either by adjusting rules or through training. Reporting that focuses on product purchase patterns, product delivery, and supplier factors to support price negotiation and vendor selection.

Selecting an E-Procurement Partner(s)

The marketplace for e-procurement systems is quite broad and complex. Products range from complete application suites to highly configurable tool kits. Similarly, suppliers range from capable technologists to experienced business automation professionals. To make things more confusing, there are often multiple suppliers involved in the process, each providing product components or integration services. Finally, there is great volatility in the technology used to deploy e-procurement. Suppliers, products, and processes change rapidly making the selection process quite difficult.

The following guidelines should minimize risk:

1.

Work quickly once scope and design are established.
2.

Avoid proprietary technologies and protocols. Even though products are System Marked or Patented, they should be built using non-proprietary tools. (Not a simple task!)
3.

Seriously consider outsourcing catalog construction and maintenance. This requires unique skills and is a critical path item.
4.

Avoid the need to acquire new skills and positions to make the system work.
5.

Give extra points to a supplier who has worked with several of your suppliers.
6.

Build an idealized model of characteristics for the solution, assign weighting factors and map supplier solutions to the model to identify differentiating and preference factors.
7.

Resist the temptation to work with 'the vital few' criteria. It is the sum of small variances from dozens of characteristics that cause cost and schedule overruns.
8.

Validate all vendor claims through customer references. This is non-trivial when products and tools change dramatically from one implementation to the next. Employ knowledgeable assistance.
9.

Understand the business model and financial performance of suppliers and develop confidence that the partnership will last through implementation and a few change cycles.
10.

Understand the technical architecture and capabilities of the suppliers to assure their ability to deliver, integrate, and maintain the system.

Implementing E-Procurement

E-procurement is seven parts process engineering and three parts information technology. Even with the best-matched technology and most capable technicians, these programs can fail partially or completely during deployment. The most common causes are lack of capability and excessive need for handling exceptions.

The following guidelines will reduce deployment risk:

1. Do not rely on executive sponsorship to make the program a success. This is necessary but insufficient.

2. Involve lead users and as many others who will be affected by the new system early and often. Use one-on-one discussions with lead users and executives. Use focus groups where possible to communicate changes and obtain feedback.

3. Identify conflicts and issues early and deal with them promptly.

4. Build the technology infrastructure and performance management systems first.

5. Build the technology systems that are least understood early to reveal issues early.

6. Pick internal clients and external supplier for early victories. Deploy internally, to procurement professionals and 'friendly' users and suppliers first and early. Sign up the most popular
and cooperative suppliers before taking on controversial ones.

7. Design and deliver management reports before going live.
Measure performance and traffic as early as possible in the deployment process.

8. Stress test the systems transaction and exception handling capacity under controlled circumstances.

9. Employ message oriented middle-ware between all applications.

10. When testing, provide extra counseling and monitoring to secondary players (Receiving, Accounts Payable, Project Management, Accounting) to avoid early misuse that leads to system data corruption.

Conclusion

This note provides the information necessary for proper preparation and implementation of an e-procurement system. The benefits should provide reduced inventories, lower procurement costs, lower product costs, shorter procurement cycle-time, higher (internal) customer satisfaction, and higher value-add from procurement professionals.

SOURCE :http://www.technologyevaluation.com/research/articles/e-procurement-is-not-electronic-purchasing-part-ii-16214/

For the upper mid-market, the tier 1 vendors' offerings remain complex applications, and the Internet architecture and new intuitive interfaces can mitigate that only so much. This perception of complexity is ammunition that the incumbent tier 2 vendors will continue to manipulate in order to hinder their bigger brethren's attempt to penetrate incumbent tier 2 vendors' traditional stronghold.

Furthermore, not all powerful functionality (such as SRM or PLM) is readily available for many pre-configured solutions, which may be a serious drawback when competing against the solid tier 2 vendors which have long offered their entire suites without any disparity between solutions for bigger and smaller customers (for example Intentia, IFS, QAD or Glovia). The "Accelerated Solutions" or "All-in-One Solutions" while enabling large vendors and their channel to offer a fixed price and fixed time implementation program in modular way, may sometimes not necessarily offer total extended-ERP functional scope but still only a part thereof. By the time the customer puts together modules to build a full collaborative enterprise system for a mid-market company, and then adds up the multiple implementation time and cost, all the touted benefits may be annulled when incumbent mid-market vendors cover all the bases with their well-entrenched offering.

While fixed time and cost solutions delivered packaged from pristine laboratories do have their appeal, mid-market prospects are becoming increasingly savvy by asking for more than just these implementations which are perceived as "cookie-cutter approach". Therefore, the likes of SAP will have to repeatedly prove that they have not taken yet another like approach, but rather each of its solutions is preconfigured to reduce cost and complexity, while allowing for available extensions and smooth upgrade path to the flagship large application, which are all based on each customer's need.

This is Part Two of a two-part tutorial.

Part One covered the historical relationship of tier 1 vendors with SMBs and the current upper-end market.

The Lower-End

Moreover, tackling the lower market segment has proven to be even a much tougher "nut to crack", for several reasons. The main reason is that this is the home ground of the likes of Intuit, Microsoft Business Solutions (MBS) (see Microsoft Keeps on Rounding up Its Business Solutions), the Sage Group, whose US subsidiary is called Best Software (see Best Software Delivers More Insights To Its Partners [As Well As To The Market]), and which has recently acquired Softline and ACCPAC (see ACCPAC—Being Much More Than Meets The Eye), two renowned vendors in the SMB sector and with particular strength in certain geographies. The list does not stop here, given the likes of Exact Software (see Exact Software Working Diligently Towards the "One Exact" Synergy), and Epicor Software, which has lately had its share of recovery and subsequent acquisitions (see Epicor Conducts Its Own ROI Acquisition Rationale) and which is soon to be merged with another SMB stalwart, Scala. Finally, there is a number of other highly specialized smaller companies catering to specific industries for accounting and manufacturing systems, while also building simple homegrown systems to handle functions like CRM or sales force automation (SFA).

The above vendors understand this market and have thus gained market and mind share and loyal customers. In addition to product offering, they have long heavily invested in recruiting, motivating and supporting the resellers that service the segment. There are also influencers like certified public accountants (CPAs) and small and midsize accounting companies that make recommendations to their clients which packages to deploy. Sage and ACCPAC have for decades been cultivating awareness and relationships within this community, which can be neither easily nor quickly toppled.

These vendors' knowledge of their customers' businesses is reflected in product interfaces, relatively uncomplicated functionality, attractive price points, and in making application programming interfaces (APIs) available to external developers to help integrate their primarily accounting-based products with vertical market extensions provided by their partners. Some of them also offer "no-frills" online or retail sold, entry level or "feeder" business-application packages that attract small businesses early on, such as BusinessWorks Gold, QuickBooks Premier, Peachtree, or ACCPAC Simply Accounting Pro. These vendors provide more advanced functions and more scalable software as the small businesses grow. Further, some smaller resellers of these vendors grant customer the rights to their applications source code, which has been unheard of by the larger vendors, despite many failed implementations' publicity coming exactly from these, which additionally may make smaller business skeptical and reticent to deal with tier 2, let alone tier 1 providers.

Most of the above SMB incumbent vendors have also embarked on major projects to converge disparate functionality within several acquired product lines into new generation of business applications. While these undertakings are still largely a lengthy work-in-progress, the promise is within unified modern architectures that should allow resellers to sell extensions to the applications, while preserving the migration path for the foundation accounting or back-office components.

Recently, for example, Microsoft has released Microsoft Business Network (MBN), a web-based communications network that allows transactions to be exchanged between trading partners via XML or electronic data interchange (EDI), tied directly into ERP applications of Microsoft Office applications. MBN is a combination of on-premise software integrated with Microsoft Office, MBS applications (albeit currently only with MBS Great Plains) or Microsoft BizTalk Server, and hosted Web services. It was designed to help businesses more easily and effectively work with their trading partners (suppliers and customers) through a fully automated Microsoft .NET-connected solution. This thereby increases efficiency with a deep degree of integration throughout their business and desktop applications and lowers the total cost of business-to-business (B2B) collaboration. In other words, MBN uses the messaging and collaboration facilities of Microsoft Outlook and the integration facilities of BizTalk Server, to solve the supply chain connectivity part of the overall supply chain management puzzle. Another extension which is soon to be available to all MBS product lines is nearly ubiquitous FRx' applications for financial reporting, consolidation and forecasting (see FRx Poised To Permeate Many More General Ledgers). The other vendors have not been sitting still either, Exact's e-Synergy and Exact Event Manager products being other object cases of ERP extensions.

These vendors also can distribute risk by initiating partner programs for developers, such as furnishing marketing and technology resources to small developers as a way of extending the reach into the SMB sector. The vendor does not get involved in direct support of its partners' (end) customers, but it does give these technology suppliers a competitive edge in being able to hook straight into their existing renowned back-end applications at small enterprises. More than their larger counterparts, SMBs are looking for relatively simple and inexpensive software that is easy to install yet also easy to customize and extend. Consequently, there is a plethora of micro-verticals around, from, for example a chiropractor's office to a B2B mortgage banking solution. These clients essentially want the same things that larger enterprises want, but their peculiar requirements are quite diverse. In other words, one size does not fit all, at all. Thus, trying to sell simplified versions of mySAP Business Suite, PeopleSoft Enterprise or Oracle E-Business Suite, without a serious re-engineering of these products, has not worked so far in the lower-end of the market.

User Recommendations

We strongly recommend identifying your clear e-business strategy and conducting thorough comparison-shopping, at least for the sake of information leverage. Consider all options, particularly vigorously weighing the offerings' current and intended functionality and integration. Most importantly identify what needs are "must have" requirements and a timeline for additional components. Once identified, comparison-shop and use the related information to negotiate the best price for the solution. Also, SMBs should be wary of being ahead of the adoption curve, because product quality issues and unplanned implementation glitches typically come with new products.

On the other hand, businesses that outgrow this low-end product might have to decide in the future whether to migrate to premium-priced, upper-end solutions or switch to another vendor. When evaluating a software application, companies often fall for a snazzy user interface or raw number-crunching power. However, a flexible system should also offer features like tools and templates, cross-reference checks, and many other parameterization utilities that provide significant system changes without changing source code. Make sure that what you select now will keep abreast of the technology changes in the future. It may sometimes be more beneficial to implement the right solution slowly than to rush the wrong one into place.


SOURCE :http://www.technologyevaluation.com/research/articles/cookie-cutter-solutions-won-t-cut-it-with-the-mid-market-part-two-challenges-and-the-lower-end-17245/

Epicor Software Corporation (NASDAQ: EPIC ), a true mid-market incumbent vendor that has not had much good news for last several years following up on its progenitors' merger and subsequent name change in 1999, seems to finally have been disseminating upbeat news both in terms of its financial performance and of its strategy clarity. Part One of this note presented Epicor's recent financial results and discussed the company strategy. Part Two presented the company background and discusses the Market Impact.

Like within its other two groups, attempting differentiation, Epicor espouses the 'one stop shop' approach to the midsize manufacturing market, and develops most of its own suite and has already moved most of the way to provide the extended enterprise system footprint. The vendor contends that its customers get Tier 1 software capabilities, including the end-to-end, event-driven supply chain aspects, as well as the service & support level, at Tier 2 prices.

Epicor also believes that buyers of enterprise software are much smarter nowadays, since they have been through a few prior generations of enterprise systems, and now they are more aware of what they want and what to expect. They are also becoming more aware of collaborative SCM and CRM solutions and their value. They want quicker implementation and payback from their enterprise systems, and they demand performance from their software suppliers.

While in the past, Epicor would integrate with partner products for best-of-breed solutions to accommodate these requirements, it has lately been expanding the boundaries of traditional ERP by building fully integrated applications that are based on the same technology and toolsets, all from one vendor. There is also still a good deal of vertical manufacturing industry experience, if not quite yet embedded in the products, but at least within its experienced staff.

Epicor competes in two enterprise business applications markets: 1) emerging enterprises and 2) mid-market enterprises. The vendor defines the first as rapidly growing businesses under $25 million in annual revenues, which require solutions that provide a more sophisticated level of functionality to effectively manage their business than can be found in "off-the-shelf" applications. Yet, these businesses require applications that are easy to implement, customize, manage and use as well as being affordable. Further, these enterprises generally lack dedicated information technology (IT) management resources and require solutions that do not require a high level of ongoing maintenance and support for their continued operation. Products in this market are principally sold through value added resellers (VARs) and telesales persons with the purchasing decision often influenced by professionals providing consulting services. Epicor believes that purchases in this market are primarily influenced by functionality, performance, and availability of a Windows-based solution, price and quality.

This is Part Three of a three-part note.

Part One discussed recent announcements.

Part Two covered the Market Impact, company background, and next generation products.

The Market For Vista

To that end, Vista is a Windows-based desktop business management system specifically designed for needs of small job shops and the MTO departments of larger businesses that have less developed infrastructures, lower IT budgets, require a shorter deployment period and seek established, user-friendly products. Vista fully integrates over following 20 core business modules under the following groups: eBusiness (electronic data interchange (EDI), and Customer Connect portal), Sales (Contact Management, Quotes, Orders, and Shipping/Receiving), Production (Jobs, Advanced Bill of Material (BOM), Data Collection, Scheduling, Quality Assurance and Document Management), Material Management (Inventory, Advanced Inventory Management, Purchasing, and Purchasing Request for Quote (RFQ), Financial Modules (Accounts Receivable, Accounts Payable, General Ledger, Payroll and Currency Management), Vista Dashboard, and System Control. More important, Vista 6.0 features the same technology framework as its bigger sibling Vantage, and supports new databases like Microsoft SQL Server and Progress RDBMS. It has also been added over 200 new features to, some of which have already been depicted like Vista Dashboard, Quality Assurance, Advanced BOM, Advanced Inventory Management, What If' Scheduling, and Contact Management.

The Market For Avant and Vantage

Still, Epicor competes primarily in the true mid-market, which it defines as growing enterprises with revenues between $10 million and $500 million, which have similar requirements like their smaller counterparts above. However, the purchases in this market are primarily influenced by functionality, performance, availability of a Windows-based solution, price, quality and customer service. The Company believes it competes favorably with respect to all of these factors with Avant and Vantage products. Increasingly, since customers in this market segment are looking for Microsoft SQL Server based solutions, the Vantage product is better positioned to address this requirement, although both products include the full range of modules.

Avant is a fully integrated ERP solution that provides both a front and back office business solution to tie together almost every aspect of a manufacturing operation. Avant's capabilities are geared toward high growth, midrange manufacturers of discrete, highly engineered products with complex manufacturing requirements in eight principal industries: industrial equipment, computer/office equipment, consumer electronics, instrumentation and controls, medical/dental products, transportation/aerospace products, capital equipment and contract manufacturers. The product is comprised of groups of modules that aim at comprehensively supporting a manufacturing company's business process, and are built upon a common set of design and development standards and tools, which share a common database architecture.

Presently the following applications are generally available in Avant version 9.2.: Accounts Payable, General Ledger, Accounts Receivable, Inventory Management, Asset Management, Job Order Tracking, Barcode Document Manager, Master Production Scheduling (MPS), Bills of Material (BOM), Material Requirements Planning (MRP), Capacity Requirements Planning (CRP), Multi-Plant Planning, Cost Accounting, Product Costing, Cash Management, Purchasing, Distribution Requirements Planning (DRP), Quality Management, Equipment Maintenance & Repair, Return Material Tracking, Estimating & Quotations, Sales Order Processing, Executive Information System (EIS), Shop Floor Control, Focus Factory Management, Work Centers & Routings, Expert Product Configurator, Service Suite, Front Office, Decision Support, Material Real Time Tracking , Barcode Shipping, Shop Floor Control/Time & Attendance, Advanced Planning and Scheduling (APS), Human Resources (HR), Payroll, Sales Analysis DataMart, and Operational Data Store.

Avant is modular in nature and can be scaled from small to large configurations on a variety of platforms supporting the Microsoft NT and UNIX operating systems, and can be implemented in a variety of multi-currency, multi-company and multi-plant environments networked through client and host-based configurations. Avant also includes front office applications through its integration with eFrontOffice.

Still, while the Avant product suite addresses many discrete manufacturing styles, including ETO, ATO, MTS and Repetitive, these are still served through its disparate variants with different names. Beside primary functions for their respective manufacturing styles (such as project management, flow manufacturing and rate-based scheduling), there may still be subtle nuances of which functionality one version supports what (or not). Also, distribution functions such as warehouse management, plant load management, transportation management and demand deployment are not available. More significant is that consolidation of three product variants (i.e., ManFact, InfoFlo and DataFlo) into one has not yet yielded one unified Avant product in which the functionality supporting multiple manufacturing styles is integrated. As a result, Epicor has been unable to leverage its broad manufacturing functionality into a single solution for enterprises with multiple manufacturing styles. In fact, Epicor admittedly does not currently have either a strategy or intentions to combine Avant, DataFlo, InfoFlo and ManFact into one product under the Avant umbrella. Enter their still disparate technologies depicted above, and there comes Epicor's rationale to enhance Avant mostly only according to existing customers' requirements, but the product is no longer actively marketed to prospective customers.

Consequently, Vantage becomes the flagship manufacturing product, as is an integrated, Windows-based ERP solution that meets the dynamic requirements of custom manufacturing operations in make-to-order (MTO), configure-to-order (CTO) and job shop manufacturers. Like its minor sibling Vista, Vantage features intuitive UI and is an easy-to-use, yet comprehensive solution that meets manufacturers' needs through its potent tools for quoting, visual scheduling, job tracking and costing, as well as shop floor data collection. The product is comprised of more than 30 fully integrated business modules and offers a broad solution, from front office functionality including sales force automation (SFA) and customer support to an e-business suite including an online storefront and portal. It provides strong scheduling and online information access capabilities, since, with its graphical scheduling tools and "what if" simulation,

Vantage enables users to create and execute realistic production schedules, based on the available resources, and react quickly and efficiently to schedule changes. Vantage supports both custom and standard part orders, product configuration and multilevel assemblies. The product is comprised of the following groups of modules that can be differently configured to support changing customer's business processes: Vantage CRM, Sales Management (Quote Management, Order Management, and Product Configuration), Planning (MRP, Vantage Scheduling, Advanced Planning and Scheduling, and Multi-Site Management), Production (Job Management, Advanced Bill of Materials, Data Collection, Quality Assurance, Field Service, and Document Management), Materials Management (Inventory Management, Shipping/Receiving, Purchasing RFQ Management, Purchasing Management, and Advanced Materials Management), Financial Management (Accounts Receivable, Accounts Payable, General Ledger, Currency Management, Payroll, FRx, Open Active Planner), Epicor eIntelligence (ShopVision Executive Query and Enterprise Business Intelligence), eBusiness (Customer ePortal, Vantage Storefront, eProcurement, and EDI) and System Tools.

Further, because of the dynamic production requirements characteristic of MTO manufacturing organizations, Vantage provides particularly strong scheduling and online information access capabilities. Vantage's graphical scheduling tools and "what if" simulation features empower users to make realistic production schedules, execute them efficiently with the resources currently available, and react quickly and efficiently to schedule changes. Vantage features a strong Business Intelligence (BI) suite that allows manufacturers to access, explore and analyze data residing within the Vantage solution, to gain the knowledge needed to make better-informed business decisions. Because much of the information is pre-built, companies should be able to start seeing an ROI in Vantage BI faster than with traditional business intelligence solutions.

More important, in addition to featuring the same framework as its smaller sibling Vista, Vantage 6.0 supports new technology like Linux and HP UNIX. It has also been added many new features, some of which have already been depicted like Enhanced Workflow Management, Vantage Dashboard, Global Multi-Company Collaboration, Global Multi-National Financials, Advanced Project Management, Enhanced Personalization & Customization, Kanban Flow Manufacturing and Web Configurator.

Additionally, Epicor APS (formerly Epicor eScheduling and C-Way) is an advanced planning & scheduling (APS) solution designed to help manufacturers realize shorter lead times, accurate real-time order promising and smaller inventories. It aims at allowing a company to create and maintain schedules that coordinate all aspects of its manufacturing environment, based upon their business practices and customer needs. Epicor APS is designed as a real-time system --there are no overnight batch processes to run-- which should remove delays between collecting and actually using information, and should ensure that schedules include the most up-to-date information. The product provides forward and backward scheduling capabilities, as well as minimum WIP, rule- and dynamic constraint-based scheduling and dispatching. Epicor APS can be used as a standalone product, or as an enhancement to the scheduling capabilities included in Epicor's manufacturing solutions including Avant and Vantage.

Contrary to the other divisions that are solely Microsoft-based, Epicor Manufacturing Solutions Group is using the Progress toolset for Web enablement, building on the client/server framework, as to allow its mid-size customers to choose platform, database, and operating system. As this dilemma to stay with Progress product or not has both benefits (i.e., a smoother migration path) and drawbacks (i.e., a dual technology strategy), some vendors have opted for opposite alternatives Frontstep (now part of MAPICS) has opted out (see Frontstep Ups The .NET Ante), while QAD and Epicor have decided to continue the relationship, since the Progress OpenEdge platform, with its embedded database, often delivers rapid deployment, low overhead, high scalability and flexibility. The combination of the Progress OpenEdge platform supported through a native Microsoft .NET UI is touted by Epicor as best of both worlds. Namely, while the .NET framework will provide smart Windows client, Web services, and Web enablement and accessibility from almost any device, the Progress platform brings to the table the business logic that is database and OS independent, and whose existing code can be reused.

Challenges

Nevertheless, Epicor might still be burdened by its past baggage and lingering issues, and the job of gaining traction will by no means be easy for the vendor still being long in a conundrum of down-spiraling revenues. The vendor, as well as its divisions, have had a rough history that it now must get beyond to gain traction in the market. First DCD, then DataWorks and then Epicor's Manufacturing Solutions Group, the reborn manufacturing division must remind its customers and the marketplace of its historic success and forget about so many years of financial pressures which have nearly sunken it into oblivion. Since the late-90's this business has been less visible to the market, and customers and the marketplace may have forgotten who Epicor Manufacturing is and what it stands for.

Also, given its other two relatively unrelated divisions, Epicor may mean different things to different people, which does not really help mind share creation in particular segments of interest. The manufacturing division must communicate its successes and strategy to the marketplace, and must aggressively invest in customer satisfaction, marketing and sales. Epicor must convince customers and prospects that it is here to stay; while the functionally rich and technologically rejuvenated products are great advantages, many other considerations make some customers and prospects perceive these solutions a risk. Until the market perceives that Epicor is completely regained its financial health, its products might be overlooked, despite their appeal.

Additionally, the remaining wealth of product names and a still somewhat unwieldy slew of products, presents sales and marketing confusion for the company, both internally and externally across the globe. Given our difficulties to figure out the peculiar traits of the above products while compiling this article, it is likely that ordinary prospective customers will not be much clearer either. Therefore, as Epicor has a myriad of products in its portfolio that could benefit from integration with, e.g., Clarus, Clientele CRM.NET, or with any third-party application, it must clearly articulate its plans and the timeline for integration for each of its products (see Epicor Claims The Forefront Of CRM.NET-ification and Epicor Picks Clarus' Bargain At The Software Flea Market). Otherwise or it may face confusion and/or anxiety amongst both its current and potential customers as well as within its VARs. That would be the music to its direct competitors' ears, some of which have better viability and revenue momentum at this stage.

Still, while the long awaited porting of Epicor's flagship products onto Microsoft SQL Server as well as continued focus on .NET framework should significantly relieve the company's R&D burden and improve its general competitiveness, the remaining work of delivering single .NET compliant application framework remains colossal. Existing 6,000 manufacturing customers, will sooner or later have to migrate from the current non-.NET application, although Epicor is committed to supporting these customers indefinitely, which will draw on its duplicated R&D and support resources. One should imagine the magnitude of the effort when the Avant instances, some with extensive customer bases on non-Microsoft technologies, should follow the path. Executing these initiatives without significantly increasing its top line will be a notable challenge.

Incidentally, the competition remains fierce. In addition to an army of solid mid-market vendors with sharp focus on particular industries, like J.D. Edwards, MAPICS, QAD, IFS, Made2Manage, SYSPRO, Lilly Software, to name only some, one should not discount the Oracle's recent aggressive online offerings for small business either, with PeopleSoft and SAP crafting similar offerings down the track (see Software Giants Make Courting A Small Guy Their "Business One" Priority).

Moreover, the competition is also flying from many directions since the parent company now competes in many diverse markets. To that end, in the traditional back-office market, the threat comes from the likes of Intuit and AccountMate in the small business accounting market, via its peers (e.g., Microsoft Business Solutions, ACCPAC, Exact Software, Best Software and Scala to name only some), to the Tier 1 vendors storming down the market. In the pure-CRM mid-market, that would be the likes of Onyx, Microsoft CRM, Pivotal, Kana, Salesforce.com and FrontRange. Not to mention that SAP, Oracle, PeopleSoft and J.D. Edwards will likely be faced in all the above markets as well.

Still, Epicor seems to have refocused on its core competencies following the turmoil of acquisitions and negative growth. While Epicor indisputably has to deal with the above challenges in a sunken market, by harnessing .NET possibly more zealously than its creator Microsoft, the company has a fair shot at remaining in the mid-market leadership race amongst a slew of formidable opponents. With its solid cash position and current well-advanced development work for what should be leading edge, Web-based, 'software as a service' enterprise and collaborative commerce suites, that offer most of what manufacturing businesses need from the IT, a return to prosperity for Epicor should not be too far-fetched.

User Recommendations

Epicor's ability to enhance its products and its determination on executing product and technology strategies deserves commendation. Current users are advised to follow Epicor's new product introductions and keep an eye on its future product strategy. The positive sign is the company's more manageable and narrower focus, as demonstrated by its most recent results. Mid-market companies with up to $500 million in revenues that are within the parent Epicor's industries of focus and companies with a need for a single-source functionality beyond core ERP scope, should benefit from including Epicor in the short list of potential candidates for the enterprise applications selection.

As for the manufacturing segment, Epicor targets mid-market manufacturers across the board, covering discrete mixed-mode, make to order (MTO), make to stock (MTS), configure to order (CTO), engineer to order (ETO) and project manufacturing. Key vertical industries are capital equipment, fabricated metals, electronics, instruments, aerospace, automotive, furniture/windows/doors, and miscellaneous job shops. Even the users from industries not mentioned above may benefit from evaluating some stand-alone Epicor product components (e.g., CRM, APS, strategic sourcing, and business intelligence application suite) on an opportunity-by-opportunity basis. This as well as obtaining Epicor's implementation guarantee could be leveraged against other vendors in a selection.

The current market trend is towards vendors that can provide comprehensive solutions for medium-sized companies with a quick ROI, and Epicor seems to have a fair shot at delivering that. Particularly well suited to the capital equipment, fabricated metals, electronics, instruments, and other discrete manufacturing industries, Epicor's integrated broad enterprise suites might help global manufacturers increase collaboration with trading partners, and improve speed throughout the value chain. Global, multi-site/multi-national mid-market MTO manufacturing enterprises should evaluate Vantage as to fulfill most of their needs including embedded customer relationship management (CRM), embedded supplier relationship management (SRM), advanced planning and scheduling, business intelligence and a complete suite of collaborative eBusiness solutions. Small single-site job shops or MTO enterprises and emote divisions of global enterprises should evaluate Vista, possibly with a view of migrating to Vantage some time in the future.

Enterprises should nevertheless monitor the consistency between the announced strategy and the company's actions in continuing to support all of the former products strategically. Existing users of Epicor products that face stabilization and/or discontinuation may benefit from querying the company's future product migration path, service & support, and/or scalability strategy. As for the newly added and/or anticipated functionality, users are advised to ask for firm assurances on the availability and future upgrades timeframes, and more detailed scope of enhanced product functionality. They should also inquire about any possible impact (or benefits) of migrating towards more advanced offering. Taking stock of current resources Progress, VB and C++ skill sets and assessing the effort to train these into VB.NET and C# is highly recommendable at this stage.

SOURCE :http://www.technologyevaluation.com/research/articles/epicor-reaches-better-vista-from-this-vantage-point-part-three-challenges-and-user-recommendations-16982/