Techaisle Blog

Techaisle’s cloud adoption trend data shows that within US SMBs the SaaS penetration increased from 27% in 2011 to 58% in 2014 and reached 73% in 2016. It is expected that the figure will reach 94% by the end of 2017. Unweighted data analysis shows that SaaS adoption within US SMBs is already at 86% and will likely reach 96% adoption within the next one year. Even at the worldwide level, survey data shows that 76% of cloud-SMBs are currently using SaaS applications.

This view of SaaS as a deepening force within the SMB market raises an important, related question: what is the current benchmark for SaaS within SMBs? How many SaaS applications are in use today? And how many new applications are expected to be added?

SAP, Europe’s largest software vendor is ramping up its solutions and marketing strategy to boost its SMB market share. Although SAP claims that 80% of its customers are SMBs (largely due to Business One and the Concur/SuccessFactors acquisitions) it is viewed as a company selling large & complex enterprise applications. Some of us who have been in the IT industry long enough remember heated debates in many business board rooms - “Fire the CEO, CFO or SAP?” - nobody dared to fire SAP. To change that perception SAP has been shaping its SMB lens for a while. In a discussion, almost on cue and pre-empting any question on the topic, EJ Jackson, EVP & GM, SAP Anywhere, said, “SAP Anywhere is a solution focused solely on the SMB space. I know whenever one hears the term SME and the words SAP; many shrug their shoulders or sigh a little because historically SAP has thought of companies with two or three thousand employees as a small company. In the case of SAP Anywhere we are actually looking at companies under 1,000 employees, truly in the 500 and under range where SAP Anywhere is focused at this point in time”.

SAP Anywhere – purpose-built for SMBs

SAP recently launched its SAP Anywhere solution for SMBs. It is a purpose-built unified front office application that combines sales, inventory management, order processing, commerce, marketing programs, mobile point-of-sale, customer support & engagement capabilities in one complete solution enabling multi-channel commerce with a multi-channel marketing platform. It is intended to be a mobile first/digital first solution with a high degree of focus on ensuring that it is low touch, quickly deployable (can be deployed within 40 hours) and easily extensible.

Toby Davidson, VP of SAP's SMB Solutions Group, reinforces the point that SAP Anywhere is purpose-built for SMBs, “…it has been built from the ground up specifically for the SMB market segment. We're not taking a large enterprise application and scaling it down to serve functionalities to the small business. That often doesn't work. What we have done is we have built the application from the ground up specifically for the small and medium business, the sub-500 space in mind for the functionality that's being delivered.”

Let us step back for a minute to understand when SAP’s clear and present focus on SMB began. In July 2014, SAP launched SMB Solutions Group, a division focused entirely on the needs of its SMB customers. The aim of this structuring was to address the technology demands of smaller companies, expand SAP’s own business opportunities as it built momentum into the SMB space. Since then the group has been re-formulating SAP’s SMB strategy and building simplified, integrated business applications powered by SAP HANA delivered via the cloud - squarely aimed at solving SMB business challenges.

Prior to SAP Anywhere, SAP’s SMB offerings included:

• SAP Business One: offering sales and customer relationships, financials and operations through dynamic ERP software
• SAP Business ByDesign: runs entire SMB business in the cloud through a single solution (designed for upper SMBs)
• SAP Business All-in-One: to automate core processes for fast-growing SMBs with industry-specific ERP solutions’ requirements
• Others solutions include SAP Crystal Solutions, SAP Lumira, and SAP Edge Solutions

SAP SMB strategy – loyal customers make it worthwhile

SAP’s strategy for selling applications to the SMB market segment has at best been ambiguous in recent years. Though its products are well designed, the problem has been with their positioning in the market. Its flagship SMB solution, SAP Business One had limited success with SMBs. However, Techaisle’s many discussions with SMBs and midmarket firms in different countries reveals that there are many die-hard SAP Business One users. As one CIO of a 175 person pharmaceutical company in India said, “SAP Business One enables a single integrated visibility to the senior management for effectively running the business operations. Moreover, it consolidates business operations of multiple subsidiaries and offices across country-wide network. SAP has also improved its quality of solution - now we can manage everyday inventory, enable faster sales and purchase processes, perform analysis for business growth, and provide better customer relationship and support”.

Techaisle routinely conducts depth interviews with actual SMB and Midmarket customers using technology to understand their business issues, challenges and lessons learned. For the first time, Techaisle is opting to publish select interviews (five in each report) under its SMB Spotlight Series reports - Insights from the Trenches of Implementers.

These reports are:

20 Questions with SMB NetSuite ERP Users
20 Questions with SMB SAP Business One ERP Users
20 Questions with Midmarket Big Data Users
20 Questions with SMB PaaS Users: SoftLayer, Azure, AWS

Techaisle’s latest Cloud Computing Adoption study, a survey of 2,675 SMBs shows that CRM and ERP are approaching somewhat similar levels of adoption but are facing very different growth trajectories. Further analysis of the data from the survey shows an intriguing connection between the two applications.

Techaisle analyzed the extent to which use/intended use of each of these applications is connected with other applications captured in the survey. We found that SMBs using/planning to use both CRM and ERP have some common characteristics: in each case, buyers are looking to deploy vertical applications, Business Intelligence, project management – and the other solution (i.e., those using/planning use of CRM are also likely to be adopting ERP, and those using/planning use of ERP are also likely adopters of CRM).

This helps illustrate the importance of the types of suites that leading vendors like SAP, Oracle, Microsoft and NetSuite have assembled: buyers are consistently looking for a combination of capabilities, and will likely look as well for integration across these applications. The CRM side of this equation shows that marketing automation is an important attached application for CRM, which highlights the importance of recent investments in this area from Salesforce.com, Oracle, Microsoft and IBM, and the probable need for competitors to invest to match this offering.

Techaisle believes that the figure above (from the survey) helps illustrate the go-to-market challenge faced by SaaS suppliers. Buyers will certainly shop for individual applications, but will also look to cluster these applications into broader systems that integrate multiple requirements. We expect to see suppliers address these issues in one of three ways:

1. Through acquisitions, enabling core solution providers to bolt on needed extensions

1. Through alliances linking providers of complementary applications

1. Through adherence to standards allowing for integration between individual applications.

At present, Salesforce.com’s Force.com is a clear leader in the third category (and we are seeing acquisitions within the Force.com community – such as FinancialForce.com’s purchase of Vana Workforce – indicating expansion across functions within the standards-led community). It will be interesting to see if other development platforms emerge to challenge Force.com in this area.

NetSuite Changing the Conversation to management of Customer Relationship

We all know that NetSuite is a clear leader in Cloud ERP solutions category. However, not many (beyond some of the users and customers of NetSuite) know that it also has an integrated CRM solution. Zach Nelson, CEO, NetSuite took the opportunity in his keynote address at SuiteWorld 2014 to emphasize that NetSuite’s solution enables any business to manage the entire customer-lifetime-value-cycle from lead generation to order fulfilment. His keynote certainly succeeded in shifting the conversation in two different but converging directions.

First shift in conversation: introducing NetSuite’s Suite Commerce Advanced for the omni-channel world, Zach Nelson emphasized that NetSuite (with its integrated ERP/CRM) helps a business manage complete customer relationship irrespective of the customer’s point-of-entry: online, in-store and/or catalog/call center. NetSuite is therefore putting equal importance to both being a Cloud ERP and CRM supplier. This is definitely the most vocal shift in conversation yet from yester-years. Granted that there are several important pieces missing such as marketing automation but current popular solutions such as Marketo, SilverPop (now IBM) and Act-On have already built integrations with NetSuite. And in all fairness, marketing automation in its present form will most likely go through a transformation as evidenced in Techaisle’s SMB Marketing Automation Adoption Trends study.

Second shift in conversation: NetSuite raised the question on the traditional definition and usage of CRM as we all know it, making the definition narrower rather than more-encompassing. CRM in NetSuite’s view is akin to SFA (Sales Force Automation). There is nothing wrong with this view except that this is not how most SMBs view their customer facing applications. CRM is the core application for SMBs and we have already seen that Sales Force Automation and Marketing Automation functions have been quickly incorporated along with Business Intelligence. All of these provide a 360 degree view of the sales and marketing process. After the SMB CRM base has been built (or simultaneously), the order of implementation depends on the SMB’s focus but survey data shows that it is usually Financials, HR/Payroll, customer service, ERP, fulfillment (SCM), industry vertical applications such as retail, communication, manufacturing, etc. The SMB buyer for applications is also moving increasingly toward the department that is responsible for delivering business results and Cloud CRM usually gets placed in middle of the SMB cloud application stack as sales revenue becomes the focus rather than tight cost control enabling rapid growth and agility.

NetSuite may have the Last Laugh

Irrespective from where the cycle starts, from CRM to ERP or vice-versa if there is a single unified database (with little requirement for data integration) that powers different application blocks: front-office driven by a single view of the customer (leads, sales, and service), tying these to accounts, billing and fulfillment, along with resource planning, materials and supply-chain management will make for a compelling value proposition for NetSuite. But NetSuite has a long way to go to convince a new customer base to be the Cloud CRM vendor of choice.

Most SMBs that have used CRM, SFA and ERP systems within the past few years are familiar with the dashboards that are available with many of these applications, either embedded or purchased separately. Dashboards continue to evolve and be dynamic in several ways; the way they use data from subsystems like ecommerce and other real time feed sources, the way users can personalize the layout of their dashboards and the ability to build KPIs “on-the-fly”. While several SaaS vendors allow this kind of metric building and start the user at a dashboard, we have yet to see anything targeted to the mid-market or SMBs that connects front office, production, fulfillment and customer service the way that NetSuite does almost out of the box. NetSuite is on the right but a long winding path.

The Fear

With NetSuite’s growing market share its applications have also become complex to support the requirements of multi-country global businesses. NetSuite started from a base of SMB customers but over the years has moved upstream making inroads into enterprises. The implementation timelines, although not in years, is still counted in several months not exactly suitable and palatable to a large majority of SMBs that are planning to adopt cloud ERP and CRM. Even the channel partners that are currently offering and planning to offer ERP/CRM solutions do not have the necessary skill-sets and the manpower to provide support. The SMB ERP market is still open and available. Question is how NetSuite will address this market segment. Fear is if this is even a priority for NetSuite.