Even though two giants of ERP software for distributors have recently grown larger through acquisition, their new size does not necessarily give them an advantage over smaller system providers. In some ways, plus-size is a negative. Let’s look briefly at the acquisitions, and closely at the pros and cons of the Davids and Goliaths - including giants not mentioned in this column.
AcquisitionsInfor Global Solutions bought Lawson Software. Infor’s software packages include sx.enterprise, A+, some less well-known names and software for manufacturers. Lawson is not well known to distributors and wholesalers because it serves sectors other than distribution.
The other giant resulted from a private equity firm buying Activant Solutions and Epicor Software, and combining the two under the Epicor name. Activant’s software packages include Eclipse, Array, Prophet 21 and Prelude. As with Lawson, Epicor is not well known to distributors and wholesalers because it serves sectors other than distribution, mainly manufacturing.
Incidental to this column, but pertinent to the current level of unemployment, historically, acquisitions in the world of software packages have resulted in reductions in personnel, even sales and marketing positions. This reduction can directly impact distributors and wholesalers who depend on consumer spending and indirectly affect others.
Not All Davids Are HeroesEven though fewer small companies are providing ERP software to wholesalers and distributors than before 2000, dozens are still out there. They are not as visible as the giants because they do not have the budget for aggressive marketing and advertising. Smaller budgets also mean they have fewer personnel for providing installation education and training, post-installation support and R&D. And smaller budgets mean their viability is not as high as that of the giants; and if a small provider ceased doing business, there would be fewer ex-employees to provide ongoing support.
On the plus side, the smaller companies tend to provide software and services that are less expensive, and are more willing to negotiate contract terms. (Historically, when software companies merge, prices tend to increase due to supply and demand.) Smaller providers also tend to be much more flexible in customizing the software prior to installation, and in response to post-installation requests. Support tends to be more personal - communication by phone in addition to Web-based problem reporting and feedback.
Not All Goliaths Are VillainsFor the most part, the cons of the smaller players are the pros of the giants, and vice versa, but there are some exceptions and nuances. The giants are not very flexible on changes in contract terms (especially with smaller distributor prospects) and are very reluctant to modify software before installation; they aim for one-size-fits-all. For distributors up and running, support tends to be impersonal - Web-based problem reporting and feedback. And requests for software changes/additions must almost always go to the users group for approval (and if approved, the changes/additions are incorporated into the base software package).
On the pro side, the giants tend to adapt new technology sooner than the smaller providers, e.g., enabling the ERP software to function with mobile devices such as an iPhone or iPad. Another example could be termed “vertical interfacing,” which in English means the software, with optional extra cost modules, can interface with vendors/suppliers and/or with customers. (This interfacing is not as rigorous as true Supply Chain Management, yet it does allow electronic sharing of information and documents but not planning.)
Financially, the giants can offer larger percentage (and absolute) discounts on the initial cost of the license for software than the smaller players. In preparation for installation, as well as for new employees needing training on the system, training and education courses, not online ones, are offered several times a year, not just once or twice - if at all. Related to education, user groups are larger (more users) and this facilitates an exchange of business ideas, not just technical aspects of the system in question; sometimes there are sub-groups for different types of distributors or for different functional areas (e.g., accounts receivable).
A mix of pros and cons is the situation where some software packages of some giants are sold by resellers, sometimes termed VARs. The resellers tend to be amenable to pre-installation software changes and to negotiating prices and the contract for services; the contract for the software license is pretty untouchable (compared to smaller providers). And the reseller, not the giant, provides installation education and training and post-installation support - but can call upon the giant if a reported problem is very difficult to fix. One con is that reseller personnel may not know the ERP software as well as personnel at the giant. Another is the viability of the reseller.
Even though the big have gotten bigger, the decision of which ERP system to obtain is still as critical as ever. Going with a giant does not guarantee success, nor does going with a smaller provider mean that there will be problems. Although money counts, especially in this “new normal,” the decision must take into account many intangible factors.