This year some distributors will make a decision to replace their business system (ERP). There will be remembrances of the last time they went through that defining moment in their business. Many will recall the business disruption and loss of profitable business metrics. Others might consider open heart surgery without anesthesia as an alternative.
For some software vendors they live for this time of year when they can sell the ‘Rip (out the old system) and Replace (with their total new system) all before the end of the year. To that end we have noted several Epicor ads that list some possible mistakes that distributors should be reminded about:
- Not Involving the Head of the Organization in the Decision-Making Process
- Skipping the Planning Phase because it “Takes Too Much Time”.
- Considering a Technology Provider that Doesn’t Truly Understand Your Industry
- Assuming You Will Do Things Exactly the Same Way You Do Them Today
- Selecting a Vendor that Lacks a Long-Term Product Vision
While all these suggestions are good reminders, there are some software companies that have recognized that the “Old Rip and Replacement” of an ERP system was actually counter productive to distributors. Epicor
Middle ware, the Stepping Stone to Productivity
Times in the software world are changing and some distributors like certain parts of their existing ERP system. Others want to cut down on the business disruption and maintain their known profit metrics. To that end some software companies are now offering “Middle ware” or software that allows a distributor to make decisions about their business in graduated steps. Depending of the middle ware company offering it could contain, but not limited to mobility apps, EDI, and process enhancements.
So, with business disruption and a potential loss of known profit metrics in the back of your mind, how likely would you be willing to investigate the potential of middle ware for your company?
13 Comments
The bad memories still persist to present day.
To your question, we would look at a middle-ware solution as opposed to a complete replacement.
We should have taken our fellow distributor recommendations with a grain of salt. The vendor is so far under water and operating negative, I suspect someone will buy them
We are saddled with what we thought at the time was a pretty good ERP provider. Now they have got themselves into some severe financial straits. I’m pretty sure others have seen the public SEC docs on them. The problem is that they may not be around very long.
In the meantime we would like to add Microsoft Dynamics as a CRM….and they are being very helpful. So Middle-ware might be a solution.
Why do you reference Epicor? We’ve been a 5 year user of Eclipse. The install went fairly smooth and they had all the answers.It’s a ugly program, but it did the core functions.
Our problems started when we wanted to add an additional program, like a CRM as referenced above. While they offered their version of middle-ware (I think it is named ICE or something like that)They were so UN-cooperative and so over blown at their last user conference we started to look a little closer.
What we found in public documents was that they were operating negative and according to their President they might not make it. They certainly don’t answer their phone very often.They must be under a terrible strain.
Here is the public link to their filing:
So as you suggest middle-ware might be an answer to start some sort of movement to another system with out so much disruption.
Personally, I don’t think the issue is tied to Eclipse or Infor. Both systems appear to handle the operational aspect of managing a distributorship well. And due diligence should be an ongoing part of any system evaluation. The bigger issue, from my viewpoint, and I focus on more of the business development aspect in working with distributors, is that neither system offers “best in class” for various functions. Years ago these functions may have been sufficient or deemed not necessary by the software systems. Today, for progressive, growth-oriented companies with more sophisticated IT departments, they are becoming competitive differences. I’m referencing SFA systems, CRM systems, e-commerce, advertising platforms, mobility initiatives, dashboards, marketing automation platforms and similar. I think it’s difficult to think that the ERP companies can be “all things to all people”, hence middle-ware represents an opportunity to integrate best of breed to enable an organization to differentiate itself. While SAP isn’t for everyone, and can be painful to implement, reportedly Border States, Summit Electric and Graybar are receiving significant benefits. There is a reason why Mayer went in a unique direction. But for small to mid-sized distributors, an “out of the box” solution may be correct.
Looking towards the future, companies that want above market growth and profitability should consider their Information Systems departments as strategic elements and resource them accordingly – but these departments should consider the other functions within the company as their customers. This model suggests that the IS department have a platform that enables it to evaluate all applicable software rather than being limited to an installed system and the modules that may be / are planned for the future.
How can you compete with a Grainger if you’re restricted to industry platforms?
It’s all about flexibility, choice and differentiation … all of which can drive sales and profits
I wanted to let distributors know that there are now some new ERP providers that are dedicated to the electrical distribution industry and provide a technology path to the future that does not involve VC’s.
The Usual Suspects are no longer the only option.
Stacey
Stacey
Software companies like Epicor and Infor (usual suspects) are owned by Private Equity not Venture Capital. There is a significant difference. PE typically hold their investments much longer and heavily invest to increase value. And at the end of the day, it’s about having capital to investment in applications, professional services and technology. Epicor for example, re-invests over $100m annually in these areas. Over $50m in their distribution applications. How much does xTuple re-invest annaully? My guess, less than $2m?
If you are going to blog, have the facts!
If they only put a fraction of that R&D money toward staffing to answer the phones and solve user problems in a timey fashion, they would not be such lucrative targets for the new, more nimble software companies.
Dear Anonymous #1,
You’re correct that PE and VC are different, but they have more in common than you’re letting on. Their differences primarily have to do with the stage of life of a company – VCs working with earlier-stage companies, and PE groups with more, shall we say, mature businesses. But they both expect to make their money and get out in a 5-7 year timeframe, and generally take an unsentimental view of the needs of their investment’s customers.
Much of the PE money that has parked in legacy software companies over the years has done so primarily for the annuity value of those maintenance customers, who are trapped by the certain knowledge of pain and agony if they were to try and switch to another ERP system. And of course, it’s a vicious circle – as a few brave customers do leave, the company is “encouraged” to cut costs in pesky operating areas like support and new product development… which in turn causes more customers to consider leaving.
The last stage of this drama is the old PE money selling out to the new suckers^H^H^H^H investors. We’ll see if the new guys ever make their money at Infor, Epicor, and their cute little nephew now called Aptean.
I am not at all impressed with what Epicor claims to “re-invest” in various mandatory operating expenses of running a software company. Perhaps since Stacey was gentleman enough to identify himself, you might return the favor, and tell us more about the inner workings of Epicor (perhaps from the perspective of a Revenue Director? Just a guess.)
Stacey is quite right that companies like xTuple, of which I am the CEO, are bringing new choices, flexibility, cost savings, and next-generation technology to the distribution world. We’re also hiring people from that world, so if anyone would like to talk about that, please email hr@xtuple.com, or just check out our company website at http://www.xtuple.com and our global open source community website at http://www.xtuple.org.
And if you’d like to read more snarky chatter about the intersection of private equity and ERP software, please visit The ERP Graveyard blog at http://www.erpgraveyard.com.
Cheers,
Ned
Hey Allen I was the IT Administrator for a top 200 Electrical distributors for years. The term I used was heart and lung transplant to describe a conversion. You are correct on the problem.
The answer I would tend to disagree with. The problem with this “middle ware” is kinda of counter to the purpose of an ERP. The goal is to conduct business on a consolidated platform that as an integrated solution. If you a talkling about Epicor’s Eclipse here, the software is really attempting to solve problems Epicor has, not the distributor.
Eclipse you see runs on a UniVerse database. UniVerse stores data in a string, using nesting to extend the data. This makes it fast doing transactions, the rub being that reporting on the data is an issue. Third parties are selling reporting for Eclipse for 30G.
The solution you speak of? Port the Eclipse data to a Microsoft SQL server for reporting, since Epicor has E9 replacing Ecplise, in an effort to merge these products.
This makes sense for Epicor. They have a ready made path to then move customers to E9. Looks like a short term solution to a longer term problem to me.
Distributors have such a terrible time with conversions for a very simple reason. They have to jump off the cliff. They can’t load current sample data and start correcting pre-existing conditions, find the right translations for current processes. They have a business to run.
With Infor, Epicor etc you have to purchase it then figure out how it would fit, and do it with a hard cut off. That is why it is a cliff.
To take a distributor to the next level you need a system that easy to manage. You never know what demands vendors or customers will ask of you, so you need to be able to customize it as your needs change.
ERP conversions are a long term commitment, you wouldn’t buy a car with testing driving. Electrical ditributors buy it then figure it out later, that makes a bad situation worse. Every ERP will have good and bad, 2 weeks after go live is not the time find out what they are.
Today you have options. Open source solutions are out there that give distributors options they never had before. Fully integrated CRM, pricing services, B2B, EDI you name it. While Infor and Epicor were buying up ERP companies and turning them into legacy systems, open source was building robust platforms.
http://sourceforge.net/projects/postbooks/
Postbooks allows an IT department to test the structure, choice of database and let Accounting, Purchasing and Sales fully understand what the basics of an ERP all before spending a dime.
My best advice to anyone looking at ERP’s would be to take your time, make educated decisions, and feel free to look around. Even if you don’t have a huge IT department you can still run a quality system without your company spending 6 months is ICU trying to do a conversion after breaking the bank.
Top 200 Electrical Distributor:
Everyone who has actually lived through an ERP conversion has suffered some sort of relief that it is finally over with. Then you began to find out what you actually bought and how you’ll interact with their support.
In our case we had a fairly good install and their support up to about 11 months ago was good. Then all of a sudden we began to experience slow response to our phone calls. We attended a meeting just after Epicor and Activant merged/taken over/bought out or what ever actually happened.
The discussion about what great financial shape the new and old entity were in, began to emerge.
They still don’t answer the phone the same week. Our leaders have looked at Epicor’s public SEC posting and there are two things that are of concern:
1.Financially Epicor is a hiccup away from a fire sale.
2.By their own words they intend to merge all platforms on to one platform. The distribution business has some very unique requirements. What we hear is that eventually we would have to merge our way of doing business to Epicor’s software, which would be modeled after a manufacturing type of software.
We’ll get support.
The fire sale aspect is yet to happen. But when and if it does happen, it will be just like the other failed software venture that let greed got in the way.
Interesting article and discussion. I’ve learned a lot from you guys.
I went through a failed attempt to install SAP into a world wide distribution company.
SAP is NOT a distribution ERP.
BTW we all got fired.
We’re also a top 200 electrical distributor. Fortunately we had a good install and have enjoyed a good business relationship with Infor.
While there are areas we want them to address & they seem to be open to including our thoughts and needs. Their user group is a good joint effort.
My personal opinion is that a number of my AD distributor friends don’t take enough time to really look at their current and future needs.
The beauty is they run their business the way they want and we run ours.
I really feel for the SAP distributor as it seems to be a money pit with no end in sight.
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