When the CEO of a rust-belt manufacturer speaks of cloud computing as critical to his company’s business strategies for competing globally, it’s clear a fundamental shift is underway.
Nearly every manufacturing company I’ve spoken with in the last ninety days has a mobility roadmap and is also challenged to integrate existing ERP, pricing and fulfillment systems into next-generation selling platforms.
One of the most driven CEOs I’ve met in manufacturing implemented a cloud-based channel management, pricing, quoting and CRM system to manage direct sales and a large distributor network across several countries. Manufacturers are bringing an entirely new level of pragmatism to cloud computing, quickly deflating its hype by pushing for results on the shop floor.
There’s also been an entirely new series of enterprise software and cloud computing forecasts and market estimates published. I’ve summarized the key take-aways below:
Enterprise sales of ERP systems will grow to $32.9B in 2016, attaining a 6.7% CAGR in the forecast period of 2011 to 2016. CRM is projected to be an $18.6B global market by 2016, attaining a CAGR of 9.1% from 2011 to 2016. The fastest growing category of enterprise software will be Web Conferencing and Team, growing at a 12.4% CAGR through the forecast period. The following graphic compares 2011 actual sales and the latest forecast for 2016 by enterprise software product category. Source: Gartner’s Forecast Analysis: Enterprise Application Software, Worldwide, 2011-2016, 4Q12 Update Published: 31 January 2013
IDC is predicting Cloud Services and enablement spending will hit $60 billion, growing at 26% through the year and that over 80% of new apps will be distributed and deployed on cloud platforms. Their predictions also are saying that 2.5% of legacy packaged enterprise apps will start migrating to clouds. Source: Top 10 Predictions, IDC Predictions 2012: Competing for 2020 by Frank Gens. You can download a copy of the IDC Predictions here: http://cdn.idc.com/research/Predictions12/Main/downloads/IDCTOP10Predictions2012.pdf
Last week Plex Systems, a leading provider of SaaS-based Enterprise Resource Planning (ERP) systems announced enterprise software veteran Jason Blessing has joined their company as CEO. He is responsible for the strategic direction and growth of the company, and has a proven track record in many facets of enterprise software, from new application development to professional services. His extensive experience includes previous executive positions at Oracle, Taleo, PeopleSoft and Price Waterhouse. You can find his LinkedIn profile here.
Plex Systems’ success delivering ERP entirely on the SaaS platform to manufacturers have many industry analysts, experts and pundits saying their unique business model is prescient of the future of enterprise software. Originally designed for an automotive parts manufacturer, Plex Online is being adopted by aerospace and defense, food and beverage, high tech and electronics, industrial machinery, and precision metal manufacturers. You can find an overview of Plex Systems here.
I recently had a chance to speak with Jason and get his views on the future of ERP, SaaS in manufacturing and the enterprise, and what he sees as the greatest challenges and opportunities for Plex Systems.
Here’s a transcript of my interview with Jason Blessing, the new CEO of Plex Systems:
What are the three biggest challenges you see to Plex Systems’ growth over the long-term and how will you and the management team address them?
Our greatest challenge is awareness of who Plex Systems is and the value we are delivering to our manufacturing customers today. We’re already putting together programs that will highlight the very meaningful customer base we have and what they are able to accomplish using Plex Online. Second, we’re going to continue making significant product investments. Our owners are growth-minded and we’re looking to create a beachheads in additional areas to compliment our heritage in auto manufacturing. Third, we’re going to expand our sales and marketing investments to provide better coverage domestically and in Europe and Asia. We’re also on a mission to lead the resurgence of manufacturing in America by giving small and mid-sized companies the systems they need to be formidable global competitors.
SaaS-based applications have proved themselves in the enterprise. How and why are manufacturers adopting SaaS-based ERP systems today? How is this going to change in the future?
Credit has to go to Taleo and Salesforce for proving SaaS can succeed at the departmental level in the enterprise. We’re finding that the combination of financials and Manufacturing Execution Systems (MES) delivered in the cloud is very well-suited for small and medium manufacturers. These manufacturers often don’t have a large Information Technologies (IT) staff and want to offload these systems so they can stay focused on their core business. In this sense we free up these smaller manufacturers to get back to work running their businesses without having to hassle with large, complex and costly ERP deployments.
Will SaaS-based ERP systems cannibalize monolithic ERP systems or coexist and compliment them? Or are you seeing a mix of both cannibalization and coexistence? For Plex Systems, what’s the best direction?
We do see customer that adopt parts of our solution, quality for example, to test the cloud model before going wall to wall Plex. Another approach we see is customers who have global operations bring foreign factories online quicker than they had in the past as a result of SaaS. The end result will be the cannibalization of monolithic ERP systems by those that are SaaS-based.
One of the implicit factors in this area of cannibalization is the typical release cadence of a SaaS provider. Most large cloud providers have, on average, 3 releases a year. Here at Plex Systems we’re on a continuous release cadence. When a customer asks for a feature enhancement or entirely new set of functions, we strive to be very responsive with our release cycles and deliver what is needed.
Plex Systems has done well in several key manufacturing industries including automotive, A&D, electronics, food and beverage, and medical devices. Do you see Plex Systems moving into additional industries, and if so, which ones? Pharmaceutical and biotech for example.
We’re going to be fairly disciplined in our approach within the verticals we’re already selling into. We’re seeing increasing interest in moving core shop floor applications to the cloud for example, and we’re going to expand out our coverage in our core vertical markets as a result.
With the majority of sales in the United States, does Plex Systems have plans for Europe and Asia? What’s your perspective of those markets for SaaS-based ERP system sales?
We’re growing at an approximately compound annual growth rate of 30%+ per year, the majority of that growth coming from North America today. We’re also seeing strong interest from EMEA, South America and Asia. What’s driving our foreign market demand is the need manufacturers have for quickly getting production centers up and running on financials, MES and Supply Chain Management Systems (SCM). We also run our own data centers and have hot standby and back facilities supporting our worldwide customer base.
Two-tier ERP delivers significant business value and is growing in adoption. How will Plex Systems capitalize on this trend and what are the implications for the application development priorities?
We’re delivering two-tier ERP implementations today and one of the largest heavy equipment manufacturers in the world uses Plex Online to run their shop floor operations at several manufacturing centers. Their main ERP system is an SAP R/3 instance, and we integrate to that and help this manufacturer be more efficient at the individual plant and shop floor level.
Last year Plex Systems announced IntelliPlex, SmartPlex, in addition to several other significant new services and partnerships. Of these, IntelliPlex has the potential to deliver analytics and business intelligence to manufacturers who may have never had these metrics available before. How do you see analytics in manufacturing improving this year, and how will this augment Plex Online’s analytics strategy going forward?
Much of our success as a provider of SaaS-based ERP systems is due to the breadth of applications that span from the shop floor to the top floor. We’re seeing analytics resonate really well with the people who write us the checks, the top floor executives and their teams responsible for the getting the highest performance from manufacturing operations. We’re going to augment our analytics this year, supporting mobile devices. We’ve also been doing data mining of production data across the worldwide Plex Systems customer base and see the potential to create an index of manufacturing performance. We’re going to look at how this data will be able to help our customers predict economic conditions in their specific manufacturing industries.
There are a myriad of studies out on the impact of mobile technologies on manufacturing. Last year, Plex Systems introduced SmartPlex Mobile, which gives ERP users access to data on iOS and Android devices. Can you discuss the challenges of mobile adoption in manufacturing and how Plex Systems will address them?
Often mobile technologies installed and used on the factory floor are proprietary to the systems and workflows for that specific factory. They are fine-tuned to the specific workflows on the factory floor, and the proprietary nature of their electronics only work with the systems they are designed for and Plex Online supports many of these devices. Material handling, RFID and other logistics projects are based on these kinds of technologies.
We’ve also found that senior management teams want to get as close to real-time data as possible on each phase of manufacturing operations. SmartPlex Mobile is designed to give senior management teams visibility into operations on Android and iOS devices, and continues to gain interest from existing and new customers alike.
Many manufacturers are dealing with “brain drain” or the retiring and churn of their long-time manufacturing, process control, and quality management professionals. How do you see Plex Systems helping these manufacturers to retain that tacit knowledge in their organizations over their long-term?
We talk quite often about this with our prospects, customers and internally in our development meetings. Prospects are especially interested in how to solve this problem as tribal knowledge is often the most difficult to capture and re-use. It’s common to find manufacturers with a myriad of Microsoft Access databases, legacy systems and data locked on spreadsheets. Our architecture is based on a Master Data Management (MDM) model with gives manufacturers a single source or version of the truth. Using our experience implementing these systems in small and medium-sized manufacturers, we’ve found methods and techniques for managing corporate-wide data effectively.
Visualization in manufacturing including the extensive use of 2D and 3D CAD drawings is also accelerating. What are your thoughts on the future of visualization in manufacturing, and more specifically, which key process areas do you see Plex Systems addressing with its visualization strategy?
This area is critically important for the shop floor as it can drive higher levels of production quality quickly. We’re going to continue to invest in this area, and our Actify partnership gives us a strong foundation to build on in this area. The partnership with Actify allows us to embed engineering drawings directly in Plex, allowing shop floor workers to look up specifications on the fly to ensure high levels of quality. The drawings are highly valuable because they are contextualized in Plex (e.g., tied to the product in question) and don’t require any expensive CAD equipment or training to view.
Plex Systems has also built a strong foundation of partners including system integrators and resellers. Do you anticipate Plex Systems will increasingly rely on resellers or stay with primarily a direct sales strategy?
It’s very important to high fidelity relationships with customers when you’re selling SaaS-based enterprise software so the direct model is important to us. That said, partners are also very important to us because of the value they can bring to customers and the added reach they can provide us. So, we’ve been successful in creating a partner program, which has a rigorous certification process that ensures those we partner with have strong domain expertise to serve our shared customers. Partners can quickly become a force multiplier for us, and we’re working towards that goal by keeping direct sales in balance.
Disclaimer: This interview was done independent of Plex Systems. I have not and have never been a paid consultant of the company. I approached them to do this interview based on insights gained from WordPress analytics showing readers’ interest in ERP, SaaS and enterprise software.
For many companies, getting their mobility strategies off the ground and successful is the highest priority project they have in 2013. The urgency to get their sales and consulting teams equipped with smart phone and tablet-based applications is accelerating.
Pilot projects have shown mobility applications can shorten sales cycles and serve as a better sales training and management platform.
Serving the sales force with these technologies is paying off across a wide spectrum of industries. It’s also changing corporate cultures, making them more responsive as well.
With these rapid advances going on and the prediction in December, 2012 by Mary Meeker that the installed base of smartphones and tablets will exceed the total PC installed base by the 2nd quarter of this year, market researchers are releasing forecasts more frequently than ever. I’ve summarized the key forecasts below:
From the obvious to the outrageous, enterprise software predictions often span a wide spectrum at the beginning of every year.
In enterprise software in general and ERP specifically, there are many safe harbors to dock predictions in, from broad industry consolidation to Oracle buying more companies. Or the inexorable advances of cloud computing and SaaS platforms in ERP today, which is often cited in enterprise software predictions.
Too often predictions gravitate too much towards theoretical economics, overly-simplified industry dynamics and technologies, leaving out the most critical element: customers as people, not just transactions. So instead of repeating what many other industry analysts, observers and pundits have said, I am predicting only the customer side of ERP advances in the next twelve months.
The following are my predictions for ERP systems and enterprise computing in 2013:
The accelerating, chaotic pace of change driven by customers will force the majority of Fortune 500 companies to reconsider and refine their ERP and enterprise computing strategies. Social, mobile and cloud computing are combining to provide customers with more acuity and articulation of what their preferences, needs and wants are. The majority of ERP systems installed today aren’t designed for managing the growing variation and pace of change in customer requirements and needs. In the next twelve months this trend will force the majority of Fortune 500 companies to re-evaluate their current ERP systems when it becomes clear their existing enterprise systems are getting in the way of attracting new customers and holding onto existing ones.
Highest-performing CIOs will rejuvenate monolithic, dated ERP systems and make them agile and customer-focused, while at the same time excelling at change management. There are CIOs who can handle these challenging tasks, and the future belongs to those who can fluidly move between them quickly. In twelve months, a group of CIOs will emerge that are doing this, delivering significant gains to gross margins and profitability in their companies as a result. They’re the emerging class of rock stars in IT and enterprise computing.
Quality ratings of ERP systems by internal customers will become commonplace, including 360-degree feedback on ERP performance. This is overdue in many companies and it takes a courageous CIO and senior management staff to value feedback on how their ERP systems are performing. In the most courageous companies, within twelve months the results of these internal surveys will be posted on bulletin boards in IT and throughout IT services departments. For some companies this will be first time IT staff members have a clear sense of just what internal customers need, how they are being served, and what needs to be done to improve business performance.
ERP systems built on a strong foundation of personas, or clear definition of customers and their roles, will overtake those built just on features alone. This is already happening and it will accelerate as featured-based ERP systems prove too difficult to be modified to reflect the fast-changing nature of personas and roles in organizations. The quickest way to determine if a given ERP system launching in the next twelve months will succeed or not is asking what personas it is based on and why.
Customers push speed and responsiveness from a “nice to have” to a “must have” as advances in mobility platforms and integration make real-time possible. If there is one unifying need across the personas of customers an ERP system serves, it is the need to improve responsiveness and speed. The same holds true within enterprises today as well. It would be fascinating to look at the data latency differences between market leaders versus laggards in the airline industry for example. Customers will push accuracy, speed and precision of response up on the enterprise computing agenda of many companies this year. Speed is the new feature.
What were once considered ERP-based operations bottlenecks will be shown to be lack of customer insight. Take for example the very rapid product lifecycles in retailing. At first glance slower sales are attributed to not having the right mix of products in stores, which is a classic supply chain problem. Yet customer-driven ERP systems will tell retailers a different story, showing how product selection, even suppliers, are no longer pertinent to their customers’ preferences and needs. More customer-centric ERP systems will help retailers overcome costly and difficult to recover from bottlenecks in their operations.
Bottom line: Enterprises clinging to monolithic, inflexible ERP systems need to re-evaluate how their enterprise computing strategies are serving their customers before their competitors do.