Everywhere you turn in ERP-land these days, up pops another app marketplace. The roster of ERP players large and small with online showcases includes Lawson, Microsoft, NetSuite, Openbravo, SAP (with EcoHub and its upcoming SAP Store), and xTuple.
Today’s ERP app marketplaces have a stronger focus on window-shopping than trying to be a software equivalent to Apple’s iTunes store. Vendors are using their marketplace websites to draw attention to an increasing variety of their own and third-party ERP app extensions as well as complementary products and services, segmented by industry, line of business, and product type.
What do you think is driving the move by ERP apps vendors to open marketplaces and what might those sites may evolve into? Here’s some of my current thinking on both topics:
Why have an app marketplace?
Reflected glory. By the scale and breadth of its offerings, an app marketplace can give customers a sense of a thriving ecosystem growing up around the vendor’s ERP software. At the same time, overstuffed marketplaces with limited ratings and segmentation can be confusing places for customers and partners alike.
Future M&A. ERP vendors can mine their app marketplace to gain insight into the extensions and apps of particular interest to their customers. The vendors can use that knowledge as a basis for future investment, either taking a stake in or buying outright the most popular third-party software.
Expansion of app usage and customer retention. ERP vendors are working to make their apps more usable and opening up the data they hold to a wider set of users. App marketplaces can help flag ERP-related extensions and apps suitable to non-traditional ERP users.
It wasn’t that long ago that packaged apps ruled the application delivery landscape and custom development was decidedly the second choice. Today, the decision is not so cut and dried, as firms struggle to find the right balance between the quick time-to-market of packages and the competitive distinction custom development can create. In the midst of this shift, a new option — rent (SaaS) — is gaining traction. Most enterprises already support a mix of packaged and custom applications — but with fast adaptation, customer experience, and process integration the top priority for most enterprises, do firms need a different mix of custom, packaged, and SaaS apps to maximize customer value?
Next month at Forrester’s IT Forum in Las Vegas, a panel of experts will debate the pros and cons of custom-developed applications and packaged applications in our Application Development & Delivery track. Attendees will have a chance to vote on the future of applications. But we decided the debate was too juicy to sit on it for another month. So, on April 25, from 2 to 3 p.m. ET, Forrester will host a Tweet Jam — using the hashtag #ITF11 — to answer the question:
“Which is better at delivering customer value: packaged or custom applications? Why?”
We asked our panelists to get the discussion started, and here is what they had to say:
The lines are blurring between software and services — with the rise of cloud computing, that trend has accelerated faster than ever. But customers aren’t just looking at cloud business models, such as software-as-a-service (SaaS), when they want more flexibility in the way they license and use software. While in 2008 upfront perpetual software licenses (capex) made up more than 80% of a company’s software license spending, this percentage will drop to about 70% in 2011. The other 30% will consist of different, more flexible licensing models, including financing, subscription services, dynamic pricing, risk sharing, or used license models.
Forrester is currently digging deeper into the different software licensing models, their current status in the market, as well as their benefits and challenges. We kindly ask companies that are selling software and/or software related services to participate in our ~20-minute Online Forrester Research Software Licensing Survey, letting us know about current and future licensing strategies. Of course, all answers are optional and will be kept strictly confidential. We will only use anonymous, aggregated data in our upcoming research report, and interested participants can get a consolidated upfront summary of the survey results if they chose to enter an optional email address in the survey.
I had the pleasure earlier this week of attending Lawson Software’s conference and user exchange, aka CUE, in Boston.
The midmarket ERP apps vendor had the singular misfortune to throw its annual user party at a time of great uncertainty for both Lawson and its customers. Lawson has yet to respond to an unsolicited $1.8 billion acquisition offer from ERP rival Infor, aside from acknowledging receipt of the offer on March 11. Despite the Infor elephant in the room, CUE was a good-humored affair. Lawson execs exhibited grace under fire while customers expressed concern but remained cheerfully stoic and pragmatic.
Do you think Lawson will end up part of Infor? Alternatively, will it remain independent or will it be bought by a private equity firm and no longer be publicly traded à la Epicor? As apps vendors try to navigate fluctuating revenue mixes — rising subscriptions versus falling maintenance — being privately held may prove to be an attractive option.
Lawson is currently evaluating whether to break out subscription revenue as a separate line item in its next fiscal year. Of its 4,500 largely on-premise customers, around 350 use a Lawson SaaS product, the fruit of purchases such as Enwisen and Healthvision. Like other apps players, Lawson’s embraced Amazon.com’s EC2 as the cloud infrastructure for its HCM, M3 and S3 ERP apps. Several Lawson cloud services early adopters at CUE talked about their organizations’ experiences and there were some similarities in those stories:
They faced hardware refreshes and/or obsolescence of the app and database versions they used
They were already successfully running third-party SaaS apps or remotely hosted software
They used Lawson managed services as a steppingstone between the on-premises and cloud services worlds