Software Licensing & Master Service Agreements : Chicago Software Licensing Lawyer & Attorney : Sam Conforti Law Firm : Master Service Agreements, Negotiations, Outsourcing : Cook County, Illinois

 

As some of my readers may recall I posted an article to this Blog on October 12, 2009 entitled Microsoft Buys Core Technology to Boost Its ERP Offering. The article mainly commented on Microsoft’s most recent purchasing strategy to boost its Dynamic ERP product offerings. After reading my article, Houston Neal, Website Content Manager for Software Advice for Manufacturing contacted me and asked me to read and comment on his article entitled Microsoft Dynamics for Manufacturing – Understanding the Difference Between GP, NAV, SL and AX. Neal’s take on the current situation is that although Microsoft has tried to establish itself as a player in the ERP market space, enterprises may still be confused as to what product(s) would be suitable to which industry.

I have read Neal’s article and was quite impressed. I’m a person that likes to understand the history behind the product and/or company. Neal does a nice job of detailing the 8 year evolution of Microsoft’s foray into the ERP industry. He starts off with a sort of Gantt Chart that breaks down the different target markets for each of the Microsoft Dynamic products.  From the enterprise size, based on number of employees, it looks as though Microsoft has taken a comprehensive approach to the SME market space and taken aim on competing directly with SAP and Oracle in this space.

I particularly liked the section where Neal describes Microsoft’s initial purchases and the making of the Dynamics portfolio of products. First there was the Great Plains acquisition in 2001 which netted the Great Plains accounting application and the Solomon business management applications. Then there was the Navision purchase in 2002 which garnered not only the human resources and CRM applications, but also the Axapta product line from a recent acquisition by Navision.

So what is Microsoft to do with four different enterprise products (Great Plains, Solomon, Navision, Axapta) each written in a different language, running in different development environments, and using different databases? Neal takes us on a tour of the daunting task that Microsoft laid out for itself to convert all four products to a single code base, Project Green.

Neal includes an evolutionary chart of which Dynamic products have become the product of choice for which industry. He reminds us that over 9000 ISV’s are out there providing customization services and support for these products. He concludes his article by stating that growth in the Dynamic Product line appears evident.

 

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I recently came across a White Paper from Saugatuck Technology, Inc. entitled “SaaS Realities: Business Benefits for Small and Mid-sized Enterprises”. In the spirit of full disclosure, this research paper was sponsored by SAP so there is a one page blurb from SAP at the end of this White Paper which reemphasizes the benefits of SaaS for SME’s and then touts its own SaaS offering Business ByDesign. I chose to post this review of the White Paper since the research is very current, describes the benefits succinctly yet thoroughly, and is also presented in an unbiased format.

The paper is written with the SME in mind, as one can discern from the title, however it begins with a very brief background to the pre-SaaS days. As a bit of a history buff myself, I always appreciate it when an adequate foundation is laid so we can see how things have progressed over time. The paper points out the initial two choices available to us:

·         Purchase of software suite from an ERP Vendor: The enterprise’s IT department is then saddled with all the tasks from selection, installation, maintenance, all hardware, and networking; or

·         Engage a VAR or Systems Integrator (“SI”) to install new software and integrate it with its existing legacy systems: Here selection and installation are handed over to the VAR or SI, leaving maintenance to the Enterprise’s IT department or perhaps outsourcing it.

The authors address the question of when is the optimal time to contemplate a switch in technology from the old approaches mentioned above to the latest alternative, SaaS:

·         Establishing a new location

·         Serving new markets

·         Sudden sustainable growth

·         Preparing for a recession

·         A new sales channel

·         A new supply channel

·         New governance or reporting standards

·         New performance goals

·         Aggressive competition

·         Increased customer expectations

The authors then go into a deeper discussion of SaaS. They begin, as most SaaS discussions begin, with the pricing model, per user / per month, and variations of this model. This is followed by a discussion of what an enterprise is really purchasing with SaaS (i.e. a business service). This business service includes:

“… the entire range of data center infrastructure services: networks, storage, operating systems, databases, application servers, Web servers, and of course, disaster recovery and backup services. Moreover, a full range of data center operational services – authentication, availability, identity management, production monitoring, patch management, activity monitoring, software upgrades and customization …”

The research paper then gets into the heart of the issue, mainly the Advantages of SaaS. There is a very well-written discussion including:

·         Financial Value

·         Time to Value:  Quicker installation, quicker integration, quicker pay-back period.

·         Affordability:  No large up-front costs

·         New technology

·         Continuous innovation:  Multi-tenancy allows for a continuous stream of enhancements

·         Improved Operations

·         Customization: Easily adaptable for SME’s

·         Integration: Service Oriented Architectures (“SOA”) are standard for SaaS providers. Also, three additional means of achieving seamless integration with other enterprise applications on premise include: Web-based SaaS integrators, SaaS integration appliances, and SaaS system integrators.

·         Fewer technical resources needed: Less strain on your IT department and small firms can take advantage of the latest technologies

·         Focus: Allows firm to focus on its core competencies

The research paper concludes by recognizing that SaaS may not be the answer for your particular firm. For example:

·         The application differentiates your firm from the rest of the market (i.e. the application is tied to your core competency); or

·         An existing large investment in your existing IT; or

·         Regulations may require that you keep and manage your data behind a firewall and your SaaS provider cannot accommodate this requirement.

Saugatuck Technology, the author of this White Paper, is a strategic advisor to senior executives, information technology vendors and investors, providing strategy consulting, subscription research and thought-leadership programs focused on emerging technologies, key business / IT challenges, and effective management strategies.

For further readings on this topic, see the following posts in this Blog:

SaaS Customer: A Checklist of What You Need to Know Before Selecting the Vendor

SaaS Contracting: Tips Leading to the Decision and What to Include in the Agreement

Also on the left hand sidebar insert “SaaS” into Keyword search and hit “go”. You will find numerous articles relating to SaaS.

 

 

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First I would like to apologize to my readers for the delay in posting this article. My goal is to post something of interest every 1 to 2 weeks, more often if events warrant it. Unfortunately, my schedule went a little haywire during the closing of the 3^rd quarter and so it has been difficult to meet my self-imposed deadlines. I think I’ve turned the corner.

Barbara Darrow, Senior News Editor for SearchITChannel.com, reports in her article entitled “Microsoft rolls partner technology into Dynamics AX ERP” that Microsoft has embarked on a purchasing strategy to build up its core technology of its Dynamic ERP offerings. The series of purchases (provisos not disclosed) included the following:

·         Fullscope Inc. – process manufacturing technology

·         Computer Generated Solutions Inc. – professional services solution

·         LS retail EHF – retail technology

·         To-Increase Denmark A/S – retail technology

Axapta, now called Dynamics AX, is one of the Dynamics ERP lines from Microsoft that competes directly with SAP’s SME offerings.   This mid market space, what Darrow identifies as the “white space”, is more often than not where VARs and ISVs do a lot of customization. This current round of technology purchases is seen as Microsoft’s attempt to add functionality while at the same time reducing the need for customization. It is probably safe to assume that SAP might not welcome this intrusion into the mid market, but the jury is still out on other VARs that perform application work in the space as to whether the additional functionality will be viewed as a help or a hindrance. Dan Fine, President of Fine Solutions, a Dynamics AX partner, stated:

"They've bought some key functionality for professional services and are putting it into the plumbing. That will let us extend our products more easily into various verticals"

He also remarked that time sheets and billing will be part of the offering.

 

 

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SAP took the opportunity at CeBIT 2008, the world leading technology fair, to announce its latest partnership which builds upon SAP’s Business All-in-One solution. SAP has teamed with Intel and will be offering a landmark product on Intel Xeon-based systems via original equipment manufacturers (OEM) and hardware system providers based on SUSE Linux Enterprise from Novell and the database SAP MaxDB. Hardware offerings pre-installed with SAP software is landmark to say the least. The intended benefit for the SME market is a reduction in the Total Cost of Ownership of their IT systems. SAP stated in its announcement:

“The offering targets midsize companies in the manufacturing, service and trade industries and directly addresses the demands in these market segments for quick and easy implementation, and tailored yet scalable solutions at predictable costs."

Ray Boggs, VP of small and medium business research IDC, noted that having the alignment of hardware and software will give customers what they have been looking to do, “reconcile the somewhat contradictory goals of a solution designed to meet their individual needs but in an almost pre-configured fashion to minimize time and cost." SAP plans to continue with this strategy of partnering with hardware vendors to directly address the needs for TCO for its SME customers. For a more comprehensive description of this announcement see SAP and Intel Collaborate to Offer Pre-Installed Business Solutions for Midsize Companies Optimized for Quad Core Intel(R) Xeon(R) Processors.

Of course on the surface this hardware with pre-installed SAP software approach seems to be a winner. Even below the surface it is hard to find fault with this methodology. But I am a simple man. When I see the words “Xeon Processor”, “SUSE Linux”, and “database” in the same sentence my eyes begin to glaze over. I might have a talent for spotting an ambiguous phrase or two in a software license or consulting agreement and perhaps the ability to offer a revision to it to bring the language to a more equitable point of view. However, I wonder if it is reasonable to ponder this new approach from SAP from a slightly different perspective. I almost get the feeling as the Portuguese explorers must have had during their successive voyages down the coast of Africa in search of the riches that lay ahead in the Far East. These aren’t entirely unchartered waters, but one cannot be quite sure what lies ahead. Others, such as Microsoft, have gone down this course before. I have to wonder what obstacles may present themselves in the future. The usual suspects are ubiquitous, (confidentiality, ownership, infringement, anti-trust). I am sure that the right people at SAP and Intel have considered these issues and more and are fully prepared. The cost of doing business is a fascinating journey.

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