After I wrote that headline I started wondering whether I was exaggerating. Based on nearly 30 years of implementing mid-market Enterprise Resource Planning (ERP) systems, I would have to say “no”. There are a few, and it is very few, companies that can find a solution so uniquely tailored to their industry and requirements they do not need to consider expanding the solution by adding third party products. It may be a major enhancement, such as our equipment rental module for Dynamics NAV, or it might be something relatively minor such as an integration to a FedEx shipping portal, but there is almost always something you will want or need to add.
When we talk about the “mid-market”, we generally mean organizations with between 5 and 400 computers, although that definition varies widely depending on the type of business and how the number of computers translates to number of employees. A surprising fact is organizations on the low end and the high end of those numbers typically require fewer add-on products than those in the mid-market. You might expect this for the smaller ones, but why at the high end?
Many of the large ERP software vendors have bundled industry-specific solutions into their offerings, such as process manufacturing, professional services, etc. This means larger customers are more likely to find a solution to fit their business model, even if it takes an average of 18 months and 7 figures to get it running. Software vendors in the mid-market have neither the ability to charge enough to bundle all of this functionality into their software or customers that would be willing to pay the high level of services required to implement the solution. This means a mid-market system is likely to be more generic and add-on vendors will quickly jump on the opportunity to develop offerings.
Mid-market businesses today find themselves with much more complex requirements than what would have been required even ten years ago. Customers have become much more demanding and competition is fierce. Technology is used now as a weapon and businesses just have to keep up. That is where the add-on products come in.
Mid-market businesses today need 90% of the functionality large organizations require but only have 10% of the budget. The most common answer to this conundrum is to take a standardized mid-market ERP system, such as Microsoft Dynamics NAV, and include a few add-on products and possibly customizations, to create a close match to an industry solution. Some add-on products are little more than tweaks and could be characterized as tools. A business intelligence report writer or the link to a FedEx system we mentioned earlier would be examples.
Software vendors who have developed mid-market solutions for industry niches are often smaller companies, who may not have the latest technology and with a less promising future than those such as Microsoft and Netsuite, who have released more generic solutions. With the promise of a larger customer base, add-on partners are quick to create add-on products for these systems, by leveraging their industry expertise to give the end user an experience or tool they wouldn’t otherwise have.
So you need to buy some third party-add products, whether you are paying for them upfront for an in-house license or via a monthly subscription charge for cloud licenses. Here are a few thoughts to consider.
- There will likely be bugs. Add-on products do not have the same customer base as the core products they are designed to enhance. This means they will not have received the same level of development discipline and testing. The most important thing is to find out how responsive the vendor is to fixing these bugs and how long they will support previous versions. There is no way around this and you really can’t expect anything different. Having 150,000 companies test your software every day is going to result in a more solid product than having a few hundred.
- Start with as few add-on products as possible. Every time you sign up for a new add-on product you are likely adding a new vendor. I remember one company, not on Dynamics NAV, who had 13 add-on products it had to consider any time it did an upgrade or needed technical support. You can always add more later but chances are the urgency of the need or want will decrease over time.
- How committed is the vendor to this add-on product? Some develop add-on’s because they came up with a great idea for one client and are now trying to sell it again. They may not have a dedicated development group or may not be actively marketing the product. If the answer is “no” to either of these questions, chances are the add-on will fade away over time.
- Was the add-on product developed within the toolkit of the core ERP product or does it run on the side using different technology or a different database? The first is an embedded solution while the second is really an integrated product. There are advantages and disadvantages to both. Make sure you consider the impact on your operations and future upgrades.
- What level of support is available for the add-on and are the vendors even in the same part of world? Chasing technical support in Europe or Australia is not a lot of fun.
- What is the add-on vendor’s strategy for the cloud and their development path? Even if you are currently using an in-house system, there is better than a 50% chance you will move to a cloud system in the next 10 years.
These are just some of the points to consider. Add-on’s are a necessary and viable strategy but should be carefully vetted before signing on.
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