What sort of software supplier should you be looking for? Part #2. By David Carter

History is often a better indicator of the future than hype. Navision, when released, was supplied in the UK with each dealer having the ability to modify the code for the software. This was so they could 'tailor the software to individual companies needs'. This resulted in a myriad of hybrid 'Navision' sites who were 'slightly different' to each other. How a new product (Product Green) can provide the facilities of three different accounting packages is difficult enough to comprehend. How this new product can also embrace all of the 'bespoke' changes for Navision users is incomprehensible. In these circumstances how ‘a reseller will be able to support the product long beyond 2013' is to say the least unclear and very worrying.
Basic support is one thing but true on-going development is an entirely different proposition. Detailing Microsoft's R&D spend may look good (if irrelevant) but how much of this will really go on to these products which are about to replaced (!!?) by Project Green?
With this uncertainty it is prudent to consider alternative options.

While accurately describing the Microsoft Dynamics AX & NAV products as red hot, the point was made that having purchased them, you may have to throw them away on the arrival of "Project Green". The reality is that all MS products are guaranteed in writing to be developed and supported until 2013. Even then, the reseller community will be able to support the product long beyond that date.

It gets even better! Providing you are on a support plan, you can trade in your old licenses for the new technology on a like for like basis when the new product arrives if you want to. In the meantime, Microsoft is spending $2.5 Billion annually in R & D in greatly increasing the functionality of each of the products.

It just may be worth pointing this out to your readers

"The danger is that these new owners know very little about software: deliberately or inadvertently they may end up mismanaging the product."

Please give examples to backup your accusation.

"Fifteen years ago resellers were under the thumb of the vendors – if you sold Tetra you weren’t allowed to sell anything else. But now the boot is on the other foot: the vendors are desperate to sign up good resellers."

Former is still true of some authors. Most channels are now rationalising.

"big vendors sell direct to the customer, who tend to be pretty ignorant."

My experience is anything but.

"But this (I think) isn’t going to happen at all because this is not a mature market."

The market for LAN based software IS mature. This is why your assertion that SAP will not meet their stated target from the mid-market is correct.

David - I'm sorry to say but you are ill informed:

"Sage is lord and master of the entry-level marketplace. Here the key decision-makers are accountants in practice, who tell their clients what to buy."
That's interesting. Our market analysis indicates some 2 million businesses that Sage doesn't reach. At least some of them must have accountants so what's happening here when you notice that Sage license sales are flatlining?

"the top level SAP’s top management seem to living in Cloud Cuckoo Land. Last year their CEO, Henning Kagermann, announced that he expected SAP’s annual turnover to increase from the current $26 billion to $71 billion by 2011 (it’s a big company)."
Untrue. 2006 revenues were roughly $12bn. What Henning actually said is they plan to grow the customer base from 40K to 100K with only year on year revenue projections.

"All this growth is supposed to come from the mid-market (the corporate market is saturated), but it’s never going to happen because these figures are ludicrous."
Yes - your figures are ludicrous.

"Corporate software vendors rarely understand the mid-market and SAP’s top management are dangerously over-optimistic here."
They are creating an entirely new business model and their new market definition is very different to yours. They have challenges but it's not impossible given the addressable market.

"Business One is a winner, but will be a lot slower than they think because the SME market is tough and fragmented."
Wrong again - B1 will be killed by A1S. I note this is a change of tune when last year you were eulogizing B1 as the mutts nuts. The SME market isn't tough. Sage is finding it tough in a number of markets because it doesn't know how to address the VSB market. Intuit is doing perfectly well.

"So Dynamics comes in three flavours – GP, NV and AX, three separate packages which occupy a very similar space in the market."
I didn't see you at the recent analyst briefing otherwise you'd know these product lines are converging and complementary. Work to do but in good shape. Project Green is dead except in the minds of a few die hards at Redmond.

"And just how important are the big vendors anyway? Perceived wisdom over recent years has been that the SME market will consolidate, with fewer and fewer vendors who will then become dominant.
But this (I think) isn’t going to happen at all because this is not a mature market."

Please be consistent. Earlier, you said that Sage, SAP and Microsoft were bullet proof. Now you say not. Which is it?

To your final point - you don't need to know how software is written, you need to know where the market is going. That's what analysts do.

LAN based yes, on-demand no. You may not be familiar with current market dynamics. Check Salesforce.com's last results. There's $700 million tracking to $1 billion in one segment. SAPs A1S year 1 projection is $405 million. Do those sound like numbers I'd want to be chewing into? They do to me, SAP, Oracle and Microsoft.

When considering the market, you can't simply look at one geography and make broad assumptions, you have to consider a geography in the context of the whole.

Globally, SAP is gearing up to go after 3 million prospects a year from 2008. They've earmarked €400 million for the initial push with roughly half spent already.

To the channel issue - ask AccessAccounts resellers what happens when they take on another vendor.