Enterprise resource planning (ERP) solutions are becoming highly intricate, making them an increasingly complex sale for software resellers and consultants. Channel Middle East asks some of the region’s leading ERP providers to detail their go-to-market strategies and outline the challenges facing the channel.
They are: Mark Van der Ven (MV), managing director at Sage Middle East; Hari Padmanabhan (HP), deputy managing director at 3i Infotech; Basil Daniells (BD), regional director at Epicor; Tamer Elhamy (TE), business solutions manager at Microsoft; Hisham Esaadi (HE), director of alliances and channels at Oracle MEA; Ferri Abolhassan (FA), executive VP of large enterprise EMEA at SAP.
If we could sell everything through the channel we would love to do that, but we have to make sure that the customer is taken care of and that the implementation is carried out professionally.
The ERP software market in the Middle East and Africa continues to grow at a double-digit rate. Is this growth sustainable and if so, why?
MV: I can see it growing like this for at least the next two years. After all, there is general economic growth for obvious reasons including the level of oil prices, which is bringing a lot of investment and a lot of cash into the region.
There is more competition, companies need to get their houses in order, there's a lot of modernisation and structuring going on and firms know that they need proper assistance for that.
The days of playing around with homemade solutions and internally-developed software are largely over.
BD: The majority of the market segment over here is small compared to global standards.
These small companies have traditionally been working with accounting systems, but now, because of the external market demands and pressures from their suppliers, they feel a need to go for an end-to-end solution that covers the whole of the business they are in.
We are seeing that kind of demand starting up now and that will continue well into the future, for us and for any ERP vendor.
TE: According to IDC reports, the ERP market in the Gulf region is growing around 15%. Last year we saw growth of 25% and this year we are estimating it to perhaps grow 50%.
Companies invest more in growth so you'll see conglomerates doing retail and distribution that also have manufacturing and warehousing facilities.
So even within one group you will see an increasing amount of companies that belong to that group. That is why we feel this growth is going to continue.
There is a heated battle for customers in the Middle East ERP market. How are you evolving your strategy to ensure you remain competitive?
HE: We have local offices and what differentiates us from most other ERP vendors is that we listen closely to the customer's needs.
For instance, our product is an Arabised product so we are able to give the customer the choice between English and Arabic versions of the application.
BD: Our product, up close, would have a lot of similarities to alternative products. The differentiator is how it is implemented and delivered in a customer's environment.
We are noticing our system integrators in this region are shying away from recruiting college graduates or those people with little experience. They are not making an adequate investment.
With Epicor, our delivery model in the Middle East region is through partners and the channel. We have very strict guidelines in terms of certification levels and education levels when it comes to our partners going out and implementing our products.
MV: Our competitive edge is the fact that we are very focused on the ERP market and nothing else. Most of our competitors have become these huge dinosaur companies with millions of different things that they are doing including operating systems and databases and middleware and everything else.
You have a lot of competitive products that are good quality but the difference in this mature market that we are in is no longer in the features of the product.
The difference is in the companies' approach to them and the people behind these products - providing the implementation, consulting - who are with the customer after the product is implemented.
TE: We are focusing on different pillars. The first one is to do more on the market perception of our products. The second one is to invest in our partners and our channel.
This year we are availing around 7,700 man hours of training for our partners. We are blessed that the model of Microsoft is 100% driven by the channel. Everything that we are doing including the strategy, the activity and the investment, revolves around our partners.
Where do you draw the line between the role that the channel plays and the direct engagement that you as a vendor have with the end customer?
MV:Because of urgency and immediate marketing opportunities, there are times when we step in when there is no channel available to do the work and it is not with the intent to take this from our channel.
If we could sell everything through the channel we would love to do that, but we must make sure that the client is taken care of and that the implementation is done professionally.
If we do not find those resources within the channel there are only two options: either we stay away from the business or we get involved and take it ourselves.
This year we started getting involved in the larger projects where the client insists on having vendor involvement from just the local channel partners.
FA: Many of our partners are already well positioned in several sectors in the upper SME segment, which was served only directly until now.
Our go-to-market model gives partners more opportunities to sell into a broader segment of midsized customers, which means we will make more business available to them.
BD: We tend to get involved in certain strategic fields from a pre-sales perspective and we will send our guys directly to demos and client education workshops.
There is no room for compromise. In this region it was not like that maybe five, 10 years ago, there is a certain speed demanded now of the whole process and the quality of the entire engagement.
And we also - as any vendor will do with their partners - join in sales calls if it's a large enough client and a strategic account.
It validates the trust that the customer has in the partner if they see the vendor is 100% behind the partner.
The partners are an extended arm of our personnel in the Middle East so to speak.
HP: We clearly have different product lines that we could market, certain product lines that the channel goes to market with exclusively and others the channel markets, but we will implement.
Channel partners essentially bring in a tremendous market presence and reach through the closeness with the customer.
So they can bring a deal on board but they do not have the implementation and resources or the ability to actually deliver on what they do.
So we do a lot of pre-sales in those instances.
TE: It's very easy because we don't work directly with end-user customers at all. It's as simple as that.
We cannot go behind our partners' backs and close a deal. We can help them in the implementation of a deal.
There are some customers that will say, "I need the quality assurance of Microsoft" so we go and provide some services around the partner implementation. But we never sell licences or implement licences.
There continues to be a high level of price slashing happening in the ERP space. What danger is there that customers are looking for the cheapest solution over the most effective one for their businesses?
MV: I think a lot of people have learned the hard way that the cost really is the last thing you want to focus on when selecting an ERP system.
You want to choose from best of breed and have a proper shortlist. Decisions come down to which people are behind it.
HP: I always believe the end-users are business people and smart people. They are not successful in business by accident and they can make the decisions.
So ultimately everybody realises at what point the price is going below a level which starts to endanger the whole process. But you have to provide higher value.
For the same dollar, for the same one dirham, you have to provide a larger value next year than you did this year and if you don't you can't be competitive.
TE: We have seen customers going to a competing platform and then after six months coming back to us and saying, "we are going to restart the project, we are going to re-implement, how can you help us?" So I don't think that slashing the prices is a strategy that will stop.
What skills and capabilities will Middle East systems integrators need in 2008 to profit from selling ERP software?
HE: There are two dynamics happening. One is a product is evolving, there are modules, more functionality, more features and it's not easy.
There won't be a magic pill that the consultant can take to instantly know the application.
He has to roll his sleeves up and complete one or two implementations to understand the product and what it is capable of.
We are also noticing that our system integrators in this region are shying away from recruiting college graduates or people with little experience.
I notice that they are not making an adequate investment in that area.
MV: We are in the IT business, we sell software, but the technical background of the majority of the people that we work with is unimportant. We don't need to have programmers to implement an accounting system, we need accountants.
The challenge for our channel is to have people that understand accounting and that understand business processes and can translate that into how the software process works.
HP: They need to understand the business of the customer, how the system works to deliver what it is they need. It is a combination of things with a successful engagement with the customer.
The channel partners who come from networking hardware sales are used to the technology, they know what they are selling.
However, they need to shift to listening to the customer and how the business operates.
They have got to ask the customer what they are trying to automate. You are trying to change the way the business works.
If you don't understand the business of the customer you will not be able to provide the customer with a solution that works.
The channel partners which are capable of understanding the business of the customer will be in a better position to take a larger chunk of the services pie and to take that to the customer and get a better margin on the deal that they make as well.
TE: The most important point is that it is becoming more vertical and customers are now more knowledgeable about the industry.
So if I'm selling in retail and distribution I would focus on the retail and distribution know-how - not just the product know-how - and how to talk with that industry.
The SMB segment is increasingly becoming a key battleground for ERP vendors.
What kind of channel do you need to address this segment and how do SMB customers differ from enterprise customers when it comes to their ERP demands?
MV: For us, this market is not new. What we are finding is that our biggest competitors are trying to come in and enter the SMB market. From their perspective SMB is really the higher end of the midmarket.
We have always been into that midmarket and we know how it works.
We know that you cannot come into it with high, intensified systems for the midmarket because people just don't have the time or the patience to wait for one- or two-year implementation cycles.
They need results because they are small companies under a lot of pressure.
They need to implement a system that helps them work more efficiently and they need to be running within three months. And whatever people tell you, these large enterprise tier-one applications cannot do that.
BD: From our perspective, the differentiating factor is how enterprise companies would deploy an ERP solution compared with a small company. Small companies would generally do a grass roots-level implementation.
They would typically do a phased implementation and the first core application would be to deal with their finance and distribution.
You would run that for maybe a six-month period and get the company stabilised and then we would look at things like a production ERP to cover the production area and expand the ERP to cover the HR area. So how you deploy it is different.
HP: SMBs are companies who are in a bit of a hurry in the sense that they want to get their jobs done in a much shorter period of time and are looking for a solution that is very specifically tuned to their nuances.
Secondly, they want to minimise and have an implementation process that is very minimal. Taking out the implementation means we develop a product that practically takes care of 90% to 95% of the requirements up front; the micro-vertically aligned solution.
The channel takes us to market, what the SMB wants is very much there to see and there is a lot stronger mapping between what they show us they want and what we give them.
The implementation cycles are much shorter and they go live much quicker.
TE: There are 600 million people doing their business everyday on an Outlook user interface. If you look at the new user face of Dynamics it is basically an Outlook user interface.
So you would go and do your leads, your accounts, your marketing - even your inventory tasks and other activities - on Outlook.
That would help an SMB account to implement fast or become live on the system very quickly. I think Microsoft Dynamics is scoring high on the amount of resources needed for ongoing support.
What ERP trends do your Middle East channel partners need to be aware of going into 2008?
BD: Probably the most important is the technology element of it. Processes and systems do change, but not as fast as technology changes.
That is probably what partners in the channel need to be constantly developing skills in - the new technologies coming out.
The new thing is that all products today are offered on what we call a service orientated architecture. The SOA architecture is something which is quite different from traditional ERPs.
It involves a lot of web services and has completely opened up the box and made it a lot more like an open architecture system. Our base philosophy is quality not quantity.
We don't have 150 partners across the region. We currently have 17 partners that we manage across the region and all of these partners have been with us for an average of five years.
MV: I guess the main trend is that ERP is not a standalone thing anymore. It is part of the full business organisation of many companies and that includes HR and CRM. There are few companies that can offer these three elements combined.
That's really the challenge. If you can do that well you can approach any client and any company in this market because there is virtually no customer which has all three of these systems in place and has them working properly. As a result, they all need something from us.
HP: I think there are a few things that are definitely happening now. The first is the customer timeline and the need to keep the commitment in terms of the schedule. There is no room for compromise.
In this region it was not like that maybe five, 10 years ago. There is a certain speed demanded now of the whole process and the quality you maintain in the entire engagement.
FA: In a nutshell, a greater client focus and demand for market agility will require faster responses and even higher quality combined with a comprehensive solution that can be scaled to meet our customers' growth plans.
HE: Resources - hiring and retaining resources. Hiring resources is one challenge, retaining them is another challenge.
Another trend will be to look at this region as a big region and not just as country specific.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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