Best-of-breed Approach to Finance and Accounting

CODA Group, a finance and systems specialist headquartered in the United Kingdom, offers financial solutions that help companies grapple with international business issues such as language, currency, and compliance. Designed to be an "upgrade friendly system", CODA applications offer open and standards-based reporting tools. CODA's alliance with Microsoft Corp. has allowed it to deliver a range of financial and management accounting systems, and it has made several strategic acquisitions to further strengthen its position as a compliance solution.

Part Three of the Composing Collaborative Financial Applications, CODA series.

Among its recent endeavors, CODA has recently announced new set of financial planning and budgeting products: CODA s-Planning ("s" standing for "standard") and CODA c-Planning ("c" standing for "collaborative"), as well as a range of improved analysis and reporting tools, which will be detailed shortly. Nevertheless, to date, these corporate performance management (CPM) capabilities have targeted mainly existing customers of the CODA transactional systems. These users have focused on financial analytics, budgeting, and planning, either through Microsoft Excel integration within CODA c-Planning and CODA s-Planning, or through a partnership with Cognos for enterprise-level planning and budgeting. CODA's consolidation capabilities have traditionally been limited to the basic ones inherent in Coda-Financials. While these are adequate for simpler enterprises, the vendor has thus far been unable to successfully compete with offerings from specialists such as Hyperion Solutions, Geac (formerly Comshare), Applix, Longview, Outlooksoft, or Cartesis. Yet, the importance of these functionalities has been witnessed by Cognos' acquisition of Adaytum in 2003 and Business Objects' recent acquisition of the specialist SRC. See Financial Reporting, Planning, and Budgeting as Necessary Pieces of EPM for information on the functionality.

Thus, this merger deal should benefit both parties for many reasons. While Simple Concepts should get access to CODA's well developed global distribution channel and benefit from its financial stability, CODA should fill the financial consolidation gaps in its solution. Immediate cross-selling opportunities into CODA's install base will expand further as CODA translates OCRA into more languages. Not to mention, there are opportunities coming from OCRA's prior integration with SAP, Oracle, and other leading enterprise resource planning (ERP) solutions. The acquisition also gives CODA a base for strengthening its direct sales operation and presence in Scandinavia.

The two recent acquisitions came at the heels of CODA's June 2005 launch of a suite of add-on applications that extends the range of planning and budgeting requirements: CODA s-Planning and CODA c-Planning . These could offer more benefits for CODA-Financials users. The suite includes Version 3 of the much talked about CODA-XL application. CODA-XL allows the fairly simple and secure output, manipulation, display, sharing, and input of CODA-Financials data within Microsoft Excel. s-Planning and c-Planning were seen to enable users to carry out a range of day-to-day tasks, such as producing and sharing statutory reports; processing expenses; or even developing and setting financial budgets using CODA-Financials alongside Excel and the other familiar Microsoft Office tools that most organizations probably already have in place. These new products were meant to make CODA-Financials the launch pad for a quicker and easier budget cycle. By combining the functionality and embedded control of CODA with the familiarity and convenience of Microsoft Excel, CODA s-Planning and CODA c-Planning should streamline the seeding, preparation, manipulation, and production of budgets, based on (or update) the user's CODA-Financials data. Moreover, CODA continues to develop its relationship with Cognos, offering the Cognos Enterprise Planning product where clients have wider enterprise requirements. The vendor also uses a mix of partnership and in-house development to address other CPM elements, such as activity-based costing (ABC), strategic planning and scenario analysis, shareholder value measurement, activity monitoring, information distribution, etc.

In addition to the "standard" budgeting and forecasting facilities provided by CODA s-Planning, users have the option to make their entire cycle more coordinated, efficient, and controlled by opting for the "collaborative" add-on of the CODA c-Planning product. This interfaces with the CODA-Control process management solution, adding a facility to publish budgets as CODA-Control web sites and tasks. This will keep all participants informed and aware of the input needed and when it is required. There are also audit trails and document history to support compliance reporting. CODA c-Planning aims to help organizations set financial budgets and collaboratively develop plans, which both reflect top-down business objectives and assess the need to account for bottom-up creativity and realities. For example, it will give budget managers visibility of process bottlenecks, including vacation and sick days of department managers, information on groups waiting for information from subsidiaries, and vice versa. Conversely, many other peer products focus purely on bringing together and reporting the figures in the system, and not on collaborative processes that are key to collecting and verifying the figures in the first place. The application's aggregation features often make the budgeting and planning process quicker, more dependable, and more predictable, giving financial professionals more time to analyze and consider their overall budget before making decisions crucial to the organization's mid-term plans.

Another analytic module worth mentioning is the CODA Collaborative Scorecard, which helps user organizations link corporate goals through group objectives and individual performance. Designed to be deployed to every desktop in the enterprise, the product supports multiple performance management methodologies. Generally speaking, scorecards assist organizations in monitoring their business performance beyond bottom-line results by tracking both financial and non-financial measures, and then reporting them in a graphical user interface (GUI). A key element is the way they cascade corporate goals through the organization, helping managers to set individual objectives, and then aggregate performance results back up through the company structure, so that management can review the contributions made by individuals and groups. This aligns corporate strategy with the activities of individuals within the organization.

CODA believes that scorecards should be a strategic pillar of any analytic framework, bonding personal accountability to the enterprise's overall performance management. Initial releases of CODA Collaborative Scorecard have complied with commonly used performance management methodologies, such as the European Foundation for Quality Management (EFQM) balanced scorecard, Six Sigma, etc. to provide a relatively functional and flexible method of managing and aligning enterprise, group, business unit, and personal objectives. However, one should note that, although scorecards should be the fundamental link between personal performance and the overall objectives of the enterprise, they are frequently the weak link in the CPM closed-loop cycle, either because they are too difficult to deploy widely in the organization, or because they have fixed, inflexible methodology (see Why Most Balanced Scorecards are Subverted).

Related to the above line of products is CODA Analytic Explorer, which is a business intelligence (BI) tool that allows CODA users to carry out multidimensional browsing across CODA-Mart and any other relational data source. It is a generic, on-line browsing tool with both two-dimensional and multidimensional browsing capabilities built in, and has a separately licensable cube builder that provides extra performance. As finance departments struggle to add value to their businesses, performance management enables them to deliver better decisions more efficiently. However, CPM is not about static plans that sit on the shelf and get dusted off at board meetings, but rather about continuously adjusting to the range of inputs that the business is constantly receiving. To that end, CODA Analytic Explorer provides the ability to investigate exceptions and trends quickly and easily, so that corrective actions can be taken, and forecasts and plans reviewed.

Enterprise Application Players Keep Refining Value Propositions

Software as a service" is experiencing a rebirth. Despite the initial problems the first generation of application service providers (ASP), on-demand availability, appropriate pricing models, and other delivery approaches for enterprise applications are gaining new prominence. Small and medium companies in particular are looking for better alternatives to rigid user licenses, labor-intensive application maintenance, and the initial, large investment and time for return on investments to emerge. (For detailed information on "software as a service" see the Trends in Delivery and Pricing Models for Enterprise Applications series)

Responding to this demand, recent moves by the most prominent players in the software realm in late 2004 suggest that "software as a service" are here to stay. In particular

* SAP America, Inc and Hewlett-Packard (HP) introduced new managed solutions for medium companies at the end of 2004.

* PeopleSoft (now merged with Oracle Corporation) announced customers can outsource some or all of their support for PeopleSoft applications.

Part One of the Enterprise Apps Players Keep on Refining Their Value Propositions series

The SAP and HP Alliance

SAP America, Inc., the US subsidiary of the largest enterprise applications provider SAP AG (NYSE: SAP), and Hewlett-Packard (HP) (NYSE: HPQ; NASDAQ: HPQ), the information technology (IT) powerhouse, have long provided managed and hosted services for large enterprises. Their new vertical industry focus, "software as a service" solutions for medium companies, will supposedly help companies reduce the guesswork and expense of deploying sophisticated business management technology by providing software, services, and support. They will create a single point of contact at a total monthly cost for as low as $325 (USD) per user. The aggregate monthly cost assumes that software license, maintenance, and implementation fees are financed through the SAP Financing Program and that the remaining services are paid on a monthly basis.

SAP and HP recognize that many medium companies, while understanding the operational efficiencies and competitive advantages of deploying enterprise applications, often hesitate to implement them because of uncertainties about expenditures and the overall complexity and project scope. Hence, SAP and HP believe that managed industry solutions will eliminate these concerns by clearly defining the costs and resources necessary to run a complete, managed enterprise solution environment over time. Their solutions were devised to greatly simplify IT evaluation, adoption, and management, offering a breadth and depth of industry process management and strategic value that is typically unavailable from point, best-of-breed solutions. Supposedly their solutions will consolidate all components of the IT landscape within a predictable cost structure and provide the added convenience, safety, and efficiency of hosted delivery.

Through HP, SAP will initially target mid-market companies in oil and gas fuel distribution, consumer products/food, high-tech, and in the technical service industries. Additional industry solutions will be added over time. Equally important, knowing that successful hosting comes through true partnerships that reduce costs and improve efficiency for the client, SAP requires its partners create at least one vertically-oriented extension to the suite in order to become a mySAP All-in-One solution provider. SAP provides hosting expertise through a special operation quality service and solution portfolio to help partners drive innovation. So far this has been fruitful. Three of the four mySAP All-in-One industry flavors, slated to be released as hosted offerings, were written by partners. In return, both HP and SAP will compensate partners that sell the managed service: HP will offer a one-time referral fee, and SAP will pay a recurring revenue stream. SAP also pledges to support its partners to operate SAP solutions better, to drive the number of escalations down, to enable faster operation planning, and to share knowledge about best practices.

Along with its four hosted vertical solutions, SAP currently has twenty-nine channel partners that provide over forty-five mySAP All-in-One products in North America. The pre-packaged template products include real-time integrated applications software for supply chain operations, manufacturing, maintenance, financials, CRM and business intelligence (BI), etc. These aim to provide "best-in-suite" applications for mid-market prospects, which should be more appealing than a diverse "best-of-breed" approach. These managed solutions also include software and implementation services from SAP and its solution partners, as well as maintenance and end user training, support, functional management, and application management from SAP.

As the datacenter provider for the solutions, HP will offer a full range of services, including operations, infrastructure hosting, storage-on-demand, business recovery solutions, managed Web solutions, and security services that will enable ongoing process improvement and innovation. The solutions will leverage implementation and support services from SAP, HP, and their partners. A dedicated SAP customer service manager will be assigned to each customer, thereby reducing the risk and the required in-house resources at the customer site. Additionally, customers will hold the software licenses, enabling greater control and strategic value. They will also have an option to switch to an on-premise solution if necessary.

As for the SAP Hosting division, although SAP has noticed of the likes of salesforce.com, it is still not directly competing with them. The HP alliance does not provide a kind of a subscription service, but rather it is a lower entry point for cash strapped customers who can spread the software cost over a few years through SAP Financing programs. SAP Hosting is positioned to provide more complete SAP-centric solutions including operation, application, and infrastructure management. Accordingly, SAP will offer customers one-stop-shopping or selective outsourcing services focused on SAP. At the same time, it will support the license sales of SAP subsidiaries, reduce TCO, and strengthen operation quality. SAP claims a strong partner focus through interfaces with the partner community, a rich set of partner services, and by working with partners on a project level.

SSA GT Beefs Up BPCS V8 Through Partnerships' Spree Part 2: Market Impact

Nevertheless, one should hold his/her horses in the SSA GT's case. It may seem cynical to object to SSA GT's returning to profits by severely trimming fat and milking revenue from the existing client base only; the fact that the vendor had reached its near extinction point lends its positive results more than mere a psychological gravity. The face value of the indisputably impressive SSA GT's marketing rhetoric must be seen in the light of the recent demise of many other software companies.

To be fair, SSA GT has mostly achieved its most imminent and important goal of enticing existing BPCS customer base to stay on their maintenance contracts. With over 1,700 accounts having signed up for continued support so far, SSA GT has secured a sound revenue base, although that might not sustain it while keeping BPCS abreast of the latest technology and functionality scope. Therefore, the above product strategy blueprint is sound given the hiatus the company has been in for some time, provided the new management team continues with an established good track record for on-time delivery of promised functionality.

The company has established partnerships to expand the BPCS footprint to envelop the vastly more comprehensive applications' functionality scope beyond core ERP, which is however available nowadays as a matter of course by many. The company seemingly intends to achieve its all-round product portfolio and implementation approach through in-depth strategic partnerships with specialized application providers. The result should be a functionally rich core manufacturing ERP product, with best-of-breed, industry specific add-ons, and systems delivered by professional service teams drawn form its target industry sectors.

The above announcement indicates SSA GT's determination to shore up its customer base, as it has been focusing on keeping its large install base content by offering them incremental value proposition extension through its SSA GT Portfolio (a.k.a. 'Open eRP') marketing strategy - surrounding BPCS with a slew of horizontal and vertical industry software, and with SSA GT's lean manufacturing methodologies toolkit. Dealing with a single point of contact for most IT needs could indeed be attractive to some manufacturers at the higher end of the mid-market.

Additionally, SSA GT's established global infrastructure and customer base (over 6,500 installations and operations in more than 70 countries), strong core-ERP functionality with a sharp industry focus and regulatory compliance, strong multinational product functionality (support for 20 languages), and a relative ease of implementing BPCS are some of the company's bargaining chips in the game of averting its customers from defecting and of giving other intruding competitors run for their money. Actually, vendors vying to be replacement solutions for the BPCS ERP system could be in for a bigger hurdle than expected as the SSA GT strategy might resonate with manufacturers that have been happy with BPCS and that are reticent to replace functioning ERP system deeply embedded in plants worldwide, particularly in these days of reduced budgets.

However, these positive developments should be backed up with the continued more aggressive commitment to expanding the native BPCS product scope internally. Although BPCS V8 is an ERP suite that can accommodate different manufacturing environment such as discrete lean manufacturing, assemble-to-order (ATO) and make-to-order (MTO) operations, and process manufacturing too, the fact remains that SSA does not yet offer much more than its traditional ERP product in conjunction with bundling extended-ERP software components from alliances.

In terms of product scope, it is mainly in the realm of manufacturing management (MRP II, JIT, repetitive discrete and some process industries), supply chain management (configurable order management, logistics and warehousing), financials, quality management, business intelligence (through Cognos) and some e-commerce. Supported platforms are the IBM AS/400 (now eServer iSeries), HP Unix/Oracle, and also from very recently, Windows NT on IBM Netfinity.

Contrast to Competitors

Moreover, contrary to Baan and Ross, SSA GT has not been able to cite a slew of new customers, except for some minor new accounts in the Asia-Pacific market. The management's rhetoric might even suggest that SSA GT is banking its future solely on its installed client base. The possibly insufficient revenue stream might, therefore, require some additional downsizing in the future as well as the R&D cutbacks. Any attempt to increase revenue by, e.g., bloating significantly support & maintenance fees, may backfire in customers' defections to preying competition.

In another contrast to Baan or Ross, SSA GT has an inordinate scope of functionality to cover through external partnerships, as seen from the above press blitz. While the best-of-breed approach has its merits and is a necessity for some plant-level applications that ERP vendors do not typically provide (e.g., data acquisition), it inadvertently leads to additional integration costs and complicates service & support arrangements. Interfaces between disparate applications like ERP, CRM and/or e-business usually require significant tailoring. This can be a barrier to future changes as further modifying already modified code is notoriously time consuming, costly, and risky. Also, the profit margins for third-party products are typically lower than for natively provided functionality, which again lessens the bottom line.

Challenges

More importantly, except for Cognos and SynQuest or Manugistics (for an advanced planning & scheduling (APS) product add-on), the above partnerships, which have certainly made a splash, are either in their infancy or are just another bite at the cherry. For partnerships to solidify and result with a true commitment and solid products, one needs time and significant user acceptance (read sales), both of which have yet to happen in earnest. There are the indications that SSA's sales force has sternly resisted some previous management's attempts to sell partner products in the past, which has resulted with faltered alliances.

Also, while embracing the IBM WebSphere platform for e-procurement, CRM, and other components integration strategy cannot be debated, the caveat lies in the fact that the company has done it only very recently. To that end, much more aggressive interaction with the analyst community and more perspicacious explanation of positioning of its Semantic Message Gateway (SMG) and Direct Data Gateways (DDG's) interconnectivity technologies would be important. There have been indications that SMG's had exhibited poor performance, hence the addition of DDG's. However, the DDG's have reportedly only been tested once for an adapter for SynQuest integration. There are no performance statistics available, and there have been no other DDG's officially announced.

While SSA GT plans to keep previous BPCS versions (e.g., V4.05CD) alive was prudent and necessary as to avoid an adverse revenue shortfall, the need to make any new functionality backward compatible and to devise an enterprise architecture to tie multiple versions together with a common portal (and even as a commercialized Private Trading Exchange (PTX) further in the future) will likely impede the speed of delivering these. The story seems to be quite compelling although one should be cognizant of the magnitude of the efforts to execute it. This may also mean that users of the most current product versions will see their annual maintenance revenues being dissipated to enhancements for V4.05CD and not to the current versions.

SSA GT is also burdened with the immaturity of some products and/or low traction issues. The V8 product could have used a longer beta testing phase, while the NT product released at the end of 2000 has reportedly resulted only in a handful of new licenses. Furthermore, the company's silence about MAX product it acquired not so long ago (see SSA Acquires MAX Hoping To Leap From Its MIN) might indicate that it was an impulse purchase and that the company has not many ideas as what to do with it, since MAX essentially competes with its own BPCS NT product.

The above challenges may impede SSA GT's ability to leverage its existing client base and channel, as illustrated in the fact that more than 3,000 BPCS users have yet to be possibly reinstated within maintenance contracts. Also, SSA GT has only recently delivered a Web Browser Interface that is not fully browser-based, which makes it quite behind its competition regarding e-business capabilities, and consequently vulnerable to their attacks. As a summary, while the company's gallant attempt to regain credibility in the industry is noteworthy, unlike Baan, it seems to have much more catching-up to do, with the market keeping a close eye on its execution..

User Recommendations

The above SSA GT's moves should be welcomed by existing BPCS customers that have been yearning to rejuvenate their almost outdated technologies in place. Less technologically aggressive global companies and/or their divisions with an inclination towards lean manufacturing philosophies may be better off by staying with BPCS for the time being. Nevertheless, keep a close eye on the company's moves and develop contingent plans for moving to a new technology if need be. Identifying and approaching your local SSA GT sales representative and vigorously negotiating assurances and firm commitment to future product roadmap, and service and support would be the best course of action at this stage.

Until the new product components, particularly through the above-mentioned partnerships, have been officially delivered and put through their paces by reference customers, we advise potential and current users to evaluate the product cautiously even within SSA GT's automotive, consumer packaged goods, electronics, pharmaceutical and chemical industries sweet spots.