Sage's X3 - Does it need big systems integrators as part of its market success?
A few days ago, several members of the analyst and press community were given a briefing on Sage’s high-end ERP product, X3. X3 was acquired by Sage three years ago and has its origins as a French company. The software is positioned to compete in the upper end of the midmarket space.
Today, X3 has been sold and implemented in 38 countries. There are 2300 customers comprising some 50,000 plus users. Sage indicated that 160 customers are now present in North America with 20 to 25 of these based out of Canada. The largest customer, by the way, has approximately 1100 users.
The X3 product line contains modules for: inventory, manufacturing, finance, sales, CRM, reporting, workflow, multi-company, multi-site, multi-warehouse, purchasing, multi-currency and multi-legislation. Like many ERP systems, X3 uses Business Objects (now a SAP subsidiary) for its business intelligence functionality.
The software is built on a service oriented architecture (SOA) platform. The platform has the mnemonic name of SAFE: Sage Application Framework for Enterprise.
The software is constructed as a single core of code and is surrounded by country specific extensions. Currently, a Sage executive reported that most users are choosing single country implementations. Approximately 20% of implementations are multi-country.
I noted that X3's ability to move further up market may be a bit constrained because of the nature of channel partners. Sage’s channel partner ecosystem may be no different from other software vendors where it is really hard to create a channel partner environment for a high-end product (but easier for SMB product lines). What I am wondering is this: more and more small and medium-size businesses are becoming multi-national corporations. They are continuing to source product from lower cost countries and many of these firms are creating subsidiaries, joint ventures or acquiring lower cost operations in countries beyond their own. The channel partner ecosystem of most application software firms is generally country-specific or highly localized in its geographic reach. For example, most US-based channel partners serve clients that are predominately within the continental 48 states. Just the prospect of crossing the border into Canada causes significant issues for many resellers locally. Likewise, Western European resellers may be able to serve clients in their home country as well as those customers in adjacent countries. But can any of these channel partners effectively serve customers with operations in the BRIC (i.e., Brazil, Russia, India and China) countries? Can they serve firms who have operations in the interior of Africa or the former Soviet republics?
For resellers to effectively sell and service multinational accounts, they must have feet on the street in other locations. In a telling back and forth conversation with multiple executives at this briefing, I pressed on this very point that a customer wants a single choke point regarding their implementation of a new ERP solution. They don't want one implementer to install the product in the United States and a completely different implementer to install and configure the software in another country like China. What would result would be two completely different instances of the software and the highly likely prospect that data will be difficult to consolidate from a reporting or operating perspective. The customer would want consistency in accounting procedures, accounting calendars, chart of accounts, production schedules, shipping data, sign-offs, etc. They would also want all of their business processes to be consistent across the corporation. But most of all, they will want to ensure that all product movement transactions that cross between country borders would result in the efficient movement of product and/or services trans-nationally. I have no doubt that Sage has qualified internal or reseller professionals who could implement X3 in many countries. But I believe that Sage will need more high-end implementers who can really deliver the multi-national implementation that many more X3 customers will demand. Generally, this means Sage will need systems integrators who possess:
- feet on the street in many countries
- intellectual property regarding the business requirements, regulatory requirements, customs, etc. of each country in which they provide services
- global program management skills
- global change management capabilities
- ability to craft multi-lingual documentation and training
- personnel with fluency in more than 1-2 languages
- ability to sell and deliver work in cost effective ways regardless of where the data center or work must be performed
- cultural sensitivity to the work forces found in global project teams
Does any of this mean that there are shortcomings in the X3 product? No. The product may be quite sound and its executive team clearly seems to understand the space. The challenge may be that Sage will need to develop its own multinational implementation capability or attract a number of higher caliber, global systems integrators into the channel ecosystem that supports X3.
I like to see more competition, not less, in the ERP space. And given the rash of consolidation that has occurred these last few years in the midmarket, it is good to see a product line like X3 coming into North America. Let's hope Sage can create the energy, enthusiasm and appropriate ecosystem components that will fuel growth of this product.