Back In The Game

Large enterprise software companies have by and large rethought how they approach the small and mid-size business market.
Though they've stumbled in the past, major enterprise applications vendors have in recent months refined their strategies for small and mid-size customers, revamping their products and services offerings and forging new partnerships. Here's a look at the strategy of the largest vendors:

Oracle has a two-pronged strategy to get a piece of the mid-market action: Act as an outsourced services provider for its own applications, and build on a partner-based strategy so that small and midsize customers can work with local resellers and systems integrators that they know and trust. Currently Oracle maintains three data centers for hosting customers' applications, or buyers can choose to have Oracle manage the software for them at their own sites. Oracle no longer breaks out the number of outsourcing clients it has, but at last count about a year ago the number was over 500.

Now Oracle is prepping new software suites for small and midsize businesses, due later this year in the U.S., that include portions of its E-business Suite. "We're packaging this so that it performs most of the operations that a midmarket company requires, and we're pricing it as such," says Frank Prestipino, vp of midmarket and applications architecture marketing. The preconfigured software, called E-business Suite Special Edition, is designed to go live in as little as 30 days. First out of the gate is a suite for financials; later Oracle will add manufacturing, service and sales, and human resources packages.

Nearly 40% of Oracle's current customer base could be classified in the midmarket sector, and demand is growing from that sector. "The midmarket represents a growth market for us," Prestipino says.

PeopleSoft is hoping to boost its small and midsize customer list, as well; already the vendor says 24% of its customer base is made up of midsize companies. And that number is growing, according to Jeffrey Read, General Manager and Vice President, PeopleSoft Mid-Market Solution. In recent quarters, 40% of the company's customer wins have been midsize businesses, he says.

In many ways, PeopleSoft's recent acquisition of J.D. Edwards & Co. is about gaining traction in the small and midsize sector, since that's where J.D. Edwards is strongest. "The attraction with J.D. Edwards was unbelievably compelling on multiple dimensions," PeopleSoft CEO Craig Conway told InformationWeek shortly after announcing plans to acquire J.D. Edwards. "One was market distribution advantage. PeopleSoft had become a leader in large enterprise apps. J.D. Edwards is a leader in midmarket enterprise apps."

PeopleSoft currently offers several modular midmarket solutions preconfigured by business process, such as an order-to-cash suite or procurement-through-payment suite, so customers needn't buy an entire application suite to get a job done. That's a better route than offering stripped-down versions of its enterprise apps, Read says. "It is a misnomer to think that if you are a midmarket company, you are less complex," he says. As soon as you 'strip out functionality to make the software look easier, "all of a sudden it's a dumbed down product."

SAP is something of an old pro at the task--about half of its installed base of clients have annual revenues of less than $500 million, but many of those companies are overseas. In the U.S., SAP made its name in the enterprise space. SAP America's president and CEO Bill McDermott has made targeting smaller businesses on this side of the big pond one of the company's top priorities. Earlier this year it introduced its Business One technology in the States, based on software acquired last year from TopManage Financial Solutions Ltd. and aimed at companies with no more than a few hundred employees that want a simpler, cheaper, and easier-to-implement product than the mySAP All-In-One midmarket suite.

To date, IBM Global Services has developed 27 vertical and horizontal implementation solutions for All-in-One. It also expanded a program with BearingPoint, in which the two will partner to offer a fixed price, pre-packaged mySAP All-in-One solution for high-tech electronics companies in the small and midsize space. American Express Tax and Business Services Inc. unveiled its own branded version of the Business One apps, and SAP says it has signed new reseller relationships with 40 additional partners in the United States for these offerings. IBM also is working with SAP to identify new resellers for the Business One product, which will be bundled with IBM eServer Xseries and storage systems.

"Mid-market customers are looking for vendors with relationships with high quality vendors, who can bring in experience in terms of what business processes are, and how they will evolve those," says Gary Fromer, SAP senior VP, Small and Midsize Business and SAP Hosting. SAP now counts more than 4,000 customers for its All-In-One line, and more than 250 partners worldwide.

Siebel meets the needs of its mid-market customers with an edition of its software that includes about 30% of the capabilities of its enterprise CRM suite. With about one-quarter of its 4,000 customers being mid-market companies, and millions more companies out there of that size, "it's a very attractive space," says David Schmaier, executive VP at Siebel.

The company says its software for that space takes into account mid-market companies' growth plans. It includes pre bult workflows and limits the number of workflows companies can build themselves, but the software uses the same code base and database scheme as the enterprise version, with a slightly more streamlined data repository. Customers can upgrade to the higher end software just by getting some new license keys and repository objects.

Siebel also has formed partnerships with a number of regional integrators. It previously hosted CRM for smaller buyers, and thinks it could be successful if it were to enter that market again. "Anyone who wants to be successful in this space needs to come out with a strategy" that provides a path to move from a hosted to an on-premises model, says Kevin Nix, group VP, industry applications at Siebel. "We understand the hosting model and what's going on out there."

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Illustration by Alison Seiffer

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