Tuesday, May 5, 2009

The root canal for the formula manufacturer

vicinity software
In working with a bakery prospect last week I was inspired to write this blog.
I was having some pain in a tooth for quite some time and my dentist sent me to an Endodontist for a root canal. While there I was taken aback by the degrees, diplomas and accreditations proudly displayed by the doctor. When I asked about the educational requirements to perform my root canal my appreciation only increased. This person really knows what they are doing. I was impressed.
My bakery prospect is a family run company and has very limited resources and does not have a defined IT department. That is pretty typical for our prospects. When they came to me they were wrestling with the development models being presented to them – All-in-One vs Best of Breed.
I told them – "I am just glad that my general practitioner did not perform my root canal. The same can be said for business software."
It seems to me that the software development world is firmly planted in one of two worlds related to formula manufacturing. All-in-one (general practitioner) vs Best of Breed (Endodontist).
The All-in-One model of development requires one software vendor to develop, write, support and document every aspect of an information system for a formula manufacturer. This includes financials (AP, AR and GL), distribution (Pos, Sales Orders and Inventory), manufacturing and every other related feature (warehouse management, CRM, eCommerce). Some notable examples are SAP and Ross on the high end. On the lower end you have small boutique development firms that are pouring all their available resources into the products and barely keeping up with technology changes and changes in manufacturing, compliance and scheduling. Some are not even on SQL as the database and few are on .NET as a platform – each have been available for many years but some of these boutiques have not yet managed the transition to current technologies.
The other group of applications takes a best-of-breed approach where one central application is the key and additional functionality is added by smaller laser focused development firms. With this approach 75% of the features most companies require are delivered by out of the box widely distributed software such as Microsoft Dynamics. A company buying into this approach will rely on Microsoft for core functionality such as financials (AP, AR and GL), distribution (Pos, Sales Orders and Inventory). The remaining functionality is often industry specific and is delivered by ISV (Independent Software Vendors) that work very closely with the core ERP system.
So which approach is better for me?
Each has strengths and weaknesses and each has their own legacy.
All-in-One – The biggest advantage of this approach is that all development is controlled by one company. That is also the biggest liability. With exception of some large developers (SAP, Ross etc) these firms are rather small - less than 50 employees. The development resources are pulled in the direction that results in more sales, often leaving core functionality unaddressed. For example: most boutique formula manufacturing development firms spend most of their time on manufacturing issues (that makes sense) but they often overlook new developments in core product offerings such as electronic disbursement, CRM, sales taxes, commissions, warehouse management, eCommerce just to name a few. Finally – as the product matures so too does its development platform. If a developer is not careful either the product will become obsolete or a significant re-write of their product will be required – stopping all new development for at least a year. Neither is good.
Best of Breed – The biggest advantage of this approach is that the unique business requirements are developed by firms that focus entirely on solving that business issue. For example: a company specializing in formula manufacturing such as Vicinity Manufacturing writes this component, warehouse management experts provide their addition and eCommerce by people that eat sleep and breath those issues. It is all tied together by Microsoft Dynamics. In the end the total solution is tailored to meet the specific needs of the company at a very competitive price. Twenty years ago this approach would not have been feasible. But with .NET as a development platform Microsoft has made this model very attractive and the cost effective option for companies to consider. The biggest challenge of this approach is to ensure the local VAR (Value Added Reseller) can assist the implementation in ensuring the proper tools are brought to the table. In the Microsoft Dynamics channel that is easy to deliver.
So in the end it comes down to your comfort level as well as your understanding of technology advances.
If you feel your company is better served by a single (often small) company that controls all the feature functionality entering your company, if you are not interested in realizing technology improvements before changing software again and the all-in-one application has everything your company may ever need – then you would go with this approach.
If your company is dynamic in nature and experiences changes in requirements as years go along, your company has limited development resources in house to address gaps in your system functionality and you embrace competition as a way to reduce cost and increase functionality then the best-of-breed is a better model for you.
Personally – I am not excited about getting a root canal but if I have to get one then I want the person with the most experience, most up to date on the latest developments and only does root canals every day working on my mouth. If I have a problem with my foot I go to the Podiatrist or headaches to a Neurologist. While I like my family doctor I will take a team approach to my medical care thank you very much and I feel the same about my business software.
How about you?


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Jacob said...

You are so right. The best qualified will cost you more in the short term and less in the long term. Not to mention the pain it will save you from enduring.


EPDM said...

I like your post. This is the best formula for manufacturers.

Thanks for sharing...

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