Microsoft launched Dynamics AX with much fanfare at its TechEd user conference this month, shining a light on its entire Dynamics portfolio and its strong channel presence in the ERP market for small and midsized businesses.
But SAP is gaining visibility among small businesses. Microsoft resellers report seeing SAP at the negotiating table as small business owners mull a decision on an ERP partner.
"Potential customers don't need all the bells and whistles that SAP offers, but we're seeing SAP more and more," said Joseph Gulino, the ERP practice director at Watertown, Mass.-based Green Beacon Solutions.
But at least one senior analyst sees the battle for a share of small businesses -- companies with fewer than 250 employees -- between software-as-a-service vendor NetSuite Inc. and SAP. With Microsoft Dynamics NAV (Navision) trailing the two vendors.
"Navision comes close, but I think SAP Business One has broader functionality," said Sanjeev Aggarwal, a senior analyst with Boston-based Yankee Group. "Business One is much more integrated with a single database that covers accounting, ERP and data warehousing."
SAP's Business One targets the discrete manufacturing, distribution and retail markets while NetSuite software focuses on the retail, distribution and services industries, Aggarwal said. Like Microsoft Dynamics NAV, Sage Software's BusinessVision trails Business One and NetSuite but has industry specific features, he said.
Choosing SAP Business One wasn't about getting any extra bells and whistles, according to Nikola Stojsin, director of IT at New Brunswick, N.J.-based Research Diets Inc. Stojsin's firm selected Business One over Microsoft Dynamics NAV (Navision) after an extensive review of the two products. The decision was largely based on choosing a stable software suite that would be supported for years to come, Stojsin said.
"Selling Navision did not appear to be Microsoft's core competence," he said. "We didn't know where Microsoft was going to take it."
Microsoft acquired Navision in 2002 for $1.45 billion in cash and stock. The software vendor is in the process of retooling its acquisitions of Navision, Great Plains, Axapta and Solomon into software suites with a Microsoft Office look and feel, aimed at specific industries. The planned completion of the software overhaul is targeted for 2008.
SAP demonstrated a strong connection to Microsoft Outlook, a compelling feature for Stojsin, whose firm conducts 90% of its sales and communications via email. Stojsin is also pleased with Third Wave Business Systems, a reseller of both Microsoft Dynamics and SAP Business One. Stojsin said Elmwood Park, New Jersey-based Third Wave helped modify Business One to his company's specific business needs.
"The modifications are handled in a different layer so when you do an upgrade they're maintained," he said.
Still, SAP has some improvements to make with Business One that would make it a more robust product, according to Stojsin. The production module within the software is not geared for the production process, which includes quality control and batch support, he said.
"I get the feeling that the production module was an afterthought," he said.
Also, the software lacks support of standard engineering documents, Stojsin said. Currently the process is being handled by Third Wave, he said.
To gain traction with customers like Stojsin, SAP has moved away from its traditional sales model with user-based pricing and a direct sales approach to a hybrid model, based on sales volume and new pricing. Territory sales representatives oversee a mixture of direct and indirect sales, and reconfigured compensation plans foster new rules of engagement for partners.
"SAP is putting a lot more focus on channel and more resellers are selling Business One now," Aggarwal said.
Dynamics reseller sells Business One
Executives at Advanced Systems Integration, a reseller of Microsoft Dynamics AX software, recently started up a Business One sales operation called 5th Gear Solutions. Based in Lake Forest, Calif., 5th Gear Solutions will cater to manufacturers with revenue below $50 million, said Jeff Onesto, a business development executive.
"This product is entry level and has a rapid implementation," Onesto said.
Onesto said that more customers are asking for information about Business One.
"What's unique about manufacturers under $50 million in revenue is that they're not yet taking advantage of the planning through technology," he said. "In this very agile, changing environment a strong ERP product helps eliminate bottlenecks that are prevalent."
For now, NetSuite is the only online business application with integrated front-office, back-office and e-commerce features, Aggarwal said. SAP's strength is in Asia and the fact that it has extensive support for languages and legal and tax laws of dozens of countries.
"SAP is putting a lot of focus on small business now that they have the right products competing," Aggarwal said. "Small businesses like an integrated suite but they're also looking for more hosted applications."