This morning, I was talking to a friend of mine who is doing his Executive MBA. He was mentioning during the conversation that one of his friends is really bent on joining an analytics company and his interest levels in that are very high. Apparently, he has tried with most known brands in analytics and he hasn’t been lucky due to various reasons.

On hearing this, I casually mentioned why doesn’t he look at starting a boutique analytics firm and he can target the small retail units. I really wasn’t talking about the largest airline companies or retailers or the software companies of the world. I was talking about companies that can act on the findings immediately.

In fact, this is going to be the next wave and there are already a few established players and as a necessary evil, all the top IT services companies are setting up a practice to tap into this space. I believe with India as the market, it would be the boutique firms that would win the business, for they would be cheaper and make analytics actionable with the local market knowledge that they have. To top it, analytics requires knowledge about Mathematics, Business and Technology. India has the knowledge in all the three areas and also the scale.

Time for the analytically bent to start the boutique firms.

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Delivering ERP on a SaaS model is great and offers enterprises of all sizes a viable, scalable and flexible model, which provides a lot of benefits to users. Gartner predicts that nearly 30 per cent of new license purchases will be in the form of SaaS or will be delivered using SaaS model. IDC predicts a growth rate of 40% in SaaS model.

Looks very interesting but Is SaaS for everyone? No hardware costs, no software costs, no upfront license costs, less training needed, short implementation cycle, accelerated ROI, vendor managed hardware maintenance, upgrades and software maintenance. The advantage of going the SaaS way is just too many. However, it still may not be for everyone.

How do I figure out if SaaS is for me or not? If your needs for business management software goes anything like this, then it is not for you:

  • I have complex or very specific business processes
  • I have well established business processes that I cannot change
  • My business model keeps changing and is constantly evolving
  • I am a mid-market company or I am a large-sized company
  • I need to integrate my business management software with legacy applications
  • I need absolute control over whatever I do
  • I am very paranoid about security

Recently, I read a couple of articles where iGate’s CEO Phaneesh Murthy stressed on Results-based billing model for IT services companies and claimed that it is going to be the future. I have heard him speak about it even before his acquisition of Patni and even then the media didn’t pick this story up as a game changer. Now again, he has started speaking about it and the ones that have picked up this story are newsletters which are primarily content aggregators. Hence, I could feel that this is being racked up again and again only towards seeking attention. I am providing an invisible percentage of that attention through this blog.

iGate couldn’t progress with the model of results-based pricing then, when they were mid-sized. He felt that there was no future in the middle and hence went ahead and managed the acquisition of a much larger Patni to enter the billion dollar league. Even now, there doesn’t seem to be any takers for the pricing model. I am sure it is not because the customers don’t find this model exciting, it is because the model is primarily articulated only as a PR message and not as a potential business model that can be discussed with a customer.

All along, companies have done milestone based deliveries where the Project Management has been the responsibility of the customer and they provided bodies and made their money. Now, he is talking about outcome-based, which essentially would be milestone-based and that means project management will have to be completely handled by the services company and most likely with consulting thrown in. This PR message alone wouldn’t be sufficient to get into that kind of relationship with the customers. Instead, there has to be clearly defined model with focus on a few domains of expertise where you know the expected outcome and what it takes to reach there. With that, you don’t have to seek the customers, instead they would seek you.

The implementation costs of an ERP are expected to be in the range of $3 to $10 per dollar spent on the software itself. When you consider ERP implementation, there are obviously more ways to fail than to succeed, most projects require years of tweaking, support costs are prohibitively expensive and can be ten times the cost of software.

Implementation costs gets allocated towards training, integration, testing, data conversion and data analysis and none of this can be ignored if you are looking at a system that can deliver the business benefits of implementing an ERP system. The significance of each of these activities is defined thus:

  • Training – employees have to learn new processes and not just a new software interface; talks about change management and is typically 10% to 15% of the total budget
  • Integration – it is not easy, for links have to be built between ERP and other best-of-breed systems on a case-to-case basis
  • Testing – has to be process driven; use real-time data preferably with real employees who would be using the system and the same volumes as expected
  • Data conversion – the most underestimated cost activity and even the best of data needs changes to match process modifications necessitated by ERP implementation
  • Data analysis – reports in ERP packages needs to be combined with goals, budgets etc. to make business meaning and this cost is more often than not overlooked

After all, the cost of ERP software is only a fraction of the total cost of the project.

Ever since I started shopping at flipkart, I stopped visiting book shops. Flipkart is one site that I visit at least a few times every week and the size of my wishlist keeps growing. I have been absolutely fascinated by the experience of the site. Initially, they were peddling only with books and with time, they started dealing with mobile phones, electronic items etc. with some fancy advertising like 30-day money back guarantee. This is what I call an elaborate exercise of ‘chewing more than you can bite’.

As it is, the retail market for books is big and getting bigger – addressing this itself would mean a number of challenges like procurement, vendor relationships, logistics and payments. Add to this mix, the other products and we are multiplying the challenges by at least another 3-5x times. Looks like, they are bent on addressing all these challenges and coming out trumps. This in the short run will certainly increase their cash flow and would sound a great strategy, however in the long run they are bound to lose focus. This is only my assumption at this point and it can be disproved but the chances I foresee are slim.

In the last few weeks, I have been having issues with flipkart where one of the books that I ordered after seeing the availability did not get delivered. Initially, I received a mail stating that they would need 3 more days to process it. After 3 days, I was told that they are sorry about having not delivered and they don’t seem to find the book in any of their procurement channels and they cancelled the order. Today, one of the deliveries got messed up – the invoice details are right but the wrong book has been delivered. Cracks have started to show now in the efficiency and what appeared a winner through ‘word of mouth’ publicity is becoming messy with expensive advertisements and whole load of products.

Maybe, I am over-reacting here but could it be a classic case of lost focus? I keep my fingers crossed on the verdict and my take would be – the earlier they hive off other products and manage just books, the better it would be.

I was talking to one of the SaaS vendors and he was mentioning that their Sales & Marketing expenses were 75% to 125% of their new sales bookings. He was also mentioning that anything below 75% and anything above 125% is considered to be danger zones. I was relating this to one of my earlier posts on this “To SaaS or not to SaaS – An ISV’s perspective”.  In that post I had dealt in detail as to why ISVs may not be going for SaaS discounting the benefits of moving to SaaS.

This high percentage of Sales & Marketing expense adds another dimension to ISVs possibly not wanting to move the SaaS way. For them to be successful, it becomes extremely important for ISVs to ensure that their sales and marketing is cost-effective, for which they need to have extremely good visibility on their sales funnel and ability to predict and forecast accurately. Additionally, they need to identify metrics that would be able to measure the returns on every program that they do in the mix. Keep what brings revenue and throw what doesn’t in your marketing mix.

This also makes it necessary for the ISVs to have access to quality funding that will allow them to do increased sales and marketing spending towards achieving breakeven and eventually profitability. As more and more customers seek SaaS, this may not result in a level playing field as big platform players would be better positioned to offer them as opposed to non-funded setups. Else, you need to have substantial legacy revenue for you to easily move the SaaS way.

Most enterprises consider business applications to be their priority. Enterprises haven’t given importance to becoming information-centric all these years but it is visibly changing. Priority business applications are ERP, business intelligence and accounting apps.

Primarily, these business applications have helped organizations convert ‘unstructured information’ into a ‘structured format’ that allows for easier management of business critical information. But, organizations have realized that this alone is not enough and there is a lot of knowledge that is available in different forms and buried in different processes across the organization. It becomes imperative for them to manage such content and capture knowledge to be efficient in their business.

This has prompted many enterprises to look at text mining tools that would allow them to do in-depth mining of ‘unstructured text’, both online and offline information, and convert them into actionable inputs for enterprises. This will include customer complaints, call center transactions, email communication etc. Though, this certainly is a few years away for this to become an enterprise priority.

Enterprises definitely have a taken a step in that direction where information-centricity will be sought, with other business applications and data mining application.