March 2013


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.

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.