System iNetwork

September 17, 2008

SMB ERP Running Strong for VAI--Despite a Lagging Economy

VAI is one of the longest living System i and IBM i-focused ERP solution providers--and that fact is an anomaly in and of itself. The company's ERP suite, S2K Enterprise 5.0, was just released, and get this: it still runs on i5/OS-IBM i and only i5/OS-IBM i. VAI hasn't rejiggered its ERP solutions for a Windows, Linux, or Unix market--the company is all about the i.

And more importantly, the strategy seems to be working.

I spoke with Joe Scioscia, VAI's VP of sales, and Kevin Beasley, VAI's CIO, to talk about what the company has been seeing in the market these days, as well as a bit about the new S2K 5.0.

VAI's largest customer generates about $2 billion in revenue each year, but VAI's sweet spot tends to be with smaller and medium sized (SMB) businesses that bring in $20 to $500 million each year. S2K 5.0 has modules that focus on wholesale distributors, manufacturers (both process and discreet), and specialty retail, which is usually for customers that combine wholesale and retail operations: building materials, HVAC, lighting showrooms, furniture, sporting goods, and the like.

No Economic Slow Down Here

"We were worried about the economic slowdown but we really haven't seen it in our segment, and I'm attributing that to the notion that companies in the SMB segment are trying to do more with less and they need to get their systems in place to accomplish that," Scioscia says.

"They need to be more lean and have more efficiencies in their buying, picking, shipping, and manufacturing processes, and these companies are now turning to technology to keep them afloat. We are not seeing much of an economic slowdown and our pipelines have never been more full," he adds.

Plus, from an IT perspective, he notes, "Our message of lower total cost of ownership is also resonating with these business as they come down to make a decision. As they look at the System i platform--now Power Systems, obviously--and hear our message about lowering their IT staff costs, that it's virus resistant, all-inclusive, and supported by IBM--that's a message that's resonating with our new sales."

And, it turns out, about 50 percent of VAI's sales are customers who are new to IBM--they are new System i/IBM i installs.

Working the Channel

While VAI is part of most every IBM promotional Business Partner program, including the successful Vertical Industry Program, IBM only drives about 10 percent of sales toward the ERP company. VAI goes to market through a reseller channel of 100 resellers in the U.S., Canada, and the Caribbean, with a direct sales force, too.

So what about competing with ERP heavyweights SAP and Oracle, both of which have been announcing targeted efforts to penetrate the SMB ERP space for years?

"They still are not priced right for the SMB market, even though they think they are," Scioscia says. "They are going to have a tough time with any customer that's under $300 million, for a number of factors."

The implementation cost is usually the biggest problem, he explains, and occasionally the actual license fees are getting more palatable to smaller customers. But the implementation cost can be 3-to-5 times the cost of the license fee whereas VAI's implementation costs are closer to 1-to-1 or 1.5-to-1. Because VAI is the author of the software it's installing, it can be much more efficient with the install process--not to mention more knowledgeable about the ins and outs of the solution.

S2K 5.0

"The main applications are still written in ILE RPG built over the DB2 database," Scioscia says. "We're using Seagull's graphical rich client, and what that enables us to do, from an end user perspective, is really provide a very attractive Windows look-and-feel user interface."

VAI also uses IBM's WebSphere Portal with its S2K Enterprise Portal. "We're getting a lot of traction with that lately. What customers are starting to understand is that it's not just e-commerce anymore. We're seeing them open the portal to their own sales forces, for CRM . . . to do things with the portal they haven't done in the past," Scioscia notes, including using VAI's mobile device interfaces for devices like the Apple iPhone.

"We're really seeing a convergence of technology in the enterprise, the web, with wireless, and our customers want to take advantage of these technologies to better serve their customers," Scioscia says. "And to take advantage of any efficiencies in their own business."

So what about push back over the "aging" System i? If half of VAI's customers are new to the IBM i world, how does VAI deal with misperception?

"We always still see that . . . and I think that comes more from our competitors. I think the mindset of our customers who are questioning that . . . is it is often coming from our competitors who are planting it--a Windows guy selling a Windows-based solution will come in and tell a prospect, 'Oh, the System i, that's an AS/400, that's old technology and it's going to be sunsetted'," Scioscia says.

"If we come in and make a pitch, our pitch resonates very well. First of all, it's easy to tell them that this is new technology because it just came out. It's the latest and greatest from IBM. In fact, the processor that's in this unit is the world's fastest chip. Once they start to hear that, they start to understand that what they've been told or what they've heard third-hand may not be true," he explains.

"It usually tends to work in our favor at that point," Beasley adds. "Some of those tactics that used to work in the past aren't the best tactics anymore."

And for IBM i lovin' aficionados, that is good news indeed.

Posted by cmaxcer at September 17, 2008 9:55 AM