Acumatica, looking ahead - assessing their cloud ERP play

Jon Reed Profile picture for user jreed March 3, 2016
Acumatica's recent Summit gave me the chance to re-assess their cloud ERP progress. Here's what I learned from talks with their executives, customers and partners.

The Acumatrica Summit was an ideal time to review Acumatica's progress and assess their cloud ERP pursuits. This was my first deep dive since Acumatica's analyst day last May. Do the market advantages still hold? Any new stumbling blocks?

The February Summit, attended by 600+ partners and customers, brought some surprises. I also had the chance to sit down with customers and prospects. (Acumatica relies exclusively on partners for go-to-market sales; this was the first summit where customers were invited, 60+ customers and prospects attended).

Acumatica gave media unfettered access to customers and prospects. I already filed two in-depth customer stories:

Doing cloud ERP the right way – field tips from Guardian Seal Tech’s Acumatica project
How a New Zealand tech startup runs their business with Acumatica ERP

I also taped an on-site podcast with diginomica contributor and enterprise curmudgeon Brian Sommer, which included an informal Acumatica review. In Sommer's piece,
Microsoft – the modern ERP arms merchant, he touched on Acumatica's surprisingly close partnership with Microsoft, and integration of Azure cloud services.

In his day one keynote, CEO Jon Roskill shared a "We've come a long way in a short time, baby!" narrative with the faithful. Though Roskill toned down his entertaining shots at NetSuite from past years, he did emphasize that Acumatica remains the "fastest growing cloud ERP vendor," with 100 percent growth year over year. Acumatica has also notched another milestone: the 2,000 customer mark.

More growth numbers from Roskill:

  • 134 percent growth on SaaS sales (Acumatica also offers private cloud and on-premise options, as well as the flexibility to switch deployments, which several customers told me they see as an advantage). Roskill: "The fact that SaaS growth is higher shows that shift to the public cloud."
  • "Perpetual licenses" were down -9 percent, which Roskill sees as a sign of the times: "It's sort of funny to put up a negative number, but this is a good thing too. We are all about building subscription businesses."
  • Comparing cloud ERP vendor growth: Roskill noted that Sage was in mid-single-digits growth, Microsoft is in single digit business applications growth, "mainly driven by their CRM business." As for NetSuite, Roskill said: "NetSuite announced 33 percent growth. Now, NetSuite is quite a bit bigger than us, so you need to be respectful of that and say, 'Good job, NetSuite is running hard and executing well.' But if you look at our growth, three times what NetSuite put up, I'm really proud of what we've done."

Roskill in keynote mode

Other notable event announcements:

  • Amazon and Microsoft as Acumatica event sponsors (they were already Acumatica partners, but both relationships are expanding). Roskill: "I think that's a statement of where Acumatica is in its growth."
  • Version 5.3 release announcement, with a "focus on performance, mobility and stability." (The analysts I spoke with noted the CRM enhancements, including sales order reporting and marketing automation). The enhanced mobile app and web services API were also cited.
  • The Acumatica M5 acquisition, which rounds out the Acumatica Field Services Edition.

How Acumatica has changed - Sommer's reaction

During our podcast, I asked Sommer how Acumatica has changed:

Acumatica was a much smaller entity back then, and they've gone through quite a bit of growth. There's been a number of personnel changes too. But the channel approach to the market hasn't changed. What has changed though, is the sheer number of partners, the revenue growth, the breadth and functionality of the product line have improved quite a bit. They've have better clarity around their multi-tenancy story.

At the Summit, Roskill doubled down on Acumatica's positioning in the "abandoned midmarket," with NetSuite and Microsoft moving up market. Sommer comments:

They stay [in the midmarket], and stay focused. It's kind of hard for us to find a lot of things to pick at a show like this, because they've been consistent in what they've been doing, and continue to be building out geographically, as well as product breadth.

Sommer also thinks Acumatica's pricing model is an advantage (Acumatica prices on transaction volume, rather than tying licenses to user seats):

This is really critical in understanding Acumatica versus the competition. Many of the competitors they go up against sign these two or three-year contracts. You work your butt off trying to negotiate that deal, and then all of a sudden the contract will then revert when you renew. The price increase can be ridiculously expensive unless you were very careful to negotiate something in advance... The point you made about pricing not being tied to users, that's key too. [With other vendors], unless you make them come up with some new kind of license for lighter users, you get killed on price.

Do Acumatica's differenatiators still hold up?

At the analyst event last May, Roskill articulated six Acumatica differentiators that help them close deals. Here's a quick update/comment from me on each:

  • “ERP for the ‘every business'” – that’s about serving the "abandoned midmarket."
  • “Open, standards-based next gen platform” – APIs and mobile enhancements have strengthened this play.
  • “Accessible technology, delivered where customers want” – Acumatica still excels for the mobile ERP worker. The cloud/mobile emphasis should serve them well in emerging markets.
  • “Right-sized, priced right” – Acumatica’s partners continue to tell me the pricing model is a key reason they are closing Acumatica deals.
  • “Deployment flexibility” – Choosing between public, private, an on-premises options, and the flexibility to move at at a later point, is another proof point.
  • “Channel ecosystem” – Acumatica hasn't wavered in its channel emphasis.

Building out vertical functionality with ISVs remains a critical mission. During his keynote, Roskill acknowledged:

There's clearly some verticals that are not yet covered by Acumatica. This is why the ISV ecosystem is a very important part of the Acumatica story as well.

Acumatica's verticals by customer count include services (24 percent), manufacturing (16 percent), Wholesale Distribution (15 percent), Retail & Commerce (11 percent). It's no coincidence that Acumatica's strongest ISVs cover manufacturing (JAAS Systems) and retail (Fusion RMS). Sommer pointed out that even within manufacturing, there is plenty of vertical functionality left to deliver:

There's a million flavors of manufacturing. That's a journey that they'll be along on for a long time.

The other challenge is Acumatica name recognition. During the day one analyst panel, a customer asked the panel about Acumatica's weaknesses. Cindy Jutras honed in on the branding issue:

I would say the weakest link is marketing and brand awareness; you haven't been as visible and vocal. Having a 14 day trial is great, but how many people know about it? I think you need to have a bigger voice. Particularly because you allow your partners to grow your business. It's a great scaleable way of growing, but let's face it, a typical VAR or ISV - not just for Acumatica but across the enterprise solution area - doesn't know how to market, doesn't know how to generate leads, doesn't know how to brand themselves, so they need that much more help from you.

By and large, Acumatica customers are a happy lot, exhibiting the same passion for Acumatica I'm used to seeing from their partners. I did run into one customer who struggled with a partner they were unhappy with. Acumatica has now taken over the implementation, and time will tell. Another customer also had some frustration with an existing partner. Partner implementation quality is a preoccupation for all ERP vendors. But given their channel reliance, Acumatica will need to be especially rigorous with partner accountability, and communication/escalation options for customers.

During my meeting with Roskill, I asked about this. He explained that a number of partner quality measures are in place. An annual customer survey helps Acumatica rate its partners. "We've fired a couple partners over their satisfaction scores," says Roskill. I asked Roskill about the customer I spoke with: "The partner needs to understand how to manage the customer over the full life cycle. So I think there was occasionally a drive-by deployment."

Roskill says when he came on board, there were four problematic implementations out of hundreds. He sent swat teams of Acumatica leaders to those sites to help turn those projects around. (The customer who shared their troubled project also told me that things started to change for the better when Roskill came on board, and personally interacted with them.)

Roskill noted they now have an "implementation assist" program for all new partners. That means Acumatica is hands-on with the partner for their first three implementations, reviewing architecture and code: "We've been doing this a year and a half. We've found that if we provide this support through three implementations, things go swimmingly." I look forward to talking with Ali Jani, VP of Partner Strategy, Enablement and Services about these partner quality measures, but it was good to hear of the actions being taken, and Roskill's own interactions with customers.

The wrap - cloud ERP momentum is growing

There's been some turnover in Acumatica's leadership the last few years. Richard Duffy was doing important training and ecosystem work with Acumatica's Open University; he has since departed after a short tenure. (Jani's team is now taking Duffy's work forward). My communications contact also left in 2015, though I got the same access to customers and executives at this year's show.

Perhaps the biggest change since last May is not with Acumatica, but in cloud adoption. Particularly in the midmarket, the openness to SaaS ERP is clearly expanding beyond the HR and CRM areas that "went SaaS" first.

Roskill hit on this in his day one keynote. He threw up a slide noting the shift in cloud attitudes. This one of cloud "blockers" from a 2014 KPMG survey:


Fast forward to 2016, and those same blockers have flipped over into benefits:


Roskill showed a slide with adoption levels of business workloads in the cloud over the last few years. In the midmarket, CRM is "basically 100 percent" in the cloud; HR is in the sixty percent range. As for ERP:

ERP is only at 9 percent. Of the roughly 1,000,000 midmarket customers in the U.S., only 9 percent are running ERP in the cloud now. It makes sense that this would be the workload that comes last. CRM doesn't stop the company from running. With HR, if your system stops - except for payroll - your company keeps running. But if your ERP system stops, your company stops running.

That ties to Roskill's point on cloud adoption blockers. As cloud blockers shift to perceived benefits, the fears of running ERP in the cloud lessen. Then the conversation can shift away from deployment and into business model change, and the advantages of extending systems to customers and suppliers via cloud/mobile access. Acumatica can run on-premise also, but it's clearly banking on cloud ERP adoption to fuel its midmarket growth. Seems like a pretty smart bet from here, but we'll follow the story.

Update, 9/3/2016 - two minor revisions, updating the paragraph on my interactions with Acumatica customers with added detail.

Image credit - Acumatica 2016 photos by Jon Reed. Slides provided by Acumatica.

Disclosure - Disclosure – Acumatica covered my airfare and hotel to attend the Acumatica Summit. NetSuite is a diginomica premier partner.

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