Acumatica's CEO on customer change - is Coronavirus the death blow to on-premise software?

At diginomica, we've debated what software vendors should say to their customers during such uncertain times. In some cases, it makes sense to lead with new data (example: sharing how customers in each of your verticals are responding).

In other cases, tips on how to move ahead with a different kind of go to market are a good call. Authenticity and a human touch is obviously the only tone that flies right now - not always an easy thing to achieve in corporate comms.

One vendor response that doesn't go over well with customers? Silence.

Even if you don't have all the answers, customers want the dialogue. From my side, Acumatica's Geoff Ashley was the first to step up and offer useful thoughts on how cloud ERP vendors should respond - from a partner relations point of view (Times like these require a different kind of cloud ERP partner). 

Acumatica customers take the video response challenge

Acumatica CEO Jon Roskill was up for the business-in-Coronatimes hot seat also. How are Roskill and team coping?

I joke around because on the one hand, it feels like it's these dog years where so much is happening in such little time. And then on the other hand, you feel like it's Groundhog Day. You wake up: Saturday is the same as Monday. Everything kind of blurs together. So it's a very odd time. But generally, all our employees are safe. We're very lucky.

Lucky in what sense?

I remind people we're very lucky to be in a cloud subscription business that sits at the core of most businesses' operations. I don't know if you had a chance to look at those videos I sent you, but we've got customers reaching out to us.

Another thing more vendors should do: informal video updates. Acumatica posted a batch from Roskill and Acumatica customers; each shot with their own phones. Roskill mentioned another story, not yet on video, that's right in the middle of Tennessee's response:

Take Liza Palmer of Palmer Foodservice for instance... If you remember, Tennessee Valley got hit by  tornadoes in January, and all of the major food distributors stopped servicing the area. They're like the only one that can bring food to this whole area - and it's a big valley. Because they moved to Acumatica almost two years ago, they're able to stay up and running and work remote from home - and everything's still ticking along. So it's kind of cool to know that we're keeping people fed and things like that.

That's a huge story of the pandemic so far: local distributors proving their worth when bigger chains buckle. So what else is Roskill seeing?

We're tracking to advice you've given in some of diginomica's articles. We loved Brian's article on Did ERP vendors learn from the last recession, where you go back, and you see some of the stupidity that was done there. And there is some continued stupidity going on out there now.

Acumatica's customer bill of rights - a pledge that gets tested

Roskill obviously has a dog in this particular fight. He argues that ERP vendors with a large portion of their business in on-premise legacy environments are in a tough spot. That type of software is difficult to run remotely. He believes customers in that situation are upset and don't want to pay, and that "we're going to see some pretty big impacts off of that." Time will tell. For now, it's about looking after your own customers. Acumatica has to live up to its own pledge:

We're the ones who published the customer bill of rights, so now is one of the testing times. Are we going to live up to that? And the answer is we're trying to do everything we can to do that.

Such as?

It starts off by following that advice: making sure that you are pro-actively reaching out to your customers. I think there are a lot of vendors out there that are afraid to call their customers. They're afraid what they might hear.

One customer call couldn't have been easy: a high-end fashion retailer in New York City. Roskill:

No one's going to fancy parties right now. All the places that sell that stuff - like Macy's and Saks - are shut. So I have a customer that's about as hosed as you can be, right? So I called the CEO to check-in. He told me: "Oh my God, Jon. Yeah, we're in tough straits here. We're trying to keep things moving to some degree. Number one, trying to keep people safe. Number two, keep as many people as we can on the payroll." He also said, "The fact that we've made this decision. to run on Acumatica; it does mean that we're able to keep the core pieces of the business going remotely."

The customer also needed help: their Acumatica upgrade had to be postponed. They needed an immediate extension on their sandbox environment. Roskill's response? "Heck yeah."

Listening for those things is going to the difference in getting through this right now... So we're all calling all our customers.

But some ERP customers aren't going to be able to pay their bills at all right now. What then?

We know we're going to have some customers that are really going to be in tough spots, and aren't going to be able to pay. So the decision point is: you can say, "Look, let's shut them down," or "Let's try and talk through what the next six months might look like with them, and let's figure out how to get through this together."

Now is not the time to pass costs along:

There's some fundamental things in the customer bill of rights. We talked about our policy around price increases, that we don't do more than a 3% annual price increase. Right now, we've put everything on hold; we're not doing any price increases for 2020. The price increase mainly takes into account our operational expenses that tend to go up about 3% every year, but we've notified everybody we're not raising prices this year.

Some customers are moving to monthly billing:

We've been doing monthly billing as an option for about two years now. We've had some customers call us up and say, "Hey, I can't manage the annual bill right now." And some of them are moving to monthly billing, because that gives them a way to manage the cash flow piece. So that's turning out to be a good tool in times like these.

My take

I have yet to talk to a cloud ERP customer - or any customer for that matter - that regrets getting an early start on cloud applications, digital commerce, or data/analytics transformation. Yes, cloud apps are a huge edge for those needing to make a fast remote work shift. That doesn't take away from the predicaments some customers are facing.

Roskill told me overall, about 1/3 of their customers have "seriously fallen off a cliff" in the short term with their business - in areas like travel or hospitality. But on the flip side, about a third of Acumatica's businesses have scaled up, and are doing 300 or 400 percent of their historical transaction volumes as of the last two months (e.g. health care, medical supply, and digital commerce customers).

Acumatica is better positioned than many ERP vendors to move through this, but Roskill is right - their expressed commitments to their customers will be put to the test in the coming months. That goes for all of us.

Roskill has a bold post-Corona prediction:

This is the death blow to on-prem - and it's never coming back.

A strong statement.

The market for non-cloud software has just gone overnight, boom, vaporized. And, you know, that's not a surprise. But I think some of our competitors are going to be impacted by this data.

I'm generally a fan of bold views, but I found this one very interesting. Acumatica does allow on-premise deployment, and they do have a small group of stalwart customers who have stuck with it. Does Roskill see them moving? They all have clear reasons for being on-prem; most have sophisticated IT teams that manage their private cloud deployments and technical infrastructure.

I agree with Roskill - when it comes to industries where cloud functionality is anything close to on par. In those areas, cloud ERP will get a big boost from all this - as if it needed one. But I see this as more of the death of on-premise analytics. I can't imagine why an enterprise would hold back on cloud analytics now - assuming the performance/security requirements can be met. But that's another day's topic.

Point is: the world won't be the same, and we'd best prepare. As Roskill said to me:

There's clearly a shift happening across America right now. You guys actually wrote about something like this, which is, "What's the world going to look like after this?" You know, we don't know how things are going to settle out. My kids are all in online classes. And I'm like, "Alright, well, if this is the world of education in the future, why doesn't everybody go to Harvard?"

That's officially beyond the scope of this piece, but an interesting one to ponder.