Acumatica's quest for cloud ERP differentiation - the analyst day report

Profile picture for user jreed By Jon Reed May 19, 2015
At Acumatica's first-ever analyst day, the cloud ERP player made its case for midmarket differentiation. Customer use cases and feature roadmaps were also shared, with the expected dose of pesky analyst questions. Here's my review and analysis.

On Thursday, May 14, a group of analysts of various flavors, including myself and Brian Sommer, gathered in Boston for Acumatica's first-ever "analyst day." So-called analyst events can be pretty dry, so I was relieved when CEO Jon Roskill immediately hit me with a juicy quote on their recent Microsoft Power BI partnership, a surprise announcement from Microsoft's Build event (pictured right):

Acumatica structured the day with a big ambition: to provide these event-weary savvy analysts with a clear sense of how Acumatica is differentiating in "cloud ERP," a suddenly crowded space with vendors spinning up a range of clouds and pseudo-clouds across the spectrum from legacy to modern. In this crowded space, you need some swagger. Roskill shared this "growth rates" slide which is, understandably, a big hit amongst the Acumatica faithful:

Those who are unfamiliar with Acumatica might think NetSuite is the obvious comparison, but this is both right and wrong. Roskill confirmed that they see NetSuite in 25-30 percent of their deal pursuits - more than any other vendor. But in Boston, Roskill re-iterated his position: Acumatica is going after the "abandoned midmarket" I wrote about last year - an attractive pool of companies Roskill believes are now neglected, given Microsoft and NetSuite's push upmarket (Roskill cited a customer "sweet spot" in the 20-50 million revenue/50-500 employee range).

How Acumatica differentiates - my review

So is Acumatica in a good position to win this market? And did they succeed in their differentiation message? Here's my rundown of Acumatica's points of differentiation:

"ERP for the 'every business'" - that's the abandoned midmarket reference. This can work for Acumatica IF they gain a reputation for ease of use/implementation amongst companies with few IT resources. Yep, that means a broader marketing push featuring the appealing use cases Acumatica shared in Boston - a fun project that now lands in the lap of freshly-minted CMO Kathy Visser-May, another Acumatica executive plucked from the Microsoft talent pool.

"Open, standards-based next gen platform" - yes, a bit of a mouthful, but this is core to Acumatica's approach - with web services APIs, partners don't even have to be Microsoft shops (Acumatica's underlying architecture includes Microsoft components and SQL/MySQL databases). Partners can build apps with Java, or use Acumatica's mobile platform to build out Android or iOS apps (without needing to program in the device language, designer can still leverage in-device features like GPS and camera). Acumatica continues to advance the open integration mantra with heavy emphasis on Odata, an open REST protocol originally created by Microsoft),

"Accessible technology, delivered where customers want" - I combined these two, but bottom line: with its HTML5/web-based design, Acumatica excels for the mobile ERP worker, that burdened global citizen who needs a lot more than mobile email. These folks need full ERP access on-the-fly, and Acumatica prides itself on this point. Add in full Office 365 integration, which Roskill asserts is vastly superior to certain competitors' recent announcements (ahem!), and you have the ERP mobile worker, Acumatica style.

"Right-sized, priced right" - Acumatica's partners frequently cite the pricing model as a factor in why they signed on to sell Acumatica. I wrote more about Acumatica's pricing model here. Acumatica partners back up this point, vouching that it's super-easy to add new users to the CPU-based consumption pricing.

"Deployment flexibility" - Choosing between public and private is just the beginning for Acumatica customers. They can switch deployment models easily and as per this slide captured by Holger Mueller, the tenancy options at the application and database layer give multi-tenancy purists something meaty to gnaw on.

"Channel ecosystem" - Acumatica's channel is everything. With no direct salesforce and all deals closed by partners, Acumatica has a high level of accountability to its partner ecosystem. 40 percent of Acumatica's revenues come from OEM partners MYOB and Visma, but the future is about growing the VAR and ISV partners, many of whom defect from older ERP solutions (In a meeting Roskill said that of the 327 VARs, 200 of which are based in North America, only 10 are new to ERP sales - the most common backgrounds are Dynamics, Sage, and Infor ).

One strength is Acumatica's "Open University" approach led by Richard Duffy. Duffy has a track record of helping partners with content-driven marketing and enablement, which in turn provides a soft landing for those disillusioned with their prior ERP channel partners.

Acumatica challenges

I always judge a firm by how they respond to their weaknesses. Heavy growth mode doesn't mean you can rest easy. During a breakout session, CEO Jon Roskill fielded my question about why they lose deals. Roskill says the deals that don't work out come down to brand recognition and, in some cases, functionality gaps. After lunch, I had a debate with a couple of analysts about user experience versus functional depth as an ERP decision-making criteria.

Buyers are still looking for a strong functional fit across the ERP core, and they don't want to build verticals from scratch. Acumatica is addressing this on both fronts, via internal development and new vertical ISV partners. Other concerns raised by analysts included the look and feel of Acumatica's CRM, which seemed to lack some modern collaboration and visual features. This is to be addressed in version 6.0, coming in Q1 2016 (Acumatica is on a quarterly release cadence, with version 5.1 in GA now).

My take

Acumatica panel
Acumatica's first analyst event concluded with a panel discussion that featured a local customer and a partner (Paula Beck of Menck Windows, and Douglas Beckerman of BHE Consulting). All in all, the day's content underscored why Acumatica is different, and why many of us find this company a refreshing player in the ERP space But there is much work ahead.

The hurdles Acumatica faces on functionality are not small.  Technically speaking, the ISV program is only a year old. 60 ISV partners, 40 of which now have live solutions, is a good start. Right now, Roskill sees their industry strengths as wholesale distribution, discrete manufacturing, and e-commerce scenarios (here, Acumatica relies on their e-commerce integration with Magento).

Some analysts didn't like how Acumatica positioned its Magento e-commerce partnership, raising questions on over-reliance on third parties for core functionality. But as Acumatica's integrations with ISVs like Fusion for Point of Sales (PDF) and JAAS for manufacturing show, Acumatica does a terrific job of integrating third party solutions into their look and feel.

This will only get better as their xRP platform matures. Expanded multi-tenant capabilities for partners are on the list for version 6.0. I'll skip the tech details, but Acumatica's "extensibility technology" will enable ISVs to build "complex vertical solutions in a multi-tenant environment." Many partners are not familiar with embedding their industry expertise into vertical applications, so guidance is needed. The Acumatica Developer Network is one more enablement piece now in place.

Acumatica calls this open platform their secret sauce. They are betting big here, with 50 percent of their engineering dollars going to platform. With their commitment to exposing APIs, Acumatica should be in better shape than most when cloud integration becomes a big purchasing factor. There's another problem: most of the VAR type resellers need major support to transform to a bona fide cloud consultancy. One issue is the lack of younger talent in these VARs.

When you combine the need to overhaul marketing into a content-driven model with the skills and business model transitions needed for cloud consulting, Acumatica's present (and future) VARs have their hands full. Acumatica's open platforms and open universities should help get this necessary transition underway. Acumatica's Mobile Framework, which allows Acumatica functionality to be exposed on mobile without programming skills, should help these VARs also. This led me to tweet:

(Acumatica's Gabriel Michaud, who I was quoting, said he'd bring his mother next time).

In a cloud market geared towards business users, Acumatica's "work anywhere, on any device" principle is one of their defining assets. For that reason, they should double down on creating the best looking/easy-to-use ERP UIs in the industry. I get the sense that's part of their evil plans for 6.0, so we'll see. While Acumatica's screens already adapt to any device size, there is more they can do with UI that would give them an even bigger edge. Vertical ISVs can be vital for UX - I thought the FusionPOS sales interfaces looked intuitive for that industry user.

The rest comes down to execution - and recruiting the right partners. Next big gut check: the Partner Summit in February in Orlando.

End note: Holger Mueller's review of Acumatica's analyst day brings out some excellent points; I did my best not to duplicate those points here.

Image credits: Slides used by express permission of Acumatica - all rights reserved. Acumatica announcement at Microsoft Build - photo by Acumatica CEO Jon Roskill.

Disclosure: Acumatica is a diginomica partner as of this writing, and helped with the travel expenses for the analyst day event. NetSuite is a diginomica premier partner.