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Can ERP deliver more customer value? Acumatica CEO John Case on why industry-based ERP matters

Jon Reed Profile picture for user jreed June 27, 2024
Summary:
Can modern ERP have a different kind of customer impact? During my catch up with Acumatica CEO John Case, we spoke about where cloud ERP is making inroads - including manufacturing. I also wanted to discuss a surprising new Acumatica board member - Zach Nelson.

John Case, Acumatica CEO
(John Case, Acumatica CEO talking shop)

When I try to define modern ERP, it comes back to this: how can ERP deliver more value to customers? That leads us back to the industry conversation. Call it ERP or whatever you want, we need industry software that isn't siloed from business management software, as it has been for too long. 

Maybe running generic ERP software separately from "green screen" industry software worked ten years ago - today it's a losing proposition. This kind of talk is right in the wheelhouse of Acumatica CEO John Case. As he told me: 

I look at us more and more as a business management system for a couple of very large and key industry verticals. Distribution has been on that list for a while, including warehousing and logistics. Certainly construction is our fastest-growing business; manufacturing is right behind it, and then we have retail commerce. And we announced at the Acumatica Summit that we are launching a professional services product this year, which we will do in our [release 2 wave in the fall].

Manufacturing jumps out; I've been waiting for cloud manufacturing to hit the so-called tipping point for a long time. Where are we now? Case responded:

In manufacturing, the business problem there is very interesting. These are folks that have been on old legacy ERP for a long time. For the first time, they're realizing there's a cloud ERP that has native-built manufacturing tools that they can build on. There's tens of thousands of small/medium manufacturers in the US, in Canada and other markets. Maybe 20 or 30% of them have gone to the cloud. There's a whole other wave coming.

We just published a case study on our customer Q-PAC, which is industrial machinery; they make things like fans for commercial HVAC systems. They went from this disconnected system; they had things like QuickBooks, spreadsheets and all kinds of task systems. And they were able to orient that all around Acumatica Manufacturing.

But is that ERP? Maybe it's cloud industry ERP. Either way, this is a different kind of impact than the ERP of old. Case added:

Now they've got inventory management, a modern platform, automated reporting. Yes, it's an ERP, but really it's a manufacturing business system. And it will transform that company in certain ways. We can give you lots of examples like that in construction or distribution as well. And even within those, we look at at a micro-vertical level. So within manufacturing alone, we separate out discrete and process manufacturing, things that are built to order, built to stock, and have different needs and different regulatory environments. We can do a lot of those things, either with our own tools, or with third party ISVs that we bring in. So the playing field is very, very large.

Is cloud manufacturing gaining momentum? 

So if there is momentum around cloud manufacturing, why now? Case sees a few factors that have jolted manufacturers into a different mindset:

Coming through the whole COVID wave, people had so much pressure on them with supply chains, inventory management, pricing, and labor shortages. So a lot of very smart manufacturers realized they can't do things the same way anymore. So that started a whole wave of innovation that was needed.

Direct-to-customer has also sparked a software rethink:

Now I see these manufacturers saying, 'How do I capitalize on the economic wave that we're seeing?' A lot of them are also going direct-to-customer. So they've also changed the way they sell. And that's become a huge factor... Even if it's B2B versus B2C, they have to implement all ways of reaching their customer base, either through e-commerce, or something else. That's created a whole wave of digital transformation.

Then there are changes in leadership and business consolidation:

I see consolidation happening; I see changes in ownership. I see family businesses handing off the business down the line to the kids.  A lot of our customers are proprietor-owned family businesses. New leadership often means new digital work, and new thinking about tool sets. So all those things are happening all at the same time.

So there is a big wave of modernization in manufacturing right now, particularly with the small to medium sized manufacturer, one that employs 100/200/300 people, because they haven't been there before. This is a chance for them to really modernize, and I think that they're seeing more and more tools like Acumatica can take them to that next level.

Of course, manufacturing is really comprised of many sub-verticals, each with their own set of cloud requirements and/or regulatory issues. That means not every sub-vertical is equally ready for the cloud - and one type of software does not fit all. Still, Case says he's seen plenty of movement - even in regulated settings:

Even within manufacturing, you can look at things that are highly regulated - industries that haven't really started moving yet pharmaceuticals or process or things that are food products really are slow to go. But things that involve machines, parts - even custom manufacturing is really moving fast right now. So I think when you look at it also in that way, there's certain sic codes, certain micro-verticals where we see more rapid adoption than others.

But manufacturers do tend to have a couple obsessions in common: labor needs and inventory management.

They're all worried about their labor force; they're all worried about their inventory. They're all worried about: can they get more productive? Customers tell us, 'Hey you know, since I started running Acumatica, I can hold 10-20% less inventory. Well, that's a major financial windfall for some of these smaller/medium manufacturers, because they've suddenly got an enterprise level of sophistication at their size and price point. And that's a big deal. Very often, that's one of the things that flips them towards really deciding to put the investment in  - and the time and the energy to rebuild. Because it is energy; it takes time. But the platform is flexible enough that they can do that.

ERP modernization is about managing change

Case has been writing about why change management remains an overlooked factor in ERP modernization. What should customers taking on this move bear in mind? Case:

It's a common set of questions that we get. Suddenly, you're asking those questions like, 'What's causing these changes right now?' A lot of companies have a model for why they're doing something, but often they lack experience in-house. They don't know how to go through that process of change.

A lot of customers are going through that change process at the same time as they're adopting new technology. We have to be able to help them with that, and our partners have to be able to help them with that. Because if we don't, then they're going to find a system that's modern, but a company that's not ready to take it, or vice versa.

How do the most successful projects manage change?

It's a pretty typical journey the customers are on, and this is a classic time for that: changes in remote work, changes in inventory, changes in labor models and legal rules. When all those things happen, companies have to decide, are they building for that future state? Or are they just trying to keep up with where they are now? The most thoughtful ones are building for a future state, and they have to go through these regular transformations.

If you get lost in the tech, you're missing the chance to change your business: 

It's a very common discussion I have when I go see customers, which I do about once a quarter - I get out and travel and do a customer tour... One of the common themes I hear is it's not just about the tech, it's about how they're reshaping their company to get the most out of what they're doing with digital. I think that's a really interesting set of stories when you hear them. [note: Acumatica has launched a new customer success stories library, including video case studies].

Acumatica isn't short on surprises: in April, two new board members were appointed, including one with a big footprint in the history of cloud ERP: former NetSuite CEO Zach Nelson (NetSuite remains a notable competitor for most SME-focused cloud ERP vendors). I asked Case: why would Nelson sign onto the Acumatica Board of Directors?

I think he's really captivated by the growth story, and how we're trying to do things in our own way, with our own channel, with our own things like the Acumatica Customer Bill of Rights, where we're approaching the market in a differentiated way... We talked directly about his interest in manufacturing and construction where he sees opportunity. Overall, it's exactly what you hit on at the beginning, which is the opportunity to be part of something that's going to be a big part of the industry for decades to come. 

My take - extracting cloud ERP value isn't a no-brainer

Why did I press the issue of cloud manufacturing adoption with Case? Because if manufacturers move aggressively into cloud ERP, that pretty much settles the industry cloud adoption question. Yes, there are a couple of industry holdouts; aerospace and defense comes to mind. But aside from airgapped companies and industries deep in compliance and complexities, modern ERP should be persuasive - as long as that division between industry software and ERP is broken down into one fluid platform. 

Add in the commerce/retail aspect, and you can see this is a different type of end-to-end capability. But as Case says, for companies to make good on this potential, internal change is necessary. When I document customers deriving the most value out of ERP, much of it happens well after go-live. And: it's my contention that it doesn't just happen. Customers have to push for it (Extracting value from cloud ERP in a customer-first world - what should we be pushing for?) .

Maturity models and peer-to-peer learning can propel us towards that. I spoke to Case about customers extracting value from a real-time ERP platform, by analyzing numbers in a more granular way - and finding surprises in the data. Case responded:

You're absolutely right. It's not just 'Does this close my books [faster] these year.' It's about: 'What can I learn from the data that we generate'? The most interesting companies often are the ones that go through those kinds of business learnings after they've rolled out a tool. 

Case sees another impact: the ability to move faster. Acquisitions are a notable example:

These customers are not static enterprises. They're buying companies. They're closing businesses; they're opening new factories. A lot of the strength in the value extraction down the road is in the rapid change management and how quickly they can do things that they couldn't do before.

Case cited an example from the Acumatica Summit, where a customer shared the story of six divisions running on Acumatica: "They could add a new one, and it would take them very little time.

When I update the cloud ERP value extraction piece, this type of business 'agility' should be emphasized. That should be a fun summer project.

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