Does cloud ERP provide a hedge against economic uncertainty? Acumatica CEO John Case weighs in, as the R2 release comes out

Every new CEO expects curveballs. But as I think back to my initial March 2022 piece with Acumatica's newly minted CEO John Case, economic uncertainty jumps to the top. Since our talk, markets have changed. So have tech buyers. But has Acumatica changed too?

That's a potent list for a catchup, on the verge of Acumatica's R2 2022 release. Acumatica used to have an in-person R2 release event each fall; now they focus their in-person attention on the annual Summit conference in January (You can catch the virtual version of the R2 release event free of charge on Thursday, September 22nd).

Has economic uncertainty changed the case for modern ERP?

I asked Case: what has he learned from his talks with customers on the ground? Case told me:

Most of our customers come from one of two places. They either come from one of these legacy ERP systems they've been using for a decade and they're struggling with it. It's not modern; they can't get what they want out of it. Or they're coming from a low-end accounting or bookkeeping solution that they've outgrown. In almost every case, they're coming from a position of saying, 'You know, this is such a business-critical application; I've really got to modernize.'

With inflation and talk of recession, has the impetus to modernize changed? Case:

One of the interesting learnings for me is that we will have to learn better as an ecosystem, and Acumatica overall, what causes people to decide,  'Now is the time to move. Now is the time where I've just got to modernize.' I actually think the economy this summer is impacting some of that. Inflation is impacting some of that.

People were saying, 'I've got to get my house in order, given the challenges in the market' - things like that. We're seeing a lot of customers telling us those things. It's obviously very different depending on what type of customer you are. If you're a construction firm, if you're a retail company - they're very different problems. [Author's note: see Case's post, Protecting Your Bottom Line Amid Rising Inflation].

How should ERP customers prepare for economic turbulence?

How should customers face this adversity? Case says Acumatica customers use better visibility and data access to mount their response:

There are headwinds and tailwinds to every economic cycle. Inflation in the US alone is at record levels for the last 20-plus years. There's definitely a set of customers that are saying, 'Now's the time. I've been behind on sorting out my cost structure, sorting out my supply chain, understanding my inventory better - I need better data.'

Customers have come to us in this environment and said, 'I should have done this before... The sooner I can get this rolled out, the sooner I can impact the business in terms of giving me better clarity, predictability,' you name it. Some of that comes from the democratization of the platform, letting all their users get connected to the data in a different way.

But some of it just comes from having better data, tracking your inventory better; what's happening with shipping. 'I need to understand all these things that are costing me more and more money. Am I building my manufacturing margin? Am I building my jobs as efficiently as possible?' All that's helping people save money now.

Of course, not all projects are pushing forward: "There are certainly other customers that are saying, I'm intrigued by cloud ERP, I'm going to wait and see what happens to the economy." I won't lie: I get concerned about using software simply as a cost-cutting tool; most businesses need a more creative response than the efficiency diet plan. In a blog post by Acumatica CRO Sanket Akerkar on preparing for a recession with ERP, Akerkar reframed the possibilities:

Not all aspects of your business are equally valuable. While each undoubtedly contributes in its own way, some areas of your business can be classified as absolutely indispensable. With the visibility ERP provides, you can easily identify your organization's most—and least—profitable sectors and classify them for development or pruning, as the case may be.

In this context, inventory is a critical issue. But I worry that companies, in their fear of getting caught short on affordable supplies, are retreating too far from just-in-time, back to "just-in-case." Just-in-case inventory management leads to paralyzing overstocks of the wrong equipment; investors aren't fond of the approach either. What does Case hear?

We get this question a lot. I've had lots of anecdotes from our customers saying, 'I couldn't get any inventory for whatever I needed six months ago, and now I have all this inventory, but it's what I needed six months ago, not what I need now.' Then there are shipping challenges; you hear about all these retail chains doing clearance sales on things that were winter clothes from last year.

Acumatica's R2 2022 release - inventory enhancements and more

Case believes Acumatica must help customers here, by adding more (and more) granular inventory monitors and controls. Which brings us back to the R2 2022 release:

We've actually built some new stuff in our tools specifically for distribution to retail on inventory. We have some new turnover KPI stuff; we have new inventory turnover management tools that are just in this version - it's a brand new set of features. I don't know if it's going solve [all these problems]. But it does give people a better way to track lots on the way in. Know what's selling, know what's on the way out... We've gotten lots of customer requests for deeper inventory tools; that's a part of we're doing in this R2 version.

True to form, Acumatica's R2 release brings a truckload of new features, from workflow automation to usability enhancements, from localizations to micro-vertical functionality. I can't get to it all, but I do want to touch on geographic localizations. Does that mean Acumatica is moving up, beyond its midmarket ERP sweet spot? Case:

All of our customers are struggling with how to operate in multiple states, counties, or even countries. We don't want to be the ERP for a global multinational company yet - that's not our strategy. I certainly think we can do more to help people with things like local bank feeds, and understanding Canada versus the US. Localization does matter. There's a bunch of things here that customers have asked for.

My take - not all cloud ERP is created equal

It's foolish to believe software magically helps us to overcome downturns. But we've neglected a painful truth, given the billions companies have spent since ERP landed: not all ERP systems can even presume to help here.

We need to see qualities like real-time inventory visibility, low-code workflow automation, and wide user adoption into multiple lines of business. Not all ERP can do that. Heck, not all cloud ERP can do that. I go with the term "modern ERP," mostly as a subset of cloud ERP. There is far too much "cloud-ERP-washing" these days otherwise.

Acumatica is not the only vendor I put in the modern ERP category. That (relatively) short list comes down to factors like location, company size, and industry. I believe any properly chosen/implemented modern ERP system can make a difference in such times - for companies with the fortitude and ingenuity to change their business, not just their systems.

That raises an interesting question: where then, does Acumatica truly excel beyond its ERP peers? Acumatica's all-partner go-to-market is certainly different; we can argue whether it's better. Acumatica is hardly the only cloud ERP vendor making heavy vertical bets, but Acumatica remains the only cloud ERP where an ISV partner built out an entire vertical (manufacturing) - an interesting proof point.

I see Acumatica's biggest differentiator as its pricing. It's not quite a consumption-based model, but it's in that ballpark. The true victory in Acumatica's pricing is the freedom from seat-based licensing, which fits right into getting users up to speed quickly - in times where moving slow exacts a heavy cost. Now is the time to reframe the business, not to deal with tedious ERP seat license (re)negotiations.

Acumatica is in the upper tier when it comes to workflow automation, but they are not alone there either. Acumatica would say their mobile-savvy usability also separates them. I'm not in the business of ranking these; buyers should carefully and critically evaluate, after a wide net is cast.

Combine these attributes, however, and a view of "modern ERP" emerges. It's a much more interconnected way of thinking about ERP. It's the only way you want to think about ERP when you are struggling with supplier pricing, inventory dilemmas, and price-frustrated consumers.

Because ERP has changed, buyers should evaluate ERP differently as well:

• Functionality comparisons are less important than aggressive roadmaps with frequent cloud releases.
• Adoption and usability are everything now. Even if a system has deeper functionality, if it's buried in a legacy interface, you're gonna have problems. ERP is no longer the domain of the green screen super-users; modern ERP systems spread quickly beyond them.
• ERP should be vertical. If you buy an ERP solution you must integrate with your proprietary industry software, you're on the wrong track. (I know customers who bought so-called "cloud ERP" they must now integrate with their vertical system. Good luck with workflow automation, role-based alerts, and intelligent AI actions with that industry software spaghetti).

I'll give Case the last word:

In every one of our major vertical solutions, targeting specific features and functionality, either for a micro-vertical, or something within one of our big verticals. You'll see that in every single release. We'll keep deepening and expanding what we do inside construction, distribution, manufacturing, and retail-commerce, because I think that matters.

Indeed - onto the virtual R2 event.