The market for SaaS manufacturing software solutions will expand considerably in the coming years
By Derek Singleton
Manufacturing software vendors are making aggressive moves to the cloud. In the past year alone, four vendors rolled out a full suite Software-as-a-Service (SaaS) offerings for the industry. That brings the current tally of SaaS players in the manufacturing arena to five: Epicor Express, Infor SyteLine, NetSuite, Plex, and SAP Business ByDesign.
The buzz around the cloud has manufacturers asking if a cloud solution is right for them. To help answer that question, I'll explore the features and functionality each vendor offers, and the ideal target market for each. Many more vendors are redesigning their software for the cloud, but I thought I would spotlight the five that are already there.
First, here's a brief introduction to the vendors.
In May of 2010, Epicor released Epicor Manufacturing Express Edition (Epicor Express), the SaaS version of their Epicor 9 product. Their SaaS offering was designed specifically with smaller job shops and manufacturers in mind. Currently, 70 of Epicor's 9,500 manufacturing clients are working in the cloud on Epicor Express. The product is currently targeting a 20 to 30 day period to go live. That should be attainable for small job shops without complex data migration needs.
Infor moved their flagship SyteLine product to the cloud in October of 2010. Of their 70,000 customers, mostly manufacturers, 800 have put some of their production in the cloud. Infor takes pride in the flexibility of their .NET architecture and their ability to serve mixed-mode manufacturers. In future releases, Infor plans to expand multi-site capabilities, and expand their mobile applications.
NetSuite began pursuing light assembly and less complex discrete manufacturing customers in 2007. In June of 2010, they launched their first full-suite manufacturing offering to target mid-market manufacturers. As a pure SaaS company, NetSuite's manufacturing clients all operate in the cloud. NetSuite currently supports multiple sites, multiple languages and currencies. In future releases, they plan to expand upon this functionality and target more complex manufacturing industries.
Plex was the first SaaS player to target the manufacturing industry with their 2001 cloud-computing debut of Plex Online. At their start, Plex targeted the automotive industry. Since then, the company has expanded into several other verticals. As a pure SaaS vendor, all of Plex's 589 manufacturing clients are in the cloud. Future releases will focus on expanding global capabilities, and developing functionality for more vertical manufacturing markets.
The July 2010 release of Business ByDesign 2.5 marked the on-premise ERP powerhouse's first SaaS move into the manufacturing market. The product hosts 250 customers, but we don't have a detailed count for how many customers are manufacturers. Regardless, SAP has tremendous manufacturing domain expertise to incorporate into the product over time. In future releases, SAP will focus on expanding their functionality to cover mixed-mode manufacturing and engineer-to-order.
What Products Serve Your Size Business?
The sweet spot for these SaaS vendors is small to mid-sized manufacturers who don't have the resources to implement more complex, expensive on-premise solutions. Epicor Express finds its niche among manufacturers with less than $50 million in revenue. Plex and Infor target a slightly higher end of the market, providing offerings for manufacturers with up to $500 million in revenue. Another way to measure target market is by number of employees. The table below breaks down the target market based on number of employees.
Support for Manufacturing Modes
The type of manufacturing mode a software package can support is a great indicator of the depth of functionality it offers. Notably missing from the modes supported by these SaaS vendors is process manufacturing. Process manufacturing is tricky to support because it requires complex formulas and involves a wide range of variability in production. The software to support these modes also has special requirements, such as material management and process modeling. Below is table indicating which modes are supported by each product.
Manufacturing mode support determines what industries these SaaS solutions can serve. Instead of trying to take on process manufacturing industries immediately, SaaS manufacturers chose "safer" industries to serve first. By serving simpler industries like consumer products or industrial machinery, SaaS vendors can build a steady revenue stream, and develop for other industries later.
Enterprise Application Breadth
Because of their heritage of offering functionally complete on-premises products, most of these vendors are able to offer a fairly rich set of applications in their cloud solutions. Therefore, in addition to manufacturing resource planning (MRP), most of these vendors also offer functionality for customer relationship management (CRM), human resources (HR), business intelligence (BI), etc. The table below illustrates the applications offered in each system.
SaaS Manufacturing Moving Forward
These vendors already offer impressive functionality in their full suite ERP cloud software. But cloud software still lags behind the functionality of on-premise systems. Most on-premise vendors could have checked all the boxes above, and then some. This gap in functional parity is sure to narrow in the coming years as more vendors invest in the cloud platform.
The growth of Plex, the SaaS manufacturing veteran, should serve as an indication of the success cloud vendors can have in the manufacturing industry. In 2010, Plex posted a record 27% increase in revenue. This is strong growth during a time when most on-premise vendors are losing licensing sales.
We believe that this sort of growth will continue and potentially accelerate. The market for SaaS manufacturing software solutions will expand considerably in the coming years.