Since 1992 BlueLink has been working on ERP solutions designed for wholesalers and distributors–companies in the business of buying and selling products. For our Q&A with BlueLink, we spoke with CEO Mark Canes on the origins of his company, the development of the ERP industry and how to design systems that speak to the needs of smaller organizations.
LOCATION: Ontario, Canada
Well, keep in mind the company’s been around since the 90s. I’m an accountant and then I became a computer programmer and then I became a system analyst. I took those skills and mixed and matched them when I worked for a couple of companies that developed ERP software back in the 80s in the UNIX environment. I also did a lot of consulting and project management for implementations of different business software projects.
What I noticed back then was that big companies, very large enterprise companies, would spend a lot of money on customizing software to work the way they worked. Smaller companies, not really tiny little mom-and-pop companies, but those with 10-20 employees, were kind of straitjacketed by the package to the point that they’d have to change the way they did business to conform to the software. It was pretty much all off-the-shelf packaged software chosen because it was affordable.
My initial take on this was to see if we couldn’t build an accounting system with a mini ERP system that could address maybe 75-80% of what a company needed out of the box, with the remainder customized to be a good fit for the company’s business processes in an affordable and upgradeable way. Back in 1995 and 1996 there was nobody doing that. We were kind of pioneers in that way.
Firstly, when you talk about things like Dynamics GP, which is a much, much more horizontal product, we really are very focused on wholesale distribution, companies that buy and sell things, products. So there’s a lot more depth, particularly for certain types of wholesalers and distributors, in our product than the more horizontal products like GP.
Those products purport to service some of the same markets we do and in many cases some of them have features and functions we don’t and we have features and functions they don’t. So one of the tricks is to try and make sure we fit the prospect’s needs to our product, or walk away. For example, say you’re in the food or pharmaceutical business and you need a very robust log tracking capability to manage product recalls and things like that. There’s nobody in our price range who can touch us on those kinds of functions. We know we’ve got a huge advantage there, and we know the customer’s point of view, so we can do stuff for them right of the box that somebody else, even some of the companies you mentioned, would have to add in through customization.
For the size of companies we deal with, typically somewhere between 10 and 100 employees total, you’re typically looking at something between five on the low end to 50 or 60 concurrent users. In that arena of wholesale distributors, job one–the prime director as I call it–is inventory management. Now, that means different things to different people, and what it tells you right away is that in 90 percent of the sales conversations we have, the accounting functions is less important.
Let me say, though, that our accounting function is very good, it’s very solid. I used to be an accountant in public practice, so obviously we’ve made sure that our accounting is solid and actually a lot more sophisticated than many others. But it’s not typically part of the conversation we get into with companies. It’s all about managing inventory search and being able to track your inventory costs correctly.
And clearly, probably the single biggest factor is the ability to help my salespeople if I’m the wholesale distributor. I want to make sure that my salespeople have the tools that allow them to sell the product, sell it at the right price and with the right margin. So it’s all about moving and managing the inventory, moving it in, moving it out and pricing it.
First of all, I think those statistics typically apply to larger ERP implementations like SAP and JD Edwards. I read a statistic in 2009 where someone did a study and said, “If you the measurement of success in ERP implementation is that you achieved at least 50 percent of the initial objectives, didn’t go more than 50 percent over the original budget and didn’t go more than two years beyond the original roll out date, only 40 percent of ERP implementations would meet that criteria.” So you’re right, there’s a history of failure in those high-end implementations.
In our space, the smallest space, though, the percentage of successes is higher. There’s still too many that are unsuccessful. I think there are a couple of big reasons. The two biggest I think of are, number one, resellers of the implemented software low-balling implementation costs in order to get a foot in the door. Therefore, the budget for implementation is just not there, there isn’t enough. Adding to that is the fact that too often companies are focusing first and foremost on a budget. So before they even start going out and defining what their needs are and trying to figure out which vendors they should go with and how much money they can save on staff, they arbitrarily set a budget. When they do that they shoot themselves in the foot to a large degree.
Lowballing of implementation costs is one of the blotches on our industry, because they know once they’ve got your money and you’re halfway through they can come up with all these change orders and cost overruns and they’ve kind of got you, right? What are you going to do? Say no halfway through an implementation? It’s unethical, but I definitely think a consumer who educates himself and understands what options there are is less likely to end up with one of those vendors. So if you assume a combination of ethical vendors and customers who actually take responsibility for understanding the needs that come with working with a vendor you probably have maybe a 90 percent success rate.
We’ve been a Microsoft Gold Partner, and now a Gold ISV partner, for oh, I would guess 16 years or something. It’s been beneficial in a number of ways. First of all, when we started developing the product we decided to take a strategic decision based on errors my previous employers had made in their technology decisions. We decided to go exclusively with Microsoft development tools and platforms, not necessarily because we thought they were the best back in 1994-1995, but we figured they’d be the most sustainable. That’s proven to be a very, very wise decision.
Obviously we’ve upgraded the product and the underlying technology. We’re on the latest versions of pretty much all the technologies, but the migration process is a lot easier when it’s just the next generation of the same family of tools. We’ve also had a certain amount of technical assistance from Microsoft.
As a Microsoft partner you get a whole lot of sales and marketing resources, you have a partner account manager, accountants to help you handles things. In terms of getting a heads up as to what’s coming down the road we’ll typically know about developments with, say, Office 2013, a long time before the general public or even the developer environment.
If you were in a group of Fortune 500 companies this would actually be a much easier discussion because you’d have committees and groups to find the KPIs that support those critical success factors and therefore have a much more coherent view of what the company needs from BI in order to run itself more efficiently.
But with the type of company we deal with that’s really not the case. the majority don’t understand anything that you and I just discussed. But I do think that ability to mine your data, to have your data proactively warn you of trends and assist in your decision making is important for the large and more sophisticated companies among my user base, but the definition of who these people are is moving downwards, downstream. Smaller companies are beginning to recognize the value.
What we do with our product is, rather than trying to generate a generic, one-size-fits-all model, we actually do have what I consider business intelligence tools built into and bundled with the software, but they are tailored to the specific business needs. This is based both on their perceived needs and what we think they need to know based on our experience in the industry.
I think the biggest challenge we’ve been facing for the last two years on an ongoing basis is identifying and recruiting people with the appropriate skills from a technological and communication point of view. But fortunately in the last year we’ve had some luck in that regard.
I think that’s probably going to be an ongoing challenge, however, and it may be the biggest challenge because, honestly, particularly with the way things have been going for us since the economy started recovering after the meltdown, we haven’t really had a whole lot of other challenges. I mean, there’s always a challenge to make sure your marketing remains fresh, your product remains fresh, the features are there, your customers are happy and your tech support is in place.
It’s crossover skills. We’re definitely looking for technical people, but technical from not just the software engineering perspective, but also those from the implementation/consulting, hand-holding, user interaction perspective.
We’re being assertive because we’ve created a little bit of a high barrier to entry for ourselves. We actually insist that our technical people understand, to some degree, the businesses in which our software is used, but we don’t actually hire an implementation consultant if they couldn’t go into a whole sale distribution company, work in the warehouse and be a value employee. Similarly, all of our developers have to either know or be willing and able to learn basic accounting and basic bookkeeping.
That really depends on what you define by success. My definition of success is strong customer satisfaction and customer retention. The latter makes the former implicit. The golden standard for any company that’s generating revenue from customers is that you’re not only keeping customers happy, you’ve got to make them ecstatic. You’ve got to make them so excited to be your customer that they would never think of moving away.
So if you take that into account, the definition of success is that you have to actually understand what customer service and customer satisfaction is. Not the lip service a lot of companies pay; you have to really get to know your customers, understand their business, not just other user software, but their whole business. That also means you have to be able to take feedback from your customers and reflect that in your software so they can see you’re actually listening to them.
You also need to know when to walk away, and I think that’s a mistake a lot of companies make. When you’re not a good fit, if your software is not right for their industry, or there’s a philosophical difference between the way you do business and the way they want you to do business, you need to walk away. A bad sale is worse than no sale, and that’s what you need to realize to be successful.
I think we’re going to see the onset of mobile devices. There’s already so much more that you can do to interact with your ERP system using mobile devices, but that’s going to be built upon a whole lot more. I think that’s one of the big opportunities, and obviously a challenge for vendors who are unable to respond quickly from a development point of view and from a strategic point of view.
One of the things we all have to recognize in the ERP business is that in the next X amount of years–whether X is five, 10, eight or whatever–but in the next X number of years the number of ERP users who will be using a keyboard are going to diminish dramatically. We need to be aware of that. A lot who are sitting at their desks right now with keyboard and mouse punching in accounting entries or transactions, they’re not going to be doing that in a few years from now. They’re going to be walking around with a mobile device.
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