Finding The Sweet Spot
Derek Jenkins was so convinced the mid-range enterprise resource planning (ERP) market would explode, he moved to the United States and founded Edgeware Computers. The integrator will reach $5.5 million in annual sales by catering to customers the SAPs of the world can't reach.
Jenkins was driven to cross the Atlantic Ocean by more than the thought of fresh peach preserves. Once in the United States, he quickly founded Edgeware Computers, Inc. His U.S. company would do essentially what his U.K. company did, only he hoped on a much larger scale.
Founded in 1990, Edgeware Computers sells and implements enterprise resource planning (ERP) systems to companies with $10 million to $250 million in gross sales. These ERP systems affect every business process within a company because data is shared by every department. A customer order for 50 radios, for example, will automatically trigger responses in accounting, manufacturing, warehousing, distribution, and other departments.
While large ERP vendors have focused on Fortune 500 companies, Jenkins' sweet spot is in the mid-range manufacturing market. "Of course, Fortune 500 companies want growth every year. But our customers are experiencing massive growth. Our mid-range customers are expecting 20% to 30% growth year after year. The only way for companies to handle this incredible amount of growth is with computers. That means companies are implementing ERP systems," states Jenkins, president of Edgeware Computers.
Large ERP vendors, such as SAP, are trying to scale down their solutions to meet the demand in the mid-range market. After all, the list of Fortune 500 companies is, of course, finite. Currently, Jenkins is not butting heads with these large ERP vendors. Edgeware Computers has grown steadily to 32 employees and is projecting gross sales of $5.5 million in 1999. The company reported $4 million in sales the previous year.
References, References, References
While Jenkins has eclipsed the sales of his former U.K.-based company, the transition to the U.S. market did not come easily. Companies in the United States differed from their English counterparts in two significant ways. First, U.S. companies were more willing to implement ERP solutions. Second, U.S. companies demanded their solution providers have references. For Jenkins, it was a case of one step forward and two steps back. "We had no accounts when we moved here. I remember sitting in my kitchen and phoning companies as I went through the Yellow Pages," recalls Jenkins. "After about one year, we got our first deal. We did everything possible to make it successful and it paid off. Now, we have about 140 customers in our base."
Integrators trying to break into the ERP market should be warned that selling without references is "damned tough." Jenkins can recall his first sales calls as if they happened yesterday. After setting up an appointment, Jenkins would go in and demonstrate the software and its capabilities. Afterwards, he would present the customer with a quote for the products and services that he would provide. "The very next thing a customer always asks is, ‘Can we see a list of your references?' If you don't have a list, the sale ends right there," says Jenkins.
Eliminate Canned Demos
Demonstrating an ERP product to a potential customer is a complicated task. For the demo to have full effect, an integrator must first completely understand the business processes of a prospective customer. In addition to outlining a company's current business model, an integrator must identify areas of a company that could be improved through the implementation of an ERP system.
Edgeware Computers always attempts to do a customized demo for each customer. This makes the demo much more effective. But, it also requires more work on the part of Jenkins and his staff. "Our competitors typically do a canned demonstration for prospective customers," says Jenkins. "Even if they are selling to a computer manufacturer, our competitors will use a demo involving a bicycle or lawn mower manufacturer." To avoid canned demos, Edgeware Computers will use information supplied by the manufacturer. For example, the integrator's demo includes a company's inventory items, bills of materials, and manufacturing processes.
Combining Core Technologies
Implementing an ERP system requires a great deal of business process reengineering for a customer. It also requires a range of expertise from an integrator in several core technologies. For the most part, Edgeware Computers does its best to apply successful, proven business models to new customer accounts. "Companies often use processes that were implemented because they were easy, not because they were the best processes," says Jenkins. Determining the cost of a manufactured product, for instance, can be done in a multitude of ways. Two of the methods are last cost (price of last manufactured good) and average cost (average price over a period of time). "We discuss all the different ways a company can do costing and the ramifications of each method," states Jenkins. "And, cost is only one item that needs to be discussed. There are hundreds of other processes that need to be evaluated and settled before implementation."
Because ERP systems affect such departments as accounting, manufacturing, and distribution, integrators need to have a wide range of skills to implement these solutions. Integrators must first have the ability to install software throughout a company's enterprise. Also, automatic identification and data collection (AIDC) will likely need to be integrated. For example, bar codes, bar code scanners, handheld computers, and radio frequency (RF) technologies are typically used in warehousing and manufacturing environments. Touch screens are also prevalent in manufacturing arenas to monitor goods as they move through the production process. "These technologies are an efficient and accurate method for getting data into an ERP system. Instead of training employees to manually enter data on a keyboard, they just have to push a button or touch an icon on a monitor," states Jenkins.
Selling To The Mid-Range Market
While targeting the mid-range ERP market has paid dividends for Edgeware Computers, Jenkins is quick to point out that this type of enterprise sale in not for every integrator. Integrators interested in exploring the ERP market should first hire employees with years of hands-on experience. "You need to have people with 5 to 10 years of experience in implementing ERP systems. There is no way around that," says Jenkins. "There are plenty of experienced people. Customers who already implemented ERP systems have employees who have this experience."
Edgeware Computers does not customize the ERP software that it installs at customer sites. Instead, the software is composed of many integrated modules each representing a division within a company. The modules can then be implemented using a phased approach with the entire installation taking six to nine months. "We use Syspro's IMPACT software. It is a modular software, which is no different than most ERP solutions. In most cases, companies are not as unique as they would like to believe. Whether it is Coca Cola or General Motors, they both run their companies in similar fashions," says Jenkins. "That's why a packaged ERP system is so effective."
As the need for mid-range ERP solutions grows, Jenkins' gamble of founding a U.S.-based company will continue to pay off. "We will add 20 to 24 new customers this year," comments Jenkins. "While most large ERP vendors are struggling, our business is extremely healthy. The high-end Fortune 500 market is saturated. However, companies in the mid-range market are really interested in ERP solutions."