Epicor’s event was chock full of the difficulties that legacy vendors face plotting a path to a viable future.

Update – Since writing this post I had a long discussion with Epicor execs about their technology road map, positioning and future. I decided to let this post run, but will follow up in the next week or so with some further insights in response to that conversation.

Traditional on-premises vendors have three options given the rise of cloud computing. Firstly, they can do what they’ve always done, enjoy good, but diminishing, revenue streams and spend the next few decades eking out whatever long-tail revenue they can. They can go all in on the cloud, common infanticide on their traditional products, change their internal culture and be part of the next epoch of computing. Finally they can attempt to walk the tightrope between these two worlds with some flavor of hybrid play.

Looking at historical examples, it is interesting to see how this works. Adobe is perhaps the best example of the “all in” strategy and has a strong and growing business, but in order to achieve that they had to jettison their existing on-premises products and business. Microsoft, under its previous CEO, Steve Balmer, attempted this hybrid, software + services model but only succeeded when they too wen all in on cloud based models. The same goes for accounting vendor Intuit who is doing well now that they’ve shifted focus almost entirely to their true cloud-based product.

So a visit to Nashville for Epicor’s Insights conference was a chance to revisit my assessment that a hybrid strategy is one which is doomed to failure. Epicor is an ancient beast, only a year younger than I am. It has gone through various permutations of corporate structure, but throughout that time has been a vendor of ERP and related products. It has a customer base of some 20,000 or so mid market organizations, and the vast majority of those organizations are using legacy products.

But Epicor realizes that the future isn’t in its historical products and is at great pains to talk about being a cloud company. Kind of. In a lunch meeting with Scott Hays, one of Epicor’s product marketing and product management heads, he explained to me that Epicor is all in on the cloud, but then went on to explain that cloud isn’t right for many customers and that there are still many issues which make cloud a no go area. I have to say that this approach, which I liken to a bait and switch one, is something I heard from vendors such as IBM and HP 10 or so years ago, before they too realized that there was no option and cloud-washing wouldn’t cut it.

So while Epicor kind of said the right things, I wanted to get a sense of what it was really doing.

Whither the ecosystem?

The first warning bells went off as I left lunch and took a wander around the solutions hall. I’m a veteran of countless trade shows and one thing that I will say is that expo halls across most vendors are a dazzling expanse of color, light, exciting swag and hyper-caffeinated booth staff. A walk around the expo floor of Salesforce or NetSuite’s conferences sees hundreds of third party vendors pushing their wares. For any one opportunity space, there will be many vendors all competing. This is great for customers as it delivers choice, flexibility and a better chance of an exact fit.

Epicor’s expo hall felt like visiting a step back in time. I would estimate that 90% of the stands were Epicor’s own one, pushing different modules or products it sells. There were a very small number of truly independent ecosystem partners, and they tended to have a little more color, but my assessment, from the expo floor anyway, was that this was in no way a true ecosystem.

Talking to one partner who, for obvious reasons, I won’t name, was illuminating. Said partner is the only one in their space that Epicor integrates with – great for the partner, less-so for the customers. Indeed unlike the NetSuite or Salesforce ecosystems, Epicor actually on sells partner products itself. While some would argue that this single bill approach is easier for the customer, it screams lock in, control and inflexibility to me.

On those hybrid deployment models

At the show, Epicor announced a new deployment model, the dedicated tenancy cloud. This model adds to the existing single-tenancy and multi-tenancy models and gives customers some more control (so long as they are in North America, the only region it is currently available). In contrast to the multi-tenant model, which deploys clients on the same application server and the same database, dedicated tenancy provides each client its own database, with the elasticity of shared application servers. Customers also have a 90 day window to push new updates.

In a Q&A session with Epicor’s CTO, myself and another analyst questioned him about the potential of higher-level technologies such as serverless computing, the public cloud vendors’ machine learning offerings, or private cloud offerings such as OpenStack. None of that really struck a chord. While obviously the CTO was well aware of those technologies, my read is that they are so far from Epicor’s core DNA, that the chances of customers seeing any benefit from them in the near (or distant) future is negligible.

Sometimes the customer is wrong. Period.

Look, I get it. Looking at the range of customers at the event, it is clear that Epicor’s customer base is generally from a particular demographic. One partner I talked to even has a persona that they use within their own organization for Epicor’s customers, “Betty.” It seems that Betty sits in a dusty room at the back of an old-school product or process-heavy business. She is a very traditional soul who likes things to be just right and, since she’s been doing the same thing for 120 or so years, she doesn’t really want to change her operating model any time soon. Indeed just moving on a computer-based system was pretty much a revolution for Betty and any more change is off the menu.

What is a vendor to do, when they have the vast majority of their customer base in the Betty camp? Sorry to say it, but Betty is a dinosaur. While it has become the popular cliché to say that every organization in every industry has their Uber moment coming for it, it really is true. If you’re a small steel mill operator in the Midwest somewhere you might think you’re safe, but somewhere there is a young, progressive entrepreneur who wants to take your business. They’re ready to engage more directly with customers and suppliers, they’re looking to market innovatively, they’re happy to partner on a more granular basis and they have the passion and fire to do it.

And so, if all of those Betty’s are likely to be disrupted in the coming years and decades, Epicor has a problem. By slowing down the pace of its own innovation and move to the cloud, simply in order to make Betty feel secure, they jeopardize their own survival. Adobe, Microsoft and Intuit all saw it and made the hard decisions that cost them in the short term, but built viability in the long term. Betty is always going to bemoan the risks of the cloud, by appeasing her with a watered down message along the lines of “we’re all in on the cloud, but sometimes cloud isn’t right, and we want to support choice, and we need to support old customers, and and and” you’re only doing damage to your own long term interests.

While they claim to be all in, Epicor has 350 cloud customers. As a percentage of those 20,000 total customers that doesn’t even rate. All in is a relative term. And while their recent acquisition of DocStar Software means they have, by default, 1,000 or so cloud customers for that product, content management (DocStar’s space) isn’t a strong gateway product to ERP and hence the core issue remains.

How much carrot, how much stick?

I put this conundrum to Epicor, that of needing to either force customers to move to the cloud or discontinue supporting them. Bear in mind that this is a 40 year old company that never end of lifes product and you have a huge cultural change needed here. I did see a glimmer of hope, being told that, while the company isn’t being too public about it, it is in the process of introducing some changes to support pricing that will, in essence, force customers to upgrade. The cost for supporting the oldest versions of software will be so high as to be similar to the cost of upgrading. It may be an effective strategy, personally I’d prefer something more out in the open?

Customers need to understand that their future survival is predicated on embracing connectivity, a web of suppliers, partners and customers. Mobile access. Real time data. Analytical insights and all the others things that sound like buzzwords but are actual value propositions. Epicor needs to be far harsher in showing their customers their future in the event that they don’t adapt. You’ve got to be cruel to be kind sometimes.

Quit with the tech-washing

In the keynote we had two demos of note, purportedly examples of IoT and augmented reality respectively.

The IoT example saw a small Raspberry Pi-like device connected through Microsoft’s Azure IoT hub and data from the device reflected in Epicor’s ERP product. I had two observations of this demo – the first was that it was pretty basic stuff that I was seeing from vendors like Salesforce many years ago. The second observation was that it was weird that no mention was made that what we were seeing was simply a modern take on SCADA integration which (I assume) Epicor customers have been doing for years anyway. One other minor beef I had was that all it really showed was that Epicor ERP has a working API. Azure IoT hub was doing all the IoT sensing and processing – all that Epicor had to do was open their platform to the external input – it’s a worrying state of affairs if that constitutes innovation.

The second demo was in the context of Epicor University, the company’s training offering. What we saw was labeled augmented reality but what it actually consisted of was the CTO scanning a QR code which then opened a web-hosted video detailing how to perform certain functions in Epicor. Sure he held that video up to his laptop screen to kind of intimate that it was AR, but it most certainly wasn’t. Again, training videos are great, and allowing people to access them via contextual QR code is, I guess, a positive step. but innovative? Not so much.

What’s a company to do?

Epicor hasn’t asked my advice, and I’m not sure they’ll talk to me again after this post. But if they did, and wanted my advice here’s what I’d say

  • Decide who you are: If you’re a legacy company, and your new private equity owners, KKR, are happy to enjoy ongoing, but decreasing, revenue streams, then simply accept that you’re an on-premises ERP product and don’t bother talking about ecosystems, the cloud, or, pretty much, the future. Enjoy your autumn years, you’ve earned them
  • If you want to survive and grow into the future: let go of the dinosaurs, they’ll drag you under as they face their demise: Servicing your existing customers with decades’ old products only slows your own metamorphosis into a modern organization. Sure their revenue is nice to have, but if it cost your long term survival, you need to cut it loose. Give them the option to move to the cloud and if they won’t… let ‘em go
  • Don’t monetize the upgrade path: customers who come over to your next-generation products will pay you on an ongoing basis, don’t try and monetize the process of them moving. If they need help shifting over, give it to them, either through products or services.
  • Build a real ecosystem: let third party vendors enjoy their own revenue streams, allow competing vendors onto the platform. Built an open and broad public API strategy and encourage third party ISVs to build to it. Give the ecosystem plenty of love. For tips on how to do it, look at Salesforce.
  • Understand emergent technologies: Don’t simply pay lip service to machine learning, artificial intelligence, augmented/virtual reality, new approaches towards infrastructure (PaaS offerings, Serverless infrastructure etc). Your competitors will use it for competitive advantage and differentiation – preempt that.

What I want to see next year

I’m fully aware that by writing this post the chances of being invited back to Epicor’s event next year is minimal but, on the off chance that they actually invite this (hopefully) constructive criticism, I’d consider it a success if next year they can show me:

  • Real cloud growth. 350 customers this year, I want several thousand next year
  • A real ecosystem. I want Epicor booths to be less obvious than third-party ones next year
  • A clearer narrative. I’d love to hear a story that makes sense, that wasn’t so full of obvious conflicts and dichotomies
  • More panache in the keynotes. While it is perhaps a little harsh, the level of excitement in the keynotes was negligible. Watch Benioff’s DreamForce event and take the levels up a few notches

Next move is yours Epicor, I’m looking forward to seeing progress.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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