Epicor’s Hidden Potential: How it could move beyond the mid-market
Looking at Epicor Kinetic, it's easy to assume it caters solely to the mid-market and discrete manufacturing companies, a perception reinforced by a visit to their website. However, a closer look would reveal that Epicor not only plays in the tier-one marketplace but is also strong in the ERP for Service-Centric Enterprises market, boasting a financial offering that matches the manufacturing piece.
Yet Epicor doesn't even make an appearance in Gartner’s analysis of Service-Centric ERP systems though its offering surpasses that of many of the companies suggested by Gartner, raising the question: Why isn't Epicor capitalizing on its potential in the Service-Centric ERP space?
The answer is simple: they don't recognize the potential of their financials, the lack of awareness stemming from a deficiency in recruiting specialized financial consultants, forming strategic business partnerships, adopting an effective sales approach, and a relentless focus on manufacturing.
Looking deeper into Epicor’s Chart of Accounts (COA), one quickly realizes its flexibility, designed to be multi-company, multi-currency, accommodating multiple books and calendars. Additionally, it provides an excellent mapping solution for companies requiring two or more COA definitions, as seen in Belgium and France for the "plan comptable." Also a robust posting engine that includes a powerful concept in its dynamic segments used to tag transactions that don't require balancing at a high level, such as those involving customers, products, employees, and so on.
However, visits to Epicor's customers reveal a contrasting reality: minimal COA setups and an absence of dynamic segments. The reason for this lies in the company's manufacturing-centric focus. The mantra is to keep the COA simple and prioritize the swift setup of manufacturing processes. But subsequently, this creates challenges for the CFO at go-live. The team must navigate through multiple tables, constructing Business Activity Queries (BAQ) that require technical expertise. This complexity extends to enabling customer and product information and has little hope of reconciling projects to the project subsystem due to the absence of dynamic segments in the General Ledger (GL).
If you were to ask any CFO, their preference would undoubtedly lean towards consolidating everything in the General Ledger (GL). After all, the GL serves as the heart, lungs, and soul of any ERP system. However, this approach does require a robust real-time reporting solution to roll up these dimensions in-memory, swiftly.
Contrast this with a leading tier-one player, Workday, which invests significant effort in adding value to its chart of account design using a similar system to dynamic segments, known as “work tags”.
Minimizing the COA with only those accounts requiring double entry at a high level maintains simplicity while tagging all transactions that don't necessitate double entry as additional fields at the transactional level, with the supposed advantage of then seamlessly rolling up transactions into various dynamic combinations.
However, the keyword is "supposed", as Workday encountered challenges in constructing their real-time reporting solution, something they ultimately resolved through the acquisition of Adaptive Insights. However whilst Adaptive excels in planning and reporting, it utilizes a staged database, the implementation intricacies of which, pose a significant hurdle: the 60-plus tagged dimensions can never be accurately mapped. Consequently, after an impressive demonstration, customers often find it challenging to realize the promised benefits of these work tags.
Epicor too adopts a staged database approach for reporting, and again the same challenges arise when mapping numerous transactions. Consequently, customers lose the potential of the otherwise excellent dynamic segments, leaving them to concentrate solely back on manufacturing.
This is precisely where FastClose steps in, presenting a solution to address these challenges. FastClose provides a flexible real-time reporting solution suitable for both Epicor’s on-premise and public cloud offerings. Notably, it capitalizes on dynamic segments, offering much-needed reporting flexibility for Epicor users.
The positioning then of Epicor as a mid-market ERP solution is puzzling considering it outperforms other tier-one solutions and its extensive adoption by tier-one companies. Utilizing the Microsoft SQL database, a recognized tier-one database, and boasting business processes that stand on par with any tier-one solution, Epicor does exhibit the capabilities expected from an enterprise-level ERP.
So why is Epicor seen as a mid-market solution? The answer lies in the absence of a significant presence among the Big 5 integrators, coupled with a lack of confidence in their capacity to compete at the enterprise level. Although SAP holds the mantle as the market leader at enterprise level, a closer look reveals a trail of failed implementations, overruns, and exorbitant costs.
The influence of large integrators and consulting companies in the evaluation and selection of ERP systems cannot be overstated. In the early 1990s, SAP formed a strategic alliance with Arthur Andersen, a pivotal partnership for SAP's success. Arthur Andersen not only crafted the Invitation to Tender (ITT) document, reviewed it, and made recommendations but also established an extensive SAP consulting service, solidifying SAP's position in the market.
Reflecting on my role as a sales director for JD Edwards during that era, a notable decision was made to abstain from responding to ITTs from Arthur Andersen as it became evident that companies employing their services were already following a distinct path.
For companies lacking a major consultancy's firm backing, the trajectory often leads them to the mid-market. The rationale behind this lies in the financial constraints of mid-market customers who find it challenging to bear the substantial costs associated with ERP implementation. This positioning sheds light on why Epicor strategically positions itself in the mid-market space.
Workday by contrast has effectively won support from top consulting companies, particularly in the realm of Human Resources. However, when it comes to the financial offering, it’s questionable as to why companies would prefer it over Epicor, especially considering Epicor's successful transition to the cloud. Nevertheless, life is not always equitable, and the momentum and robust marketing of Workday have propelled it to the status of a Rock Star in Service-Centric Enterprises.
So what does this all mean for Epicor? Well, current turnover remains steady at around $1 billion, but to grow, building Service-Centric Enterprises into their portfolio would present a lucrative opportunity. Of course, this endeavor comes with challenges requiring the recruitment of specialized financial business partners and consultants. Embracing solutions like FastClose and maintaining a dedicated focus on their software is essential. Addressing weaknesses such as the absence of non-stock purchasing (critical for commitment accounting), the lack of a dynamic segment in the GL for project accounting, and adopting project enhancement solutions from business partners are manageable tasks. Combined, they would then be able to successfully penetrate this market.
Nick Gomersall: CEO of FastClose Ltd