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When Unit4 stepped foot in Asia-Pacific years ago, it was looking for new sources of growth after its home turf in Europe was hit by a multi-year debt crisis.
Its foray into the region has turned out well so far, going by its double-digit growth across a handful of key markets including Singapore and Australia, where its enterprise resource planning (ERP) software is being used to manage payrolls and corporate budgets.
Jack van der Velde, Unit4’s senior vice-president and regional president for Asia-Pacific, attributed the firm’s success to its ability to enable business users to tweak their software on their own rather than rely on consultants, turning the traditional ERP business model on its head.
In an interview with Computer Weekly, Van der Velde talks up Unit4’s efforts to grow its regional footprint, how it is punching above its weight in a market dominated by the likes of SAP and Oracle, and its strategic partnership with Microsoft.
How is Unit4 doing in the Asia-Pacific region, and what is it doing to grow its footprint in the market?
Van der Velde: Unit4 in Asia-Pacific is quite new. We are about 35 years old, and for the past 25 years, we’ve been operating mostly in bigger countries and economies in Europe. It was only in the past 10 years that we started looking at the North American and Asia-Pacific markets.
We’ve been acquiring businesses in APAC that provided us with growth on the back of our acquired customers and products such as Prosoft. I started here about four years ago, as part of a transformation, because the company was publicly listed on the Euronext stock exchange and was taken private by US-based Advent International, one of the biggest private equity firms in the world.
Advent looked at how the business could improve and what markets to focus on. And I think in that sense, Asia-Pacific, like North America, was seen as a growth market, as you would probably recall four or five years ago, the economic crisis was hitting Europe harder than the rest of the world.
So far, we’ve been doing quite well in Asia-Pacific. We’ve had 25% year-over-year top line growth, and we’re increasing our profitability as well. From a strategic point of view, we sell Unit4 Prosoft in the HR payroll space, and we have a cloud-based ERP product set targeting the office of the CFO. We also have applications that cover a specific area of ERP, and they are Unit4 Financials, PSA Suite and Prevero, a corporate performance management [CPM] suite for budgeting and planning.
While the business on the finance side grew a bit faster, the majority of our business in Asia is still HR [human resources] payroll. We set out to do a few things in Asia.
One, we see growing regionalisation of businesses in Asia which require localised software with specific characteristics to support regional expansion. The localised software needs to, for instance, share the same database so they can do reporting wherever they are.
Jack van der Velde, Unit4
Unit4 Prosoft does this very well, with 10 localisations for all the bigger countries in Asia. Its security architecture also allows us to have one engine that can be deployed across those 10 countries in different ways, depending on the customer environment.
We also have this strategy called “cloud at your speed”, which means that depending on customer requirements, we can deploy the software as a service [SaaS] – but we could also deploy it on-premise in various combinations.
That has proven to be a very good strategy because not all countries in Asia are on the same cloud maturity level. Some of them are very cloud-savvy, like Singapore, while others don’t have the necessary infrastructure or trust in cloud services.
Our other strategy is to focus on Australia and New Zealand for our cloud ERP software, which is specifically targeted at service industries such as professional services, government and education. Plus, our self-driving technology enables users to offload a lot more tasks than traditionally ERP do.
In Australia, 85% of people work in the service industry. It’s a service-based economy and slightly more mature than the rest of production-oriented Asia. So far, we’ve been growing quite rapidly, gaining market share in Australia. But of course, we’re one of the smaller players among ERP and cloud ERP suplliers so it’s easy to gain market share.
In terms of your market wins, are you looking at greenfield markets? Or are you looking to supplant some of the other players in the marketplace? Do your customers typically switch from another supplier? Or are they using ERP or HR tools for the first time?
Van der Velde: It depends. The market situation in each country is different. In Singapore, we still have customers that don’t have systems in place, but there aren’t a lot of them anymore. It’s more like a replacement market. In Australia, everything is already automated so it’s a 100% replacement market.
Then there are also customers in countries like Malaysia, even in Hong Kong, that have requirements to automate processes that aren’t automated yet. It also depends on the domain. For cloud ERP, there are definitely organisations in Singapore that don’t have it, but most have HR payroll systems. For CPM, there are a lot of companies that don’t have budgeting and planning tools, and are doing things manually with spreadsheets and composite processes.
What is your typical customer size? Are you looking at the mid-market segment or are you also targeting larger firms?
Van der Velde: We do have some very large enterprise customers, but they usually operate on a regional, not a global, scale. I’d say most of our customers are mid-sized businesses. That’s where we feel comfortable as well. It’s also a good fit from a customer perspective because the customer needs to feel that they get the right attention.
If we were to go to very small companies with a more direct approach, we could end up with unhappy customers because we also have other bigger customers. The same goes for the big cloud ERP companies that want to be successful in the midmarket – they might struggle as well.
So for us, I think there’s a sweet spot in the middle. And of course, we try to differentiate, but mainly in the HR payroll segment where we address the needs of certain markets. We do this through an ecosystem with products that partners can also add value to as we enter industries and markets that we wouldn’t be able to do so on our own.
Most cloud ERP suppliers tend to have limited customisation options. Some companies find that some cloud ERP applications are inflexible in meeting their specific needs. They often find themselves going back to the code themselves or to their systems integrators to customise the software. What is your take on some of these potential limitations of cloud ERP applications?
Van der Velde: It’s definitely an issue in the market. Flexibility and scale don't usually go very well together. We're quite lucky that Unit4 Business World, our ERP product, was a SaaS product before anyone knew what SaaS meant – even us – because we built it 35 years ago for the Swedish government initially as a shared service.
We built the product so that the Swedish government’s shared service centre could meet different requirements from one platform. So we’re very happy and lucky that the Swedish government had this requirement so early in time.
Today, we have an infrastructure and architecture very well-suited for SaaS and offers flexibility through what we call a post-implementation agility toolkit. This is key because customers need to be able to change, and a system that does not care for that change is basically not usable and will be replaced eventually.
The post-implementation agility toolkit helps us in multiple ways. Besides providing flexibility for customers, it also enables us to be sustainable as an ERP software supplier. It also lets us offer the lowest TCO [total cost of ownership] in the market because business change leads to technical change, and technical change is the most expensive activity in any ERP investment. If change is not easy and you need a lot of coders and consultancy services to make the change in a system, your TCO will increase.
That said, there were core areas of our system shared by all our customers that could not be customised. To solve that, we’ve just launched something called an extension kit that allows partners and customers to go very deep into the system to make the changes.
So is there still a role for partners to help your customers in whatever customisation they need as well?
Van der Velde: Absolutely. What we are saying is basically aimed at enablement of the customer. What we want is to be the cloud ERP with the lowest TCO – and we have the toolset for that. The more the customer can change things themselves, the less cost they will incur, but not only because they can save on consultancy fees; they can also minimise disruption because if a company decides to acquire another firm or restructure, those changes need to be reflected in its ERP system.
Now, those changes can be made by a business user with our post-implementation toolkit, while with a lot of other cloud ERP suppliers, you need to change the system – at least some configurations – using consultants. We try to enable the business user to make the changes themselves and that’s how we want to keep the customer in the long term.
Jack van der Velde, Unit4
The downside of that, of course, is that there is less technical business after implementation for consultants. This is typically a problem for suppliers with large partner ecosystems built 20 years ago, because those partners now fight for everything they can do, or can still do, in the ERP world.
Unit4 has always been very self-sufficient with a large professional services team of our own. In the past five-plus years, we’ve been building our partner ecosystem that is very motivated and sized to the work we have in our landscape. That also means although there’s less work after implementation for partners and a lot less competition, which means our partners are still profitable and that keeps them with us in the long term.
This is how we run our business – we need to be smart because we are not the biggest supplier.
The other thing I wanted to ask you was about your datacentre footprint across the world. Can you share more about that?
Van der Velde: We have a partnership with Microsoft. I think, interestingly, Microsoft sees us as one of their most important ISVs [independent software vendors]. And they talk about that at their own events, at our events, and we talk about Microsoft as well because it’s important to us. It’s a win-win partnership. What we try to do is create business outcomes for our users.
Microsoft talks a lot about artificial intelligence [AI], cognitive learning, and all the location-based stuff today. They have created a toolset that can help build software for customers to automate things that traditionally couldn’t be automated.
We were one of the first ISVs that said we were going to use their technology, not build it ourselves. And to our customers, that means that we can be faster and quicker in rolling out innovative functionalities and we use the Azure toolset for that.
Our software sits on Azure, not only for the service, but also for the use of those innovative technologies. Two years ago, we started using the Azure availability zones in Melbourne and Sydney. In 2017, we also launched the Singapore instance.
But at the same time, Microsoft also uses the same capabilities in its Dynamics 365 ERP software. So do you think that you’re competing with them in some way? Do your customers see enough differentiation in your products to not consider Microsoft’s own cloud ERP offerings?
Van der Velde: Well, we do compete once in a while and that’s healthy when the requirements of the customer can be served with solutions from both Microsoft and Unit4. But I don’t see that as a problem honestly. It’s not that we are reselling Microsoft’s technologies – we build Unit4 specific technologies in a way we think we can serve the customer best. I think that’s where we compete and differentiate. We can also innovate at a much faster pace because we don’t have to build everything ourselves.
I noticed the markets that you have a strong presence in are typically mature markets. What about developing markets in Asia like Indonesia?
Van der Velde: I think for Unit4, there’s a lot of growth potential in Asia, but it’s also a matter of making decisions in terms of what we want to do now and how good we are in a market before we move on to the next one.
Like every company, we have limited resources and we need to make sure that we have some sort of scale before we go into other other markets to avoid the risk of spreading ourselves too thin.
We do have a strategy where we decide the most interesting countries and verticals for us to go into. So, our focus for ERP, like I said, is the markets where service industries are big, so Singapore and Australia are interesting. Indonesia is interesting too and there are more markets, but let’s make this a success first before we go into those markets.
My last question is on the Unit4 platform itself. Have you opened up the platform to third-party ISVs for them to innovate and create value-added offerings for your customers?
Van der Velde: Yes. We’ve just started that, so it’s new to us. Our partners can already extend the software through a specific toolset, but it’s a bit cumbersome as they need to be certified and trained. We are going to make that a lot easier and that’s why built the extension kit available since March this year. We are going to build in more capabilities in the extension kit over the next couple of years to make sure other software vendors can easily build on top of what we have.
Read more about ERP in APAC
- While cloud-based ERP applications are more widely adopted in the APAC region, some companies are still hanging on to on-premise systems that remain core to their business.
- By adopting cloud-based ERP software, Australia’s Plaut IT was freed to focus on its customers rather than its computers.
- SAP now counts companies such as China’s Ameco Beijing as clients, and it is also going all out to address hitches that stand in the way of wider adoption of its S/4 Hana software.
- NetSuite will deliver its suite of cloud-based business applications through Oracle’s datacentre in Sydney, as part of its plans to expand its footprint in the APAC region.