The push to tie the distributed design chain with run-the-business applications has segued into the software as a service (SaaS) space as PLM purveyor Arena Solutions and ERP software developer Intacct Corp. late this week disclosed plans to integrate their hosted application services.
The rationale to integrate the two SaaS offerings was driven by multiple motivations, executives of both companies said, in separate interviews. Both vendors share a significant number of customers, some of whom have expressed interest in tighter connectivity between their PLM and ERP solutions.
Also, the two Silicon Valley companies (Arena of Menlo Park; Intacct of Los Gatos) are well acquainted with one another. Both are acknowledged leaders in the SaaS space (Intacct is IBM's only partner in the on-demand accounting and ERP segments; Arena pioneered SaaS in the PLM business). Moreover, Arena practices what it preaches: it relies on Intacct's on-demand enterprise application service to run its business.
The two companies have not announced any customers of the integrated application service, nor did they say when it would be available. Pam Kostka, Arena's vice president of products said Teneros Inc., a Mountain View, CA provider of "application continuity appliances", is one customer that has expressed interest. Application integration between the Arena and Intacct solutions is primarily enabled by standard XML and web services built into both application suites. "That's the beauty of software as a service," Kostka noted.
The SaaS market is perhaps the lone bright spot in the enterprise applications market, driven primarily by small to medium sized businesses (SMBs) that are seeking lower cost, end-to-end hosted applications with which to run their enterprises. Though fraught with customization challenges and data security concerns, the SaaS model offers SMBs lower IT overhead costs, mainly by allowing them to save on maintaining infrastructure and application upgrades. Customers pay monthly subscription fees for applications hosted and updated by the vendor.
Worldwide SaaS spending reached $4.2 billion in 2004 and is expected to grow 21% annually to $10.7 billion in 2009, according to research conducted by International Data Corp. (Framingham, MA).
The alliance between Arena and Intacct makes sense, noted Ed Miller, president of PLM consultancy, CIMdata (Ann Arbor, MI), because of the stress manufacturers, large and small, experience in tying together their PLM and ERP applications. Conservative elements within the manufacturing industry, however, have been slow to embrace SaaS for a variety of reasons. Chief among them: technological limitations that prevent broad customization and concerns that proprietary data can't be locked down when it resides outside corporate firewalls.
Manufacturers can get beyond some of this. Arena Solutions, for instance, can be reconfigured to meet non-standard business requirements, Miller pointed out. Intacct customers can create customized fields and screens using its exposed API, noted Aaron Harris, the company's director of application engineering.
Data security and privacy concerns can also be dealt with, said Robert Jurkowski, Intacct's CEO. "We are providing the capability of a Fortune 50 data center with back-up, recovery, mirroring and privacy services," he said, alluding to his company's hosting relationship with IBM. "We're doing something that no company -- with limited resources -- could do for itself."
Regardless of the tactical and perceptual challenges, manufacturers must focus on how to apply new applications -- be they packages or services -- to facilitate business process improvements. "Whether it's hosted or not, [manufacturers] need to know what business process they want to take advantage of," Miller said, noting that the real value of any PLM offering is in improving design and development collaboration across internal departments and with partners and suppliers.
And that's what this PLM/ERP alliance hopes to allow customers to do, Arena's Kostka said. Joint Arena and Intacct customers using the integrated solution will be able to more proactively manage their collaborative design chains and procurement/supplier relationships. An Arena user, for example, will be able to manage a bill of materials and see all associated item maps, including designs developed outside the company. He could also look at third-party supplier's costs relative to those designs by opening a tab within the Arena application to pull data from Intacct's ERP application service to make sure design expenses stay within business objectives, she explained.
Both companies intend to partner with a variety of SaaS vendors to "build an ecosystem" of on-demand application services, Jurkowski said. "Mike [Topolovac, Arena's CEO] and I share the same view of bringing together building blocks to provide better end-to-end solutions to manufacturers."
Kostka said her company already integrates with many traditional ERP packages and foresees relationships with other SaaS players like ERP provider NetSuite and MRO procurement application service purveyor Ketera Technologies. "It makes sense for all of us to get together and form the equivalent of Oracle and offer best-of-breed SaaS," she said.
Arena will charge a nominal one-time fee for the PLM/ERP integration. Intacct, however, said the integration would be covered by customers' existing per-seat pricing. "We're not going charge extra," Intacct's Jurkowski said. "We're making it easier ... so customers will not have the burden to figure out how these applications work together."