IBM i ERP Vendor Finds Success With SaaS

April 6, 2015 Dan Burger

As a topic of discussion, software pricing is an incendiary device. But a flame without fuel goes out quickly. And for a lot of companies, status quo means no open flames and don’t even think about throwing that wood on the fire. There’s another term for status quo. It’s called complacency. The opposite of complacency is not change; it’s investigate. In terms of software, that means taking a look at software as a service.

Software licensing, support, and maintenance costs can be pretty steep, particularly the up-front licensing charges, which are often a point of fixation for customers. There’s a wider view for those who slowly turn around and look in all directions. Software as a service (SaaS) attracts admiring glances because it eliminates the ugly initial costs of licensing, but over time the cost is likely to be greater. That amount of time is usually between three and five years. But that’s not the end of the story. SaaS is not just about software. When we’re talking about a major application, a reduction in server hardware and the salaries of the people who manage that equipment are part of the equation. For some companies, it is the part of the equation that drives the investigation forward.

AgVantage is an IBM i enterprise resource planning (ERP) software vendor with 12 years of SaaS experience. Its niche market is primarily agri-business with applications that include general ledger, financial and inventory reporting, accounts payable and receivable, time and attendance, and payroll. All the backend applications run on IBM i on Power Systems, although Windows applications are a growing part of the application packages the company offers. The company also sells IBM Power Systems hardware and the performance management tool from Midrange Performance Group.

Fifty percent of the companies using AgVantage ERP are buying it on the pay-as-you-go service model, running on a hosted environment in the AgVantage data center. In the past five years, every new customer, except one, has chosen SaaS over the traditional licensing model. That’s a big deal for AgVantage and you can bet it’s a big deal for the companies that have decided that SaaS makes sense for them.

“Mainly they like this because they no longer have to look after a system. There’s no nightly backups, no applying PTFs–not only our software, but IBM PTFs. And having disaster recovery is a big issue,” says Brian Belcher, a systems analyst who has spent 15 years at AgVantage.

“Companies don’t really save in terms of hardware cost comparisons of on-premise versus hosted services. The savings is realized with reduction in staff needed to run the hardware that’s no longer needed. The staff can be more focused on business than on IT,” Belcher says. “One of our larger customers doesn’t really have an IT staff. Everything is outsourced. There’s one guy who handles IT, but he is doing it part time along with other business responsibilities. They have services for their networking, email, and their software is hosted here. The company went through some mergers and no longer wanted to support an IT department staff.”

The shift in thinking about replacing on-premise IT with service providers has led to adjustments on the application development side. Software customization, for most ERP vendors, was very common ten or fifteen years ago. That has changed for AgVantage. With half its customers selecting SaaS, few are maintaining an in-house development staff, which means a greater dependence on AgVantage to provide the tweaks and enhancements. It has raised the level of customer-focused development, Belcher says.

While some organizations would describe their vendors as totalitarian dictatorships, it works more like a democracy at AgVantage, according to Belcher.

“At our annual user conference, customers tell us what they want to have built into the software. Customers vote on the requests to determine priority. We base our development off those recommendations,” he says. “This has been a factor in reducing customization at the customer level. A lot of our customers don’t have a development staff that tweaks our software. This isn’t like a JD Edwards shop where there’s a development staff making changes to the code. We do all the changes and enhancements. If a customer wants something customized, and it doesn’t get voted as a priority or they don’t want to wait for the next version of our software, they sometimes pay to have that customization done by us or someone we recommend. This is happening less and less though.”

Many of the customer requests are related to industry requirements or financial auditing standards. Some are government mandated, but more often it is a matter of best practices. Security is a huge factor. The accounting regulations enacted by the Sarbanes-Oxley Act that apply to public companies are being adopted by many private companies on their own accord.

“We have to make changes in how things are secured in our environment,” Belcher says. “The i needs to be secure and the apps need to be secured. There needs to be audit trails and the financial executives need to be able to see exactly what is going on.”

Nearly all of AgVantage’s customers running in SaaS mode run in a shared environment, while a few large companies have dedicated partitions. AgVantage manages its approximately 80 customers within eight partitions using dual VIOS servers for redundancy. It has IBM PowerHA in one partition for customers that require their servers be available at all time. The shared partitions are all set up with disaster recovery capabilities.

Mobile application development is another customer-driven priority. They are being developed in PHP and .NET without a connection to the i in most cases.

“Not all our software runs on IBM i. Some runs on Windows, but the info that is gathered gets transferred back to the i. We are getting into more Windows applications for users who are out in the field and those who are making deliveries. We also use Windows apps for our point of sale. These are areas where there is a lot of employee turnover, so the system needs to be easy to learn, easy to train,” Belcher says. “Our primary data source is DB2 on i. And all apps eventually touch the i.”

Five years ago, all AgVantage applications displayed with green screens. Now there are PHP front ends on the green-screen apps and Windows apps for non-technical people. And the programming staff at AgVantage is mostly cross-trained to do development work in all three environments–RPG, PHP, and .NET. Green-screen applications are still in use and will be for a long time, Belcher says, because they are effective and productive just the way they are.

The company’s latest release, AgVantage Version 8, is programmed for IBM i 7.1 and Belcher is setting up a development environment with 7.2.

For SaaS customers, that means the features and functionality of those modern releases are available to them. Of course, companies that continue to buy software licenses have that option as well, but they’ll not only be buying the latest version of AgVantage ERP, they’ll be purchasing software maintenance and probably new hardware that runs IBM i 7.1. And they’ll have paid staff to run that hardware.

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