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Scaling Down Software For the Midmarket

Midmarket customers still have big-time needs
By Carolyn A. April
Tuesday, August 12, 2003

Like many solution providers that sell software to midmarket companies, Carrier Logistics has gone the extra mile and then some to become a domain expert for its transportation-industry customers. For 31 years, the Tarrytown, N.Y.-based independent software vendor (ISV) has immersed itself in the unique business processes that govern a subset of the trucking industry known as "less-than-truckload," a market in which small shipments of goods are consolidated onto trucks as they wind their away through multiple stops on the broader trip from point A to point B.

Going the niche route has panned out quite well for the midmarket ISV, which sells a soup-to-nuts application solution--built and updated on Progress Software's platform--that automates nearly every aspect of the less-than-truckload operation from order placement and pricing to tracking, delivery and payments. The solution plays to midmarket needs, including being highly customizable and flexible enough to give users a choice of a GUI or no GUI.

Ken Weinberg, vice president of marketing and a principal founder of Carrier Logistics, says that selling software to the midmarket does differ from working enterprise accounts. Primarily, midmarket sales are all about honing your people skills and gaining insight into how your customers' businesses run. Then you figure out where software fits into their overall goals. In many cases, the small and midsize companies he encounters seek the same degree of software functionality as large enterprises; the difference is that they can't handle the implementation, support and maintenance in-house, Weinberg says.

That's where VARs and ISVs can come in, really roll up their sleeves and offer the midmarket personalized service. You can't take the cookie-cutter approach to midmarket technology jobs, Weinberg warns.

"This isn't buying an Excel spreadsheet," he says. "I know transportation. Microsoft can't come in and say they have the tools to address my customer's needs. My customers want apps that are right for them."

All Eyes On the Midmarket
The Microsoft machine might not be steeped in the ins and outs of the less-than-truckload industry, but that is not stopping the software giant from running fast after such midmarket companies and the partners who cater to them. The company's very public push into the applications arena has come via the acquisitions of Great Plains and Navision for their popular financial and ERP apps, as well as internal development of its own CRM package.

And the folks in Redmond aren't alone in this quest. Enterprise-software vendors such as Oracle and SAP and infrastructure giant IBM have identified the midmarket as their next untapped frontier, fueling a flurry of major technology and marketing initiatives, such as IBM Software's lineup of Express products and SAP's SAP Business One.

It's no wonder: Unlike the battened-down enterprise that spent lavishly on software in the '90s and is now tapped, the midmarket represents a new reservoir of opportunity. This is a space inhabited by countless companies that have not upgraded their financial applications or ERP in years; they are limping along on dated systems and proprietary infrastructure that is just ripe for an IT overhaul or Web-oriented face-lift.

In addition, these smaller companies also often lack--or eschew, in some cases--an in-house IT department, and therefore look more than ever to VARs and solution providers to aid with technology decisions and implementation, outsourcing and hosting.

"For the midmarket, it's all about a solution sell with products that typically have a smaller footprint and meet a specific business need," says Jon Derome, industry analyst at the Yankee Group, Boston. "They also want a fixed price and low overhead on service agreements."

A number of software technologies are bleeping across today's midmarket radar screen. Not surprisingly, security solutions top the list. VARBusiness' State of Midmarket Spending survey found 68 percent of respondents singling out antivirus software, and 60 percent citing firewall and intrusion-detection technologies as their top software priorities for 2003. Other key spending areas identified by survey respondents include server and desktop operating systems, databases, accounting and ERP applications, antispam software, disaster recovery, and office suites/productivity applications.

When it comes to software trends, a lot of midmarket buzz is happening around portals and e-commerce front-ends. It seems that the Fortune 1,000s clamoring to get their businesses onto the Web and link electronically with partners and customers now is filtering down to midsize firms. In fact, according to VARBusiness research, more than one-third (36 percent) of midmarket executives polled say their companies offer an extended enterprise network to customers, suppliers, vendors or partners.

Suffice to say, companies with 100 to 999 employees are eager to see the benefits to be gained from systems integration and automation, including operational cost reductions, supply-chain efficiencies and higher customer satisfaction gained through faster service and multiple sales channels.

VARs and developers can capitalize by crafting solutions that unite the right pieces of technology to extend old systems forward to a Web environment.

"The integration of the front- and back-ends is really where the midmarket wants expertise right now," says Peter Boni, chairman and CEO of Surebridge, a solution provider and application-hosting company based in Lexington, Mass.

One of Surebridge's customers, Chicago-based EA (Energy Absorption) Systems, recently shook off its legacy shackles and standardized on PeopleSoft's software for a range of run-the-business applications needs. The 330-person company, which manufactures highway safety devices and is a wholly owned subsidiary of Quixote Corp., also latched onto another burgeoning trend within the midmarket: application hosting.

Bob Latek, senior vice president and controller at EA Systems, says the decision to go with PeopleSoft came after careful deliberation over whether to go with a tier 2 or tier 3 software player instead.

Latek's initial belief was that a tier 1 software suite, such as PeopleSoft's, would be too massive to implement and difficult to support without an in-house IT staff. But then he was pleasantly surprised by PeopleSoft 8 and its browser front-end, which he lauds as user-friendly and facile at getting data in and out of systems quickly through querying.

And when Surebridge suggested a hosting arrangement, Latek knew it was the way he needed to go. By outsourcing the operation and maintenance of the software, he could focus more energy on applying the suite in ways that helped the business meet its goals, he says.

"Now I drive the software; it doesn't drive me," says Latek, who has contracted with Surebridge to roll out additional PeopleSoft modules at EA Systems, as well as begin migrating Quixote's other subsidiaries over to the suite.

I Want My ROI
EA Systems completed the first stage of its PeopleSoft project, courtesy of Surebridge, in a quick three months. In fact, fast results are an economic imperative these days, so much so that companies hang their technology decisions on what can deliver them the fastest ROI.

The midmarket, of course, is no exception. Midmarket firms have seen the effects of the enterprises' late '90s software binges on SAP and Siebel, and it's not pretty. You either end up with a shelf full of expensive, unexploited software--and a ticked-off CEO--or you face a painful and lengthy application rollout that jams up daily business operations and costs a fortune in service contracts.

It's a headache either way, and for many midmarket firms whose application needs are strictly defined, it's also unnecessary.

"I know what I want a product to deliver to me, and one major goal is that it not disrupt things [when it is implemented]," says Patty Stibbs, practice administrator at the Plastic Surgery Center of Hampton Roads, Newport News, Va., which recently deployed a new patient-tracking automation system courtesy of Austin, Texas-based integrator Ascendant. "I can't afford any implementation that's going to slow down the business."

The surgery center's new solution is based on IBM's Express products and Lotus Sametime collaboration technology (all running on tablet PCs from Hewlett-Packard). The combination enables the company to, among other things, electronically sign in patients, track how long they have been waiting and classify them according to medical priority.

In addition, it's also an employee-communication tool, putting instant messaging into the hands of technicians to improve collaboration and cut down on the overhead paging, which Stibbs says sounded "like an airport."

Stibbs says Ascendant's solution is meeting all of her prerequisites, including being simple to use.

"I really needed the software to be user-friendly from an administrative point of view, so that I could go in and make policy changes and not have to call someone to do it," she says.

Such targeted, project-oriented solutions, like the one completed at Plastic Surgery Center of Hampton Roads, are where the software dollars are being spent in the midmarket today. Keen to this, PeopleSoft and SAP, for example, have tailored their suites to be sold and implemented on a per-module basis, so that users can buy only the piece of functionality they need.

Hand in hand with such projects, however, comes the need to integrate. Whether it's tying the new solution into older, siloed software packages or extending systems to the Web, integration and messaging technologies have become a new area of urgency--a finding backed by VARBusiness research (see "Web Wares," right). Web services hold appeal in this regard because of their relative simplicity, low cost (as compared to a full-blown EAI solution from the likes of Tibco or webMethods, for example) and open-standards nature.

Tim Huckaby, CEO of InterKnowlogy, an integrator and Microsoft partner based in Carlsbad, Calif., says the midmarket companies he sees tend to be more agile--less hog-tied than large enterprises by 20 years' worth of capital investments in hardware and software licensing.

That opens the door for innovation at the software level, a willingness to try new technologies such as Web services and, by extension, Microsoft's .Net platform.

"In the enterprise, you see a lot of CIOs who say, 'I would love to switch to .Net, but see that big piece of iron over there?'" Huckaby says.

But for midmarket companies without all the baggage, .Net can be a "no-brainer" choice, contends Huckaby, who says that software developers have a golden opportunity to drive technology shifts within this particular market segment.

The development appeal of .Net to the midmarket lies in the expediency with which applications can be written, Huckaby claims. Midmarket companies typically do not have in-house Java development expertise, nor do they have the financial wherewithal to hire J2EE integrators to build applications or buy the J2EE infrastructure.

CIO Technologies, which provides order-fulfillment software services to companies that sell products via television infomercials, recently extended its COBOL-based flagship application as a set of individual Web services. Pieces of the core application's business logic have been extracted and are now available to its customers as services over the Web, representing various processes such as "ship to" and "get customer address," according to Gunnar Fredlund, president and CEO at CIO Technologies, Santa Barbara, Calif.

Web-services technology, along with IBM's DB2 Express, have enabled his company--which used Acucorp as a solution provider on the project,to take its operation to the Web without needing to rewrite the entire application or employ a large internal IT staff to manage it all.

"And it has allowed us to hide the complexity of what we are doing for our customers," he says.

That's the bottom line for many midmarket companies: Technology is merely a tool for achieving a business goal, not an end in itself.

"When you are in the midmarket, people want to talk about how they can solve particular business problems that they have, not about technology," says Sam Fatigato, president of Ascendant. "Technology just isn't the primary dialogue that you have with these executives and managers."
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Copyright 2001 CMP Media LLC.

   
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