Reference no: EM132697548

Plex Systems Cloud Community Founded in 1995, Plex Systems developed out of a project initiated at an automotive supplier. The company has expanded its customer base and develops software for a variety of manufacturing companies. In particular, Plex provides a complete, cloud-based ERP solution for manufacturing companies. Plex moved to cloud computing in 2000 and developed its cloud strategy using the multi-tenant model versus a hosted environment. In a hosted environment, a separate system is created and managed for each customer, while in a multitenant model, there is only one system and each customer is a tenant in the system. Plex chose this approach because it wanted to leverage customer enhancements. Because there is only one copy of the Plex system, whenever an improvement is made to it, the update is available to all tenants. Plex makes sure enhancements are designed to add functionality that might be valuable to multiple customers, but customers are not required to adopt every update. Customers can choose whether or not to adopt a change through simple configuration settings. While manufacturing environments are complex, Plex decided that users needed a simple interface design for the shop floor. The simple interface makes the software easy to use. In addition, the interface is configurable so individual users can organize icons and buttons and control them with user authorizations as they are provided with Plex's screen building tool. A sample Plex screen is shown in Figure 8-6. Source Line: Plex Systems. FIGURE 8-6 Sample Plex screen (continued)

Another unique feature of Plex's software is its pricing model. Many ERP companies price their software on a per-user basis. Plex saw a problem with this approach: it encouraged companies to limit the number of people who would interact with the software. Plex, however, wanted to encourage customers to use software. In addition, the company wanted to match its pricing to the real costs of transactions processed. In a seat license model, a customer may minimize users but have the same volume of transactions as a customer with many more users. Plex prices its software based on the size of the business, whether measured by company revenue or total number of employees. Plex adjusts the amount of the subscription on a yearly cycle. If a company suffers a downturn in business-and its revenue or number of employees is reduced- then its subscription is reduced. Of course, if the customer grows, so does its subscription. Plex has observed an interesting phenomenon with its customers. At first, new customers are hesitant to use a cloud system-they are concerned about data integrity when all customers reside in a single system. But after a while, customers typically realize that other Plex customers actually form a community, and collaboration within the Plex community provides value. Rather than being a software company that is sales and marketing driven, Plex has become a company where users, and the user community, directly drive innovation, and all customers benefit.

Questions:

1. How will SaaS affect large ERP companies such as SAP and Oracle? Will their size and research capabilities allow SAP and Oracle to gain dominance of the SaaS marketplace, or will ERP systems be provided by a growing number of small companies, such as Plex, each providing specialized ERP packages specially tailored for specific industries?

2. Will Fortune 500 companies eventually leave SAP ERP for SaaS systems? Will they adopt SaaS products from smaller providers? Will they use Business ByDesign? Or will companies like SAP and Oracle migrate their current large ERP packages to an SaaS environment?