In our opinion, the biggest mistake that companies make when buying a new software solution is that they overbuy software. They buy software that is too complex, difficult to implement, and pay way too much money. This applies not only to smaller companies, but also to large Fortune 500 companies. Don’t make that mistake!
This software market overview will help you better categorize the software vendors so you can focus on the right vendors that fit your company. SoftResources divides the software market into 5 tiers. You will notice that there is significant overlap between the different levels. This is because the software products have become increasingly scalable over the last few years allowing companies of various sizes to grow with the software. We recommend that you look one level above and one level below your target level. This assures you do not miss a bargain buy, but also allows you to see added functionality you might get by paying a little extra. See Software Market Trends or read our Software Selection Blog (focuses on the software selection process) and the Software Evaluation Blog (focuses on the latest news from software vendors) for more information regarding what is happening with the software vendors.
Tier 1 – Enterprise Software
This level of software is for large Fortune 500, multi-location, and multi-national companies. These are complex companies that require complex implementations that usually have to interface with multiple systems. The major players in this market are now SAP and Oracle.
Tier 2 – Upper Market Software
The Upper Market focuses on companies that are still fairly complex and require significant implementation work, but are not as large as the Tier 1 companies. Surprisingly, there are a lot of software vendors that focus on this market. They offer significant functionality typically at a lower cost and complexity than the Tier 1 vendors. If you are a Tier 1 or a Tier 2 company, we recommend that you consider some of the alternatives in this market as they will save you a lot of money and implementation effort. This tier includes vendors such as Infor/Lawson, IFS, MS Dynamics AX, and many others.
Tier 3 – Mid Market Software
The mid-market is a huge market and the software vendors are really focusing on it. Some of the major players you may have heard about include Microsoft Dynamics NAV & GP, Sage, Exact, Infor, Syspro, SAP Business One, NetSuite, and a host of other software. On top of these general vendors, there are a ton of vertical market solutions that focus on a particular industry such as manufacturing (Infor, Epicor, Consona), Distribution (Activant, Infor, etc.), Government (Springbrook, Tyler, New World, etc.) and many others. If your company falls in the Tier 3 category, you have a LOT of options to choose from.
Tier 4 – Lower Market Software
Companies in the Tier 4 market are smaller companies that have outgrown Tier 5 solutions. They require more industry specific functionality, but don’t have a high user count. Software vendors have good solutions for this market with fairly inexpensive software and scalable solutions, such as Sage – MAS 90, Accpac, and others.
Tier 5 – Shrink Wrap Software Market
Frequently called the Small Office/Home Office (SOHO) market, this software costs between $100-500 and is typically bought at the local software store and implemented by the end user. The major players in this market are Sage Peachtree, Intuit QuickBooks, Sage Simply Accounting, Intuit Quicken, and others. Although they have industry templates, these systems do not allow for customization of the software and are not built to have large numbers of users on the system.
You will notice that some software vendors have products that target multiple tiers. For example, Sage has the following products: Sage 50 (Peachtree (Tier 5)), Sage 100 ERP (MAS 90 (Tier 4 and 3)), Sage 500 ERP (MAS 500 (Tier 3 and lower Tier 2)), and Sage ERP X3 (Tier 3 and lower Tier 2). When you talk with vendors that have multiple products, make sure that you are very clear which software product you are talking about. Although they may have similar names, they are completely different products written in different code and with different functionality, so if you outgrow one product you will need to implement a completely different product.