9
ERP Marketing and Italian SMEs VICENZO MORABITO, Bocconi University STEFANO PACE, Bocconi University PIETRO PREVITALI, University of Pavia The growing relevance of Enterprise Resource Planning (ERP) has raised much attention in the academic literature, business practice and media. Current literature and thought are primarily focused on two aspects of this phenomenon: the economic and organizational impact of the adop- tion of ERPs inside a firm, and the best way to man- age that adoption. While these research questions are certainly critical, our aim stands upstream: to explore the marketing activities of ERP vendors, checking if the marketing tenets for BtoB selling are followed or not. The study of suppliers’ market- ing approach – rather than adopter’s practices – may explain a good part of success/failure of ERPs diffu- sion and adoption. We conducted a survey on nearly 150 installations of ERP in Italian SMEs. The results showed that the marketing competencies of vendors are not extensively developed or, if anything, are not fully leveraged. In particular, often vendors are too focused on selling ERP solutions to existing and known customers, refraining from searching for new clients, and therefore failing to explore the extension of the potential market to its fullest. The marketing tenet of relationship is here myopi- cally applied, keeping suppliers too tied to their current customers. A further finding is that few suppliers are willing to involve network partners in the sales stage, preferring to deal with customers by themselves. This is contrary to the dictates of lit- erature that see each BtoB relationship embedded in a network. The implications of our research are that part of ERPs diffusion and success is determined by the marketing abilities of suppliers, rather than low demand or failure in adoption processes by clients. Marketing competencies of suppliers-resellers should be fostered in order to allow ERP producers to really reach their market. Ó 2005 Elsevier Ltd. All rights reserved. Keywords: Enterprise resource planning, ERP, Project marketing, SMEs, Italy, Sales processes, BtoB selling ERP Systems and SMEs ERP systems have been defined as comprehensive software solutions that integrate organizational pro- cesses through shared information and data flows (Shanks and Seddon, 2000). ERP systems, therefore, are marketed as a vehicle for the integration of an enterprise’s core business activities, such as finance, logistics and human resources, and as a means of overcoming problems associated with the so-called ‘‘legacy systems’’. They are based on developing a common IT infrastructure and common business processes. In the past, many incompatible systems and processes co-existed, especially in large globally distributed corporations, making integration diffi- cult. Our opinion is that ERP systems can play an important part in leveraging organizational competi- tiveness, by improving the way in which strategically valuable information is produced, shared and man- aged across functions and locations. ERP systems, therefore, have been strongly promoted, promising improved competitiveness, by increasing productiv- ity, reducing costs and improving decision quality and resource control, thereby enabling a leaner pro- duction (Communications of the ACM, 2000). There- fore, firms are motivated to adopt ERP systems in the hope of increasing productivity and efficiency. Gattiker and Goodhue (2000) classify the literature on the ERPs benefits into four categories: (1) improvement of information flow between sub-units through standardization and integration of activities; (2) centralization of administrative activities, such as accounts payable and payroll; (3) reduction of IS maintenance costs and increased ability to deploy new IS functionality; (4) enablement of transforma- 590 European Management Journal Vol. 23, No. 5, pp. 590–598, October 2005 doi:10.1016/j.emj.2005.09.014 European Management Journal Vol. 23, No. 5, pp. 590–598, 2005 Ó 2005 Elsevier Ltd. All rights reserved. Printed in Great Britain 0263-2373 $30.00

ERP Marketing and Italian SMEs

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ERP Marketing andItalian SMEs

VICENZO MORABITO, Bocconi University

STEFANO PACE, Bocconi University

PIETRO PREVITALI, University of Pavia

The growing relevance of Enterprise ResourcePlanning (ERP) has raised much attention in theacademic literature, business practice and media.Current literature and thought are primarilyfocused on two aspects of this phenomenon: theeconomic and organizational impact of the adop-tion of ERPs inside a firm, and the best way to man-age that adoption. While these research questionsare certainly critical, our aim stands upstream: toexplore the marketing activities of ERP vendors,checking if the marketing tenets for BtoB sellingare followed or not. The study of suppliers’ market-ing approach – rather than adopter’s practices – mayexplain a good part of success/failure of ERPs diffu-sion and adoption.

We conducted a survey on nearly 150 installationsof ERP in Italian SMEs. The results showed thatthe marketing competencies of vendors are notextensively developed or, if anything, are not fullyleveraged. In particular, often vendors are toofocused on selling ERP solutions to existing andknown customers, refraining from searching fornew clients, and therefore failing to explore theextension of the potential market to its fullest.The marketing tenet of relationship is here myopi-cally applied, keeping suppliers too tied to theircurrent customers. A further finding is that fewsuppliers are willing to involve network partnersin the sales stage, preferring to deal with customersby themselves. This is contrary to the dictates of lit-erature that see each BtoB relationship embeddedin a network.

The implications of our research are that part ofERPs diffusion and success is determined by themarketing abilities of suppliers, rather than lowdemand or failure in adoption processes by clients.Marketing competencies of suppliers-resellersshould be fostered in order to allow ERP producersto really reach their market.� 2005 Elsevier Ltd. All rights reserved.

Keywords: Enterprise resource planning, ERP,Project marketing, SMEs, Italy, Sales processes,BtoB selling

ERP Systems and SMEs

ERP systems have been defined as comprehensivesoftware solutions that integrate organizational pro-cesses through shared information and data flows(Shanks and Seddon, 2000). ERP systems, therefore,are marketed as a vehicle for the integration of anenterprise’s core business activities, such as finance,logistics and human resources, and as a means ofovercoming problems associated with the so-called‘‘legacy systems’’. They are based on developing acommon IT infrastructure and common businessprocesses. In the past, many incompatible systemsand processes co-existed, especially in large globallydistributed corporations, making integration diffi-cult. Our opinion is that ERP systems can play animportant part in leveraging organizational competi-tiveness, by improving the way in which strategicallyvaluable information is produced, shared and man-aged across functions and locations. ERP systems,therefore, have been strongly promoted, promisingimproved competitiveness, by increasing productiv-ity, reducing costs and improving decision qualityand resource control, thereby enabling a leaner pro-duction (Communications of the ACM, 2000). There-fore, firms are motivated to adopt ERP systems in thehope of increasing productivity and efficiency.

Gattiker and Goodhue (2000) classify the literatureon the ERPs benefits into four categories: (1)improvement of information flow between sub-unitsthrough standardization and integration of activities;(2) centralization of administrative activities, such asaccounts payable and payroll; (3) reduction of ISmaintenance costs and increased ability to deploynew IS functionality; (4) enablement of transforma-

590 European Management Journal Vol. 23, No. 5, pp. 590–598, October 2005

doi:10.1016/j.emj.2005.09.014

European Management Journal Vol. 23, No. 5, pp. 590–598, 2005

� 2005 Elsevier Ltd. All rights reserved.

Printed in Great Britain

0263-2373 $30.00

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tion from inefficient business processes to acceptedbest-of-practice processes. The authors also showedthat firm- and site-specific differences may be criticalfactors in the outcome of implementation.

Besides the benefits resulting from the investments inERP software, an organization may also face consid-erable risks associated with such investments. Anumber of articles has dealt with failed ERP projects(Scott, 1999; Davenport, 1998; Mabert, Soni and Ven-kataramanan, 2001). The risks associated with invest-ments in ERP software are especially high amongSmall and Medium Enterprises (SMEs). The financialimpact of a failed ERP software implementation canbe disastrous for an SME.

Since the majority of large companies have alreadyimplemented ERP systems, today ERP vendors areshifting their focus towards SMEs. Several reasonshave encouraged the interest of ERP vendors to-wards SMEs. These include the saturation of the mar-ket, as most large enterprises have implemented ERPsoftware, the supply chain integration between largeand small enterprises, the high number of SMEscompared to the number of large enterprises, andthe technological development together with theavailability of relatively cheap hardware.

From our point of view, ERPs for SMEs differ fromERPs for large enterprises in the following two majoraspects:

v ERPs for SMEs are cheaper and simplified/easierto implement. If setting up an ERP can take atleast 9 months, an equivalent ERP for a SMEcan be set up in 2–3 months;

v ERPs for SMEs are sold, implemented and sup-ported through a different channel. While ERPsare distributed through systems integrators (suchas Deloitte and KPMG), ERPs for SMEs are dis-tributed through Value Added Resellers (VARs),which have access to the code and therefore areable to modify the applications by themselves.A typical VAR is a medium software firm usu-ally specialized in a given industrial sectorand/or well-defined geographical area.

Even if ERP vendors are working hard to attractSMEs clients, the rate of adoption of ERP systemsby SMEs has slowed down (European Commission,2003 and 2004). What are the problems that SMEshave to face today when adopting technology? First,SME organizations do not have a large amount ofmoney to invest in IT, compared to their large enter-prise counterparts. Secondly, they do not have a teamdedicated to implementation/post-sale maintenanceand software operation – our research confirmed thishypothesis, as shown in Figure 1. Thirdly, because ofthe risk of lock-ins in ERP systems, prospective buy-ers are afraid of investing in these applications, unless

they are completely sure of future requirements.Lastly, they may already be using bits and pieces ofother systems that cannot be integrated with anynew system they currently require (Brock and Uwe,2000; Southern and Tilley, 2002; Scally, Stanfieldand Grant, 2001; Forth and Mason, 2004).

Based upon these considerations, the most importanthypothesis of our work is that the organization ofVARs’ marketing processes – one of the less exploredanalysis perspective in current literature (Vervilleand Halingten, 2000) – is one of the main reasonsfor ERPs failing or succeeding in being adopted byItalian SMEs – excluding product validity and othermotivations previously described. We strongly be-lieve that by correctly approaching marketing pro-cesses, VARs can contribute to make ERP diffusioneasier among Italian SMEs.

Theoretical Approach

An ERP system is strongly characterized by theimplementation project. This can be seen in the imple-mentation costs which can amount up to five times alicense purchase price (Adam and O’Doherty, 2000).Hence, the need to adopt a classical analysis perspec-tive in the analysis of a project that has been definedby the literature as project marketing or, more exten-sively, business-to-business marketing (Cova, Ghauriand Salle, 2002; Cova and Salle, 2002; Cova and Salle,2003), also considering in particular a reference to themarketing processes that characterize our work.

Based upon this approach, a project can be defined as‘‘a complex transaction covering a package of prod-ucts, services and work, specifically designed to cre-ate capital assets that produce benefits for a buyerover an extended period of time’’ (Cova, Ghauriand Salle, 2002, 3). A project is characterized by fourelements: discontinuity, uniqueness, complexity,financial commitment (Cova and Salle, 2002). Suchdefinition and elements apply to an ERP project.

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Figure 1 Customer Functions Involved in the Project

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The project marketing discipline presents specificpeculiarities compared to traditional project manage-ment and within business-to-business marketing.Considering the case of VARs of ERPs, it is possibleto delineate some characteristics that otherwisemight defy the analysis of this phenomenon. Projectmarketing sets itself apart from project management inthat it is more customer-oriented and because of allthe stages that come before the actual start of pro-jects, i.e., the signing of a contract between customerand supplier. Traditionally, when studying a project,the need for project marketing has never been felt,primarily due to two reasons (Cova and Salle, 2002):

v Most projects are executed within a given com-pany, without an external buyer.

v Projects are executed within a limited period oftime and project management starts when the pro-ject begins.

Since project management is strongly focused on exec-utive operations, this approach exposes the enter-prises to the risk of neglecting all stages prior tocontract signing, which include an accurate market-ing strategy.

As for BtoB marketing, three key variables are beinginvestigated in our work, which in project marketingbecome particularly relevant and take on a new sig-nificance. These are: relationship, network and seg-mentation. A brief analysis of these three factors isgiven below, stressing their importance within BtoBmarketing and their peculiarities in project marketing.

The Relationship

Within the BtoB marketing, besides an approachfocusing on the buying behavior of industrial custom-ers 1, thanks to the contributions of the IndustrialMarketing and Purchasing Group, (Hakansson andOstberg, 1975; Ford, 1980) a current set of studies onthe relationship between supplier and customer hasdeveloped since the Seventies (Turnbull, Ford andCunningham, 1996), which originated the concept ofrelationship marketing. Based upon this approach, asingle transaction between supplier and customer isno longer an object of study but, rather, their relation-ship. From viewing the market as a conglomerate ofseparate and anonymous atoms, the shift is now to-wards a market formed by suppliers and customersthat closely interact and adapt to one another, thatis, from a singularly examined transaction to a seriesof interactions that form a relationship. Therefore, arelationship pattern has emerged, existing nowadaysin the entire marketing in various forms and versions(Castaldo, 2002; Padula, 2002).

Enterprises usually prefer to entertain relationshipswith well-known and reliable suppliers, as such rela-tionships allow for better supplied services and finalproducts and reduced costs – negotiation costs with

unknown suppliers or search costs for new supplierscan be spared – as well as for a real transfer of com-petencies, besides a mere transfer of products andservices (Golfetto and Mazursky, 2004). It is fair topostulate a continuum from a purely transactionalcontact to a cooperative relationship. In the first case,the relationship between supplier and customer islimited to a mere exchange (product, price, duration,delivery, contractual terms). In the second case, thetwo actors develop a comprehensive relationshipthat also involves a social interaction and a mutualstrategic perspective.

A relationship is particularly relevant in project mar-keting. According to traditional project management,one of the characteristics of projects is discontinuity,whereby the relation between supplier and customeris restricted to the project in question and thereforestarts and terminates with it. Project managementtherefore is limited to a single project and to the bestway to implement it. The focus on the relationshiponly concerns managing and monitoring customersatisfaction during the project. On the other hand,according to project marketing principles, suppliersshould seek a close relationship with customers alsoand foremost outside the project. Still according toproject marketing, suppliers should also abandon thetransactional logic and adopt a relational approach.In this way, it is possible to overcome the problemof relationship discontinuity (Cova and Salle, 2003,14–15). This allows them to obtain economies ofexperience and to mitigate costs and complexity, whichare typical features of projects. A way to establishsuch a relationship is through the organization ofevents – even social ones – in the periods running be-tween one project and another involving the samecustomer. Another possible way to this end is thecreation of occasions of further contact and economicinteraction, such as maintenance operations, partsrestoration and components replacement. Finally,oftentimes a supplier for a given project only inter-acts with a single player of the customer organiza-tion. By identifying a customer’s needs in a broadersense, that is, in relation to other company functions,a supplier is able to keep a relationship alive and tolearn about new possible customer needs (Covaand Salle, 2003, 44–46). The relational perspective inproject marketing is further developed by the inclusionof other actors, besides the customer, who has an im-pact on the project, as described in the paragraph onthe network. ‘‘Project marketing has become increas-ingly relational taking the social dimension more andmore into account’’ (Cova and Salle, 2002, 8).

The Network

The second most important characteristic of BtoBmarketing, confirmed and reviewed by project market-ing, is the network approach. A relationship is closelyconnected to the network concept. The shift from anenterprise as an atom to a relationship has pushed

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researchers even further, that is, to set each dyadicrelationship within a broader network. In fact, theposition within a network can be defined as the total-ity of the relationships entertained by a given enter-prise (Turnbull et al., 1996, 47, 56). Each decision ofthe enterprise is bound or enabled by the networkto which it belongs and affects such a network in amutual causal relationship that renders enterprisesstrongly connected to the network of other actors(Ford and Redwood, 2004).

The network approach is particularly apparent, andtakes on further significance, in project marketing.One of the distinctive features of the concept of pro-ject is its complexity. Such complexity requires thepresence of a vast network of subjects that are ableto form with the supplier a structure that can com-plete the project (Cova and Salle, 2003, 12). In projectmarketing, a supplier is expressly required to deployand coordinate internal and external resources, i.e.,other enterprises for possible partnerships. Often-times, the creation of an external network of partnersbecomes a real and stable alliance, independent of aspecific project (Cova and Salle, 2003, 55–56). In pro-ject management, the only network being consideredis the buying network formed by the subjects that par-ticipate in the tender procedure of the project and inits implementation. This is a temporary, project-re-lated network. In project marketing, a network alsotakes the following two forms (Cova and Salle,2002, 9):

v Project network. It is the network of subjects thatallow the supplier to identify new projects and itis active before the actual draft of the tendernotice.

v ‘‘Milieu’’. It is the totality of business and non-business subjects that form the permanent net-work to which potential buyers belong. In thisnetwork, relationships become extremely impor-tant and are independent of projects in progress.It is more a relationship of a social type.

Segmentation

Segmentation is an additional fundamental pillar ofBtoB marketing (Anderson and Narus, 1999), eventhough for a long time it has been considered moreas a peculiar feature of BtoC marketing (Crittenden,2002). To segment the market means to divide it intogroups of homogeneous customers according to acommon feature. Once the market has been seg-mented, enterprises can formulate specific offers foreach segment, instead of drafting an offer for eachsingle customer. Segmentation allows therefore tooptimize the trade-off between productivity that onewould obtain through a single standard offer andpersonalization for each single customer. The idealsituation for a producer is that all customers be equalso that one single standard offer might be used, withrelated economies of scale and savings. On the other

hand, the ideal situation for a customer is to receive acustomized offer to its specific needs. Segmentationis a good compromise between these two extremes.Segmentation within BtoB uses, in an alternate orintegrated way, macro (e.g., standard industrial clas-sifications, customer size) and micro criteria (e.g.,process and structure that influence customers’ deci-sion to buy).

Segmentation in project marketing might sound like aparadox, considering that a project must necessarilybe intended for a single customer. However, the nec-essary starting point for each project marketing strat-egy is really an adequate project preparation thatcomes before any explicit request. Suppliers shouldnot passively wait for customer requests throughcalls for tender, but they should foresee projects(Cova and Salle, 2002) in a search phase that is inde-pendent of any current project. Segmentation criteriamay regard not only the traditional parameters of thecommodity sector to which the customers belong, orthe size, but also criteria such as risk sensibility orwillingness to closely interact with a supplier (Covaand Salle, 2003, 68).

Research Method

In the study of SMEs, it is necessary first to define theconcept of it. Brooksbank (1991) believes that bothquantitative and qualitative criteria should be usedwhen defining SMEs. Quantitative criteria, such asnumber of employees, sales turnover and total assets,have traditionally been used for research purposesdue to the measurability problems involved withqualitative criteria. Also in the research on ERP soft-ware and SMEs, the criteria used to define SMEs aremostly quantitative (for instance, see Bernroider andKoch, 2000; van Everdingen et al., 2000). In this study,we used a qualitative criterion that defines SMEs asthe target identified by interviewees of softwarevendors. We considered this definition suitable forthe purpose of our investigation.

Therefore, we identified our sample of final custom-ers/software installations by number of employeesand number of sold ‘‘seats’’, i.e., the number ofsimultaneous users that the system will support(see Figures 2 and 3).

The study was articulated in two stages. In the firststage, we approached 3 ERP software vendors andtogether predefined a general set of criteria that theirresellers would acknowledge as the best practices inselling ERP solutions to SMEs. Further, the criteriawere improved in a series of focus groups with salesforce and sales managers of 30 VARs (Value AddedResellers) and during a training-day for the salesforce. The first stage ended with the creation of astructured questionnaire on the best marketing prac-tices applied by VARs for their sales.

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In the second stage, we conducted a survey using asample of 148 installations, sold by the above men-tioned 30 VARs. The sample was created selectingat random names from the sales directory of theVARs. We then asked the 30 sales managers of theseVARs to fill in the questionnaire for each of their cus-tomers selected in the sample (140 SMEs), describingthe applied process for the software sale, i.e., whowas involved in the decision-making process andwhat kind of evaluation methods were used by thecustomers, the number of ‘‘seats’’ and the functionalmodules that were sold, and so on. Participants wererequired to refer to their database of all license agree-ments for the 3 software solutions sold in Italy overthe 1999–2004 period – we did not directly contactthe 148 customers of the VARs.

The questionnaire was composed of 3 parts, eachwith a different focus: company demographics,assessment of what had been sold (e.g., number ofseats, functional modules, date of purchase, totalvalue of the agreement) and assessment of how ithad been sold (e.g., subjects involved in the decision-making process, possible existence of internal spon-sors, role of the entrepreneurs, best sales practicesused to persuade customers, lead generation tool).

Empirical Findings

The findings of our research showed that VARs donot organize in a proper manner their marketing pro-cesses, interpreting the teaching of BtoB marketingand project marketing in an incorrect way.

Our analysis describes how the relationship concept,most of the time, is misunderstood and hampersmarket segmentation. Offer preparation shouldabide by a procedure that starts before meeting thecustomer. Suppliers should define how to segmenttheir market and then select a target (Michel et al.,2003, 204). ERP vendors ‘skip’ the segmentationsteps, jumping directly to the contact with ac-quainted customers:

v 30% of vendors only contact companies alreadylisted in their customer portfolio.

v 20% only contact companies previously met bymeans of personal contacts.

Moreover, most resellers trying to establish a contactwith prospective buyers only contact customers thatin the past had entertained some kind of a procure-ment relation with the reseller. Almost 20% of resell-ers contact firms whose managers are personalacquaintances of the resellers’ top management (seeFigure 4).

One might argue that resellers are too quick in gettingcustomers. A relational approach with current cus-tomers is even excessively applied, to the detrimentof market segmentation. The relationship approachtherefore seems to be understood by resellers onlyin part. To sell ERP packages, VARs only contact cus-tomers already listed in their portfolio. In addition,current portfolios are considered by VARs as ‘‘sleep-ers’’, that is, customers that did not purchase any-thing from the reseller in recent times (see Figure 5).

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Figure 4 How Resellers come into Contact withCustomers

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Figure 2 Structure of the Sample by Number ofEmployees

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Figure 3 Structure of the Sample by Number of SoldSeats

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This proves that the relationship with the customer isseen as ‘‘transactional’’ rather than ‘‘relational’’.

A contact with a sleeping client shows that there isno true relationship. A relationship is such when itis active and ongoing, while a ‘relationship withsleeping customers’ sounds like an oxymoron. Eventhough it is true that according to project marketingprinciples a sleeping customer is still a customerwith whom resellers should continue to entertainnon-commercial relationships, awaiting future andpossible orders, our survey did not show that VARsentertain significant relationships with customers,outside a relationship for a project implementation.After all, relationship does not mean contacting a listof former customers just because their managers arepersonal acquaintances of the reseller, as the sur-veyed companies seem to do.

As we can see, the relationships with current custom-ers (51%) does not appear to be proportionate, to thedetriment of a previous segmentation (scouting is14%). By neglecting the segmentation stage, resellerscannot identify ‘hidden clients’, i.e., customers thatmay be interested in the vendor-reseller’s offer butare not listed in the reseller portfolio. Customersare overlooked and remain ‘hidden’. An ERP is al-most an all-purpose software that can be imple-mented to virtually any type of firm. Therefore, it isreasonable that some firms that are not currentlyserved by a reseller might be interested in an offer.The only way to identify such a firm is to apply thesegmentation process.

As for the network approach, surveyed resellers donot see themselves as actors in a network playing aspecific role. They do not have a clear network iden-tity (Anderson and Narus, 1999, p. 31). They viewthemselves as mere resellers of a product, while, asseen before, ERPs require the concerted action andeffort of many actors (Brown and Vessey, 2003), suchas hardware vendors, TLC operators, IT consultants,management consultants, and so on.

To further substantiate that the network concept isonly partially applied, we should stress that involve-

ment of other actors in the network – such as consul-tants, other suppliers – only ranks eight in the Tableabove (Table 1). Moreover, business support fromvendors only ranks ninth. Other partners selling thesame ERP rank tenth. Use of demos and directinvolvement of entrepreneurs are techniques thatrank first. These data reveal that resellers liaise withcustomers all by themselves, a fact that may be inter-preted as a further result of the excessively directrelationship sought by resellers with their clients. Itis a sort of ‘This is my turf’-syndrome that hinderscooperation with other relevant actors in thenetwork.

The complexity of this scenario is well outlined in thecase study of Tikkanen et al. (2000), which shows thatconflicts and disagreements between the several ac-tors involved in an ERP implementation project canruin the relationship between a VAR and a customer.The low percentages relating to other VARs (1%) andassociations or third parties (1%) shown in Figure 1can be considered as a proof thereof.

The use of demos as the first best practice denotesthat resellers are focused on the visit rather than onthe marketing. A reseller approaches a customerwith a ‘show & tell’ mentality that prevents a goodvisit preparation. In the second position, we findthe practice of personal contact with entrepreneurs,which is a shortcut rather than a marketing ap-proach. Noteworthy and a further confirmation ofour findings is that resellers do not seek the supportof partners and vendors (last two positions in theranking). This confirms the lack of a strong market-ing approach on the part of resellers. Paradoxically,a reseller knows so well its ‘territory’ that it mistak-enly believes that it has no need for a formal andstrategic marketing process.

In summary, resellers fail to apply a full-fledgedmarketing strategy, involving a segmentation pro-cess and a ‘real’ relationship propensity. This con-flicts with the marketing posture of softwarevendors whose ERPs are sold by resellers. In theaccompanying documents to resellers, software ven-dors clearly recommend applying an accurate market

Customer Status

Lost 9% Active10%

‘Sleeping’81%

Figure 5 Status of Customers when Contacted byResellers

Table 1 Best Practices Ranked by Resellers

Ranking Best Practices

1 Use of demos

2 Direct involvement of entrepreneurs

3 Past business relations with customers

4 Internal sponsorship

5 Reference visit

6 Killer application

7 Prototype development

8 Involvement of external sponsors

(consultants, other suppliers)

9 Business support from vendors

10 Involvement of other ERP partners

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segmentation, which indicates the difference of per-spectives between a software company and its resell-ers. Viewing the market as a totality that has to bewon through segmentation and marketing, softwarevendors apply a macro-perspective. On the contrary,resellers see customers, rather than a market. In thecontinuum between dispersed market and concen-trated market/project, software vendors face a dis-persed market, while resellers face single projects.This mismatch between the two perspectives is thereason why the marketing tools recommended bysoftware companies are not strictly applied byresellers.

Sales and marketing are considered as synonymousby resellers, whereas sales are a result and a functionof marketing. While strategic marketing cannotaccomplish anything real without sales (and therespective marketing mix), sales cannot occur with-out strategic marketing. The strategic nature of ERPsand the fact that they imply both for the supplier andcustomer a major project call for a close relationship.It is a vicious circle at the opposite end of whatshould be considered as the very nature of a market-ing approach: to segment a market in order to estab-lish a relationship leveraging on the network. Inreality, as shown by the research, marketing is an up-stream function considered by software vendors,while resellers pursue the sale of a system consideredas a product that can be sold without any help. Oncethe market has been segmented, vendors shouldestablish a relationship in order to get the projectdone, while the network will help in the process.

Conclusions

The results of this study provide organizations withvaluable knowledge that might prompt them tomake significant changes in their current ERP-relatedprocesses and the acquisition of enterprise packagedsoftware, which in turn could result in substantialsavings. It can serve as the basis for the developmentof or amendment to a formal process policy of com-plex packaged software acquisition.

However, our intent is to first examine the necessarybasic attributes of resellers when offering their prod-ucts to the SME market. A reseller must be able tooffer end-to-end business management solutionswhich address the requirements of the market andmust be able to provide its customers with a strongsupport network necessary to service the client, be-fore and after implementation of the solution.

We can offer some recommendations to the VARs ofERPs:

v Invest in training and enrichment of marketingcompetencies. This solution may sound generic,but for a small or medium enterprise such as a

VAR, this investment may represent a significantcost item in the balance sheet and most of all maybe perceived in conflict with the best practices thatare well-established in this sector and haveproved so far to be effective.

v Apply in practice the concept of network, whichmeans involving in the marketing processesother actors, such as management consultants,IT consultants, other VARs, to shift from thetransactional logic to the relational logic, fromcompetition to cooperation.

v Empower the use of best practices such as killerapplications, reference visits and prototypedevelopment, that require a shift from a nearlyexclusive technological partner to a businesspartner.

Finally, a last consideration regards software ven-dors, large corporations such as Microsoft, SAP, Ora-cle, that probably still need to invest to gain a betterunderstanding of the Italian market and conse-quently both of VARs’ needs (sales support of soft-ware vendors only ranks second last in the bestpractices) and final customers’ needs that use on adaily basis ERP systems for the management of theirbusiness.

Note

1. For a comprehensive presentation on Buying Behavior theories,formulated within BtoB, see Michel et al., 2003, p. 66 andfollowing.

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Further reading

Grant, R.M. (2001) Contemporary Strategy Analysis. Black-well Publishers, Oxford (UK).

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VICENZO MORAB-ITO, IOSI – UniversitaCommerciale Luigi Boc-coni, Viale Isonzo 23,20135, Milan, Italy. E-mail: [email protected]

Vicenzo Morabito isAssistant Professor ofinformation systems atBocconi University withresearch interests in IT

banking and governance, IT implementation in SMEs,and application service provider business strategies.

STEFANO PACE, IEGI– Universita CommercialeLuigi Bocconi, Viale Fil-ippetti 9, 20122 Milan,Italy. E-mail: [email protected]

Stefano Pace is AssistantProfessor in Marketing atBocconi University. Hisresearch focuses on BtoBmarketing, trust manage-ment, and internet andservice marketing.

PIETRO PREVITALI,Universita degli Studi diPavia, Via San Felice 7,27100, Pavia, Italy. E-mail:[email protected]

Pietro Previtali is aResearcher in BusinessOrganisation at the Uni-versity of Pavia, withresearch interests in SMEs,organizational strategies,IT banking organizationand IT implementation inSMEs.

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