Cloud computing gives small and mid-sized businesses—even wineries—IT-enabled capabilities that they otherwise couldn't begin to afford. The tradeoff with SaaS solutions for the midmarket, however, is that customers usually have to accept relatively generic implementations and a small number of providers for their specific industries, says IDC research analyst Ian Song. Customization costs can add up.
The balance between cost and customization can be tricky. But both the customer and service provider can change the equation by taking advantage of the same advantages that make cloud economics work in the first place, says Pat Oates, CEO of three-year-old startup Wine Management Systems (WMS).
WMS is a SaaS provider whose applications are designed to track, automate and optimize the surprisingly technical and complex process of winemaking.
"There are 5,000 wineries in the United States, but most of them are really small and almost none of them can afford the $20,000 to $40,000 plus annual maintenance that traditional client/server wine-management software costs," Oates says. "We can charge $200 a month for a small winery, so they're not using something built in FoxPro or Excel."
Tracking Winemaking's Technical Side
WMS customers range from relatively simple operations that produce less than 2,000 cases per year to larger ones that produce tens of thousands. The wineries need to track and manage customer-management and incentive programs, marketing programs and other promotions, in addition to tracking and reporting the process of making and packaging wine.
"Every winery has to track and report when the wine came in, what chemicals were added and when, what kinds of blends they're doing, what was the number and name of the wines that were blended, the lot numbers for corks or caps and bottles. It gets to be a lot to try to track in a spreadsheet," Oates says.
"They have to produce a bioterrorism report with all the data on ingredients and packaging for the Tax and Trade Bureau (part of the ATF) and report lot numbers for corks and caps and bottles and everything to help with tracking," Oates says. "It gets to be a lot to track in Excel, but that's what most small wineries are using, but if they get audited, they're sorry it wasn't a more transaction-based system."
Oates system, built on Java, DB2 and Websphere, tracks and automates grape growing, inventory management, production and bottling and wine-club management, but didn't have analysis or reporting functions sophisticated or flexible enough for customers.
"Winemakers are a pretty opinionated group, so we'd finish one set of reports for one winemaker and go show it to someone else and they'd say 'no, no, I don't want to see it this way, I want to see it a different way,'" Oates says.
A SaaS Partnership Pays off
Unable to afford to build its own analytics, WMS created a partnership with business intelligence software developer PivotLink to show functions from the SaaS version of PivotLink's reporting and analysis products inside WMS' interface.
"My background is mostly in IBM technology, so I would have preferred to use Cognos, but that would make the service too expensive for most of the smaller customers," Oates says.
PivotLink's logo and interface is visible where it appears in the WMS application, but most customers just think of it as a WMS reporting function; they tend not to be bothered that more than one company might be providing the services, he says.
The agreement with PivotLink was scaled such that the cost to WMS is much lower in the beginning, when its customer base is still relatively small, and higher when it really begins to grow, Oates says. (WMS has about 65 customers now and hopes to grow to 250 in two years.)
The wineries, like any business relying on SaaS, must choose reliable vendors and get legal documentation spelling out service levels and potential penalties for expensive failures, analysts point out. Done right, SaaS helps wineries focus on their own product and growth, not technology.
"It's amazing the number of wineries and the growth," Oates says. "There are 130 wineries in Indiana; Texas is huge; Oregon is huge; in Washington they're opening 100 new wineries a year; Virginia is growing really fast. We get snobby out here in California, but there is a lot of good wine being made in places all over the country."
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