A tale of two ERP vendors - And the crucial decision of choosing the right business model

Abstract

The paper looks at the history of two ERP vendors (Maconomy and Navision) in Denmark pursuing two different business models. On one hand, Maconomy decided to develop, sell and implement ERP packages directly to customer. They believed they would be best at it, and they would obtain valuable information about customer requirements in the process. On the other hand, Navision adopted a business model which relied on an ecosystem of partners consisting of value added resellers (VAR) and independent software vendors (ISV) to sell, implement and further develop add-ons for their software. The paper presents a Resource Based View (RBV) analysis comparing and contrasting the resources of the two companies, in order to explain why Navision was sold for 16 times as much as Maconomy. We posit that the main reason for this huge difference is the value of Navision's ecosystem enabling them to achieve economies of scale. © 2011 Springer-Verlag.