Cloud Migration: SAP Partner Navigator Helps Schoolhouse Electric Transform Its Business

Schoolhouse Electric & Supply Co. is known for its classic lighting products and period-style furniture and home goods. But there's nothing vintage about the company's IT strategy.

Portland, Ore.-based Schoolhouse Electric has taken a cloud-focused approach to its IT, adopting SAP's Business ByDesign cloud-based ERP and business management application set and working closely with Navigator Business Solutions, an SAP partner that has undergone its own cloud transformation.

On the eve of SAP's Sapphire Now conference, where the vendor's ongoing push into cloud software will be a major topic of discussion, the cloud computing experiences of Schoolhouse Electric and Navigator provide examples of the potential opportunities for solution providers and the potential benefits for their customers.

[Related: New SAP Initiative Seeks To Spur Partner Development, Sales Of Fixed-Scope Cloud Software Packages]

Schoolhouse Electric, founded in 2003, manufactures and sells a broad range of classic lighting fixtures, furniture, clocks, kitchen and bathroom hardware and more. Headquartered in a refurbished brick factory building in Portland, Oregon, the company sells its handmade products online, through its catalogs and through its own stores in Portland and New York City.

A source of pride for the company is that about 80 percent of the components and materials used to manufacture and assemble its products come from small suppliers.

Schoolhouse Electric has recorded 25 percent annual growth and by 2015 the company's IT, including Intuit's QuickBooks, wasn't robust enough to keep up, especially in managing the company's parts and materials ordering and inventory management, and its order processing and shipping, said Chris Tufts, vice president of operations and finance, in an interview with CRN.

Orders for custom lighting products, for example, could take three or four weeks to fulfill, Tufts said.

The executive said it became clear the growing company needed to upgrade to a full ERP (enterprise resource planning) system. "There was too much volume, too much complexity, to manage without a dedicated ERP system," he said.

The question was, what kind of system to adopt?

Enter Navigator Business Solutions, a Salt Lake City-based solution provider that in recent years had undergone its own transformation from selling on-premise IT systems to a cloud-only systems purveyor.

Navigator sells SAP's BusinessOne applications for smaller businesses and Business ByDesign for mid-size customers. The company began offering the cloud-only Business ByDesign in 2009 at a time when only about one-in-10 customers even inquired about cloud, said CEO Grant Fraser, in an interview with CRN.

Navigator has been an SAP Gold partner for more than 11 years and in 2017 was the winner of the SAP Pinnacle Award: SAP Business ByDesign Partner of the Year.

Cloud sales grew and in 2016 the company moved from a "cloud-first" sales strategy to a "cloud-only" approach. (The company continues to support existing customers with on-premise systems.) Customers today include company's that are implementing their first ERP applications, moving up from software such as QuickBooks and even Excel, or migrating to the cloud from legacy on-premise ERP products, according to Fraser.

Navigator is also moving one or two customers a month from on-premise servers to cloud systems, no longer wanting the headaches and expense associated with buying and maintaining server hardware.

Such was the case with Schoolhouse Electric, which Tufts said has a minimal number of IT personnel and wanted to keep its on-premise IT to a minimum.

"It's a pretty low-tech environment," he said. "We don't need to have servers in our building," he said.

Aside from cost, Fraser said adopting a cloud system versus installing an on-premise system has other benefits. "They can focus on the business reasons for putting in ERP applications, whereas on-premise it becomes an IT project," he said.

Schoolhouse chose to go with SAP's Business ByDesign for its accounting, inventory management, production, costing, and accounts receivable/accounts payable functions. "It's really given us an [IT] backbone for everything we do," Tufts said.

Altogether the implementation project took about eight months between Sept. 2014 and may of 2015

Grant notes that the ability to remotely handle a lot of cloud ERP implementation and support chores helps hold down costs. "But ERP is still a lot of change management," he notes.

Navigator has developed quite a bit of its own intellectual property and cloud delivery models for implementing and supporting BusinessOne and Business ByDesign implementations and training customers on the system, Fraser said. Navigator has also developed a lot of technology and content specific to vertical industries.

Fraser sees such intellectual property as key for solution providers that want to stand out and succeed in cloud computing.

Schoolhouse has since added other cloud services to its lineup, including email, Zendesk for customer service and Shopify for ecommerce – all of which tie in the Business ByDesign system.

Schoolhouse would not have been able to maintain its growth trajectory without an application like Business ByDesign, according to Tufts.

It has given the company a level of operational control, including better inventory and production management, it would not have today with the previous system, according to Tufts. It has cut production and order fulfillment times, from a couple weeks to five days for standard orders and from three to four weeks to two weeks for custom jobs – with the promise of shortening those times even more.

The new system, with its management and forecasting capabilities, has also benefited the small manufacturers that make up Schoolhouse's parts and materials supply chain, providing them with more predictable demand and orders. "There's absolutely a ripple effect there," Tufts said.

This year the parts and materials inventory system is becoming even more efficient as suppliers begin using a bar code system to tag shipments to Schoolhouse.

"This is all a prerequisite for growth," Tufts said.