Adexa Prepares To Step Into The Spotlight
From its roots in advanced planning and scheduling, Adexa, Inc. has emerged
as a strong challenger in the business-to-business collaboration software
market. Based in Los Angeles, California, Adexa, formerly known as Paragon
Management Systems, was founded in 1994 by Dr. K. Cyrus Hadavi and his
brother Kameron. While working for i2 Technologies, Hadavi found that
most supply chain management applications were built around shop floor
scheduling, a foundation that prevented them from scaling effectively
to support enterprise-wide decision making.
Paragon focused on producing a scalable solution that could optimize variables
across the entire supply chain using a single data model. Its original
product suite, Pacemaker, was developed with the semiconductor industry
in mind and contained a broad array of functionality, encompassing high-level
manufacturing planning across enterprises, detail-level demand/supply
matching, ATP, CTP, and material procurement planning. In 1996, Paragon
signed five new clients and generated $1.84 million in revenue, primarily
from new licenses.
the first two years of existence, Adexa invested its resources on developing
its Pacemaker applications and working closely with its few customers
on enhancements. Its efforts began to pay off between 1996 and 1998, when
total revenues grew 340% to $8.1 million, far exceeding the growth rate
of the APS market as a whole (~40%). This success proved to be only a
prelude to its dramatic growth during 1999. Officially, its revenue increased
by 194% over 1998 to $23.7 million, but this excludes $12 million carried
over to 2000, which would have yielded a considerably higher growth rate.
by its financial success and new surge in software sales, Paragon renamed
itself Adexa, a moniker that combines "adaptability" and "dexterity,"
which the company believes are hallmarks of its collaborative supply chain
planning suite, iCollaboration.
Strategy and Trajectory:
Today, Adexa's license revenue is approximately three times its services
revenue, the highest ratio for an SCM vendor of its size. Though a high
percentage of licenses is typical for young companies on the rise, Adexa
does not maintain a large services organization, preferring instead to
partner with consulting and systems integration firms for implementation
services. These partners include traditional full-service integration
firms such as Andersen Consulting, Deloitte & Touche, EDS, Compaq Professional
Services, as well as e-business service providers like Origin, and most
recently WaveBend Solutions LLC.
seeks to embed its advanced planning and collaboration solutions into
third party enterprise applications and e-business applications through
alliances. Its objective is to support independent trading exchanges and
company run portals with business-to-business collaboration and intelligence
in the form of advanced planning capabilities.
Alliances take the form of joint sales and marketing alliances as well
as technology alliances where products are integrated and represent the
second largest investment for Adexa following research and development.
Among the complementary software partners that Adexa enlists in this strategy
are ERP vendors QAD, a mid market provider to a broad range of industries,
and WDS, a niche player focusing on aerospace & defense.
also maintains relationships with supply chain execution system vendors
Essentus (formerly Richter Systems) and McHugh Software. A recent partnership
with Selectica is intended to enable companies that sell configured products
via the Internet to provide their customers with accurate ATP and CTP
information. E-business infrastructure partners include Commerce One,
which jointly sells and markets iCollaboration with its MarketSite portals,
and Broadvision, which will provide customers with customized Internet
access to iCollaboration and supply chain information. Access to product
catalogs is provided through arrangements with Commerce One and Agile
and as-needed data integration can be achieved through Vitria. iCollaboration
is supported on a number of Unix server platforms and uses Windows NT/98
Adexa focuses primarily on semiconductor, electronics, textiles, apparel,
and automotive industries, but also targets aerospace and defense with
Western Data Systems. Some notable clients among its customer base are
Toshiba, Panasonic, Milliken, General Motors, and Firmenich. Other key
clients include Sharp, Xerox, Philips Semiconductor, Philips Components,
AT&T Wireless, Lucent Microelectronics and Conexant.
For a small company, Adexa derives a substantial portion of its revenue
from clients outside the U.S., especially Japanese and Asian semiconductor
and electronics manufacturers, but also many in Europe, primarily electronics,
semiconductor, and CPG companies. Privately held, Adexa receives substantial
financial backing from Sutter Hill Ventures and Information Technology
Broad product suite with advanced features: In iCollaboration,
Adexa has built upon its original Pacemaker suite, adding product lifecycle
management, extended enterprise planning, and collaboration. Other vendors
offer broad suites, but Adexa's is the only one that was built from the
ground up on a single data model. A host of third party software alliances
further extend its applications into electronic procurement, order management,
warehouse management, transportation management, and data warehousing.
Strong vision for expanding supply chain management to true multi-enterprise
collaboration: Adexa has no plans to peddle Internet trading marketplaces,
but focuses instead on providing the decision support capabilities required
to enable efficient collaboration between an enterprise and external links
in its supply chain. Adexa's vision involves not merely giving customers
and suppliers access to iCollaboration via a web browser, but more importantly
delivering advanced planning features geared specifically for business-to-business
collaboration. The company is also working on intelligent agent technology
to automate B2B transactions to improve speed and reduce the level of
growth: Because of its low profile, Adexa is rarely the first choice
for larger multinational companies and, in fact, often is not invited
to participate in software selections. Adexa's growth comes in many cases
as a result of being the second choice, acquired by clients who are unsatisfied
with their first selection. In instances where Adexa does compete head-to-head
with other SCM vendors, it often comes out on top due to its ability to
demonstrate a working solution.
Poor visibility in the SCM marketplace: Paragon Management Systems
failed to capture significant mind share among top-level corporate IT
professionals, those vested with the power to make buying decisions. As
Adexa, the company hopes to shed its anonymity and assume a place among
the supply chain management market leaders on every shortlist.
on small direct sales force: In spite of recent additions to its sales
organization, Adexa's direct sales channel is grossly undersized compared
to its competition, especially i2. Adexa has 32 quota-carrying salespersons,
making up 14% of its total employees. This compares poorly to the industry
average of 22%, not to mention the fact that its competitors have significantly
more salespersons in absolute numbers.
of capital a barrier to growth: As a private company, Adexa's growth
is limited by the supply of venture capital funding. With the recent decline
in software company valuations, private funding will be harder to come
by, even from established firms. Although it has accomplished much in
terms of product development and alliances, Adexa will find it difficult
to grow as a private company, at least without significantly diluting
its equity base.
- Adexa has embarked on an aggressive marketing campaign aimed at avoiding
the lack of visibility it suffered as Paragon. In conjunction with these
activities, the company has hired a new public relations firm, launched
a major advertising campaign, and planned high profile events featuring
well known speakers. Though effective marketing can often compensate
for little substance behind the image, we believe Adexa will be successful
due to its compelling vision and very real accomplishments in the marketplace.
In response, its total revenue growth rate in 2000 should top 50%, outpacing
the rest of the market, as its marketing efforts pay off (70% probability).
- In the
longer term, Adexa should prosper as it can offer itself as the "i2
alternative" for semiconductor and high tech electronics and has set
in motion the right partnerships to increase the applicability of its
products. Provided its capital position remains steady, we expect Adexa
to grow with the rest of the market over the next three to five years
its collaborative planning products and architecture are completed,
Adexa will pose serious competition for Logility in the apparel market,
from which it will derive a 15% increase in new license revenue in 2001
Initial public offering: In spite of the recent turmoil on Wall
Street, we believe Adexa's long-term growth prospects and viability are
excellent. Adexa should continue with its IPO plans, but may want to delay
it until the market stabilizes to avoid needless loss of valuation arising
from general volatility.
industry expansion: Though it can expect growth from its existing
target industries, Adexa should consider a move into the lucrative consumer
packaged goods or retail sector by marketing its collaboration products
to large CPG manufacturers and distributors.
Seek stronger alliances with mid market ERP vendors: To increase
its profile among mid market corporate IT buyers, Adexa should build stronger
alliances with those ERP vendors that have yet to launch their own supply
chain management modules such as Ross Systems or Solomon Software. In
addition to sales and marketing agreements, Adexa can improve its win
rate by developing standard interfaces to ERP products so that clients
have fewer reasons to acquire competitive products. While Adexa maintains
a relationship with mid-tier ERP vendor QAD, Inc. in which QAD resells
its APS solution, Supply Chain Optimizer, with its MFG/PRO manufacturing
execution suite, it needs to expand its software alliance network to generate
more license revenue.
a strong partnership or merger with a supply chain execution vendor:
Adexa should begin looking forward to the time when enterprises will require
seamless integration between planning and execution systems in order to
maintain their competitive standing. Several vendors have taken steps
toward realizing this goal such as SynQuest, SCT Corporation, and Aspen
Technology. A possible match for Adexa is EXE Technologies, an SCE vendor
with broad geographic coverage that offers fulfillment and distribution
execution software on Unix platforms. A choice that would bring synergy
in the apparel market is Manhattan Associates.
Users in semiconductor and electronics should place Adexa high on any
short list and should not be daunted by its relatively short operating
history and small size. Adexa's applications have proven themselves in
difficult environments of small and large companies.
Users should keep in mind that many of Adexa's third party software alliances
are in early stages, especially Commerce One, Selectica, and Essentus.
Still, movement of its primary competitor i2 into e-commerce imparts new
urgency to these new partnerships, which improves their chances for producing
should approach Adexa's collaborative products with realistic expectations,
a difficult proposition amid the B2B hype that prevails in the marketplace.
Scripted scenario demonstrations are a must for the collaboration products
and these should replicate actual business processes used by clients to
plan and coordinate forecasts and replenishments with their customers