SoftBrands, Inc. (AMEX: SBN; http://www.softbrands.com/), is a Minneapolis, Minnesota (US)-based provider of enterprise solutions for small- to medium-sized businesses (SMB) in the manufacturing and hospitality industries worldwide. The company's revenue nowadays comes mostly (about two thirds or more) from the SoftBrands Manufacturing division. For details on SoftBrands' recent history, see SoftBrands' Recovery Softens the AremisSoft Bankruptcy Blow.
This is Part Two of the five-part SoftBrands' Recovery Softens the AremisSoft Bankruptcy Blow series.
Classic Fourth Shift
Classic Fourth Shift is SoftBrand's core manufacturing product aimed at manufacturing SMBs. Fourth Shift software, which is built on a Microsoft platform, was introduced in 1985 as one of the first personal computer (PC)-based enterprise resource planning (ERP) systems. Its comprehensive extended ERP suite facilitates critical business functions, including manufacturing, engineering, operations (order entry, purchasing, and shipping), financials and accounting, workflow, e-business, human resource (HR) management (including recruitment, hiring, benefits administration, payroll, compliance, and employee training), customer relationship management (CRM), advanced planning and scheduling (APS), and supplier relationship management (SRM).
Producing approximately 65 percent of its revenue, the Fourth Shift product remains a major breadwinner for the SoftBrands Manufacturing division. It is a Web-enabled product for different manufacturing mid-markets that is available in seventeen languages. More than 4,000 systems have been sold to over 1,500 customers in 60 different countries. Classic Fourth Shift users include some of the fastest growing manufacturers and global enterprises from the Global 2500, such as Eastman Kodak, Unilever, Bosch, TTK Prestige, and Electrolux.
The product covers many bases with nearly fifty integrated application modules handling order entry, accounting and finance, inventory control, manufacturing, executive decision support and business intelligence (BI), engineering, purchasing, and shipping. It also has adaptable Web-based supply chain visibility modules that communicate through portal technology. For a more detailed account of the solution's features see Fourth Shift's evolution within SoftBrands' DemandStream.
These capabilities led to Classic Fourth Shift being promoted as one of the first mid-market ERP products whose ability to embrace customer and supplier activities was tied to core transactional back-office systems. To support these claims, Fourth Shift has long offered very competitive e-commerce ability within its market niche, which includes, but is not limited to, on-line catalogs, Internet storefronts, on-line credit checking, credit card validation, a rule-based parametric product configurator, on-line procurement, and order fulfillment. All the major user groups have been provided with e-business applications—while the My Fourth Shift Workplace takes care of employees, the Customer Center application enables customers or channel partners to browse the user enterprise's on-line catalog, configure products, place orders, view their own specific pricing, check product availability, and access the status of their order(s) by tracking shipping and viewing their account and payment information.
The product has also traditionally been very strong in terms of transaction entry and reporting, tactical level production status visibility, lot traceability, cost control, and work in progress (WIP) management, rendering it well suited for order-ship-bill operations within make-to-stock (MTS) and configure-to-order (CTO) manufacturing environments.
The typical sale price for an installation of Fourth Shift, including license, training, and other up-front services, is approximately $200,000 (USD).
Expanding the Fourth Shift Footprint
In addition to the more than fifty native Fourth Shift modules, SoftBrands has expanded its solution by offering fifteen companion modules (covering the areas of customer operations, financial management, inventory management, manufacturing operations, planning and scheduling, product definition, vendor operation, and general business needs), which SoftBrands distributes on behalf of third parties. These modules may be licensed either individually or in combination (for more information, see Fourth Shift's evolution within SoftBrands' DemandStream).
In addition, Fourth Shift's acquisition in the late 1990s of Computer-Aided Business Systems (CABS), a Colorado (US)-based developer of workflow-based e-business solutions, improved the product's plant execution and multi-site product functionality by providing VisiTools applications to improve user companies' control, visibility, and understanding of manufacturing operations. These workflow-based extensions of the Fourth Shift product help track the movement of components and products through the plant from receiving through production, to the warehouse and final shipping. These applications also enable customers to monitor transactions and automatically take action as specified events occur, which should improve efficiency through tighter control over inventory with greater accuracy and less manual intervention. Many customers also praise the product's workflow capabilities between production lines and warehousing facilities (including electronic data interchange [EDI] functionality that can be integrated with barcodes, automatic generation of all advance shipping notices [ASN] and containerization data, etc.), as well as its automatic data collection (ADC) capabilities for near real time operation (see The Why of Data Collection).
The Visitools include VisiBar, a data collection and workflow application that incorporates bar code data collection, real time data access, serial-device control, and a high-level programming language to create business-specific solutions (for more information, see Fourth Shift's evolution within SoftBrands' DemandStream). To that end, the VisiBar Designer uses a Microsoft Windows environment to generate scripts, which incorporate logic and database access to an organization's business systems for validation and updates, and user interface (UI) commands to communicate with users. User prompts are delivered using desktop VBClient software, whose configuration settings allow multiple languages to be used simultaneously, so that each user interacts in their preferred language. In addition, VisiBar can print labels based upon the data collected and validated for material receipts, warehouse movement, and customer shipments. Several types of data collection devices are supported, and drivers can be developed for other devices.
The transaction monitoring application VisiWatch includes a selection of pre-written applets that often can help reduce the amount of time manufacturers spend on administrative tasks by notifying users about changes to their systems before those changes become problems. VisiWatch applets alert customers regarding bill of materials (BOM) changes; new customer orders and credit status changes; inventory adjustments; manufacturing order creation; purchase orders; remote control virtual reality (RCVR) errors; Sarbanes-Oxley compliance events; and queue e-mail delivery (for more information on Visiwatch, see Fourth Shift's evolution within SoftBrands' DemandStream). Because of these capabilities, Fourth Shift could be regarded as one of the first proponents of emerging business activity monitoring (BAM) applications (for more details, see Business Activity Monitoring: Watching the Store for You).
More Partnerships and Alliances
SoftBrands has also sought help in satisfying burgeoning customer requirements for radio frequency identification (RFID) and UCCnet compliance. In October 2005, SoftBrands formed a partnership with GlobeRanger, a leading provider of RFID, mobility, and sensor-based software solutions. The partnership should extend and enhance the existing RFID capabilities in the Fourth Shift ERP solution with GlobeRanger's iMotion RFID platform.
This partnership came about a year after SoftBrands announced its vision for a global supply chain networking solution, which would provide manufacturers with a tightly-woven, broad framework for compliance with global data pools, such as UCCnet. At this time, the vendor also pledged to provide cornerstone technology to meet key supply chain requirements for the implementation of RFID technology. GlobalNet software's two modules help meet these requirements.
The GlobalNet Data Synchronization Module (GDSM) ensures that the data users upload to UCCnet complies with the database's format requirements, since the business rules, data relationships, and attribute hierarchies built into GDSM validate the users' information, thus allowing them to publish correctly the first time. The module creates a foundation for adopting RFID by giving user companies the mechanism to store and manage data that RFID will rely on, thereby positioning the user company for the ultimate move to RFID.
On the other hand, GlobalNet Dock Door (GDD) serves as a manufacturer's investiture into the world of RFID by enabling companies to comply with specific mandates today, while providing the scalability, data management, and integration capabilities for enterprise-wide RFID roll-outs as required in the near future. It is a middleware solution built specifically for real time data collection and processing. It allows for user-defined rules and adds business context to product movement data by identifying critical events and providing alerts both locally and back to enterprise systems. GDD stores data for a permanent history of product movement through the supply chain, which is the foundation for value-added business applications. It also provides remote monitoring, device management, data management, and open integration. Its flexible model accommodates both electronic product code (EPC) and proprietary formats.
As part of the above-outlined vision, SoftBrands also entered into a strategic partnership with Internet Commerce Corporation (ICC), a pioneer in business-to-business (B2B) e-commerce connectivity. This alliance integrates ICC's Global Data Synchronization (GDS) solution with Fourth Shift to simplify and speed GDS implementations for SoftBrands' customers. To this end, SoftBrands has modified its Fourth Shift data repository to maintain the full complement of data synchronization data attributes, provide the necessary workflow to manage item status, and utilize the ICC.NET network service.
ICC.NET has received Drummond approval and meets uniform commercial code (UCC)-compliance requirements for UCCnet services due to its extensible markup language (XML) processing and applicability statement 2 (AS2) Internet EDI connectivity capabilities. Because ICC is certified as a 2.2.1 UCCnet solution partner, its array of data synchronization offerings have gone through a rigorous certification process to ensure standards compliance, technical expertise, solution requirements, and implementation tasks in accordance with UCCnet standards. Therefore, the ICC partnership presents SoftBrands' manufacturing customers with the ability to gain an out-of-the-box interface to exchange information with complete compliance to UCCnet standards. The ICC and SoftBrands combined solution should seamlessly transmit item data reliably, securely, and efficiently from Fourth Shift to trading partners via UCCnet.
Along similar product enhancements lines, early in 2005, Aegis Analytical Corporation, a provider of compliance enterprise software and expertise for pharmaceutical and biotechnology manufacturers, selected SoftBrands as a software alliance reseller of its Discoverant Paper Record Input Manager (PRIMR) solution. The Food and Drug Administration (FDA) Title 21 Code of Federal Regulations Part 11 (21 CFR Part 11)-compliant PRIMR allows users to capture their paper-based data more easily and accurately in the highly demanding manufacturing environment. The data can then be used in a variety of ongoing quality compliance and operational tasks, such as process trending, specification setting, annual product reviews, and process validation. This alliance thus expands the value of the Fourth Shift Lot Trace Module.
PRIMR's user-centric graphical interface provides customizable, on-screen data entry forms based on a user's existing paper forms. Once data is entered through the PRIMR interface, it is verified and approved. The data then becomes available to the entire user community within the company for all their operational excellence and quality compliance tasks. The partnership provides SoftBrands' customers with a data capture method vastly superior to paper record keeping, whereby vital data can be easily backed up and therefore protected. In addition, customers can search and select the records needed for further analysis much faster than they can hunt through paper records.
Fourth Shift Edition for SAP Business One
Fourth Shift Edition for SAP Business One, another of SoftBrands Manufacturing division's core products, is the result of a 2004 agreement for a significant joint-initiative with the SAP Business One product to address the software applications needs of small- and medium-sized manufacturing companies.
As the largest enterprise application software company in the world, SAP has significant marketing, distribution, and name-recognition advantages. The giant selected SoftBrands as its partner for mid-market manufacturing opportunities. The reasons cited for this partnership included SoftBrands' brand recognition in the target market; existing customer base and global reach; large accounts potential; and fully integrated functionality with SAP Business One at the user interface (UI) level.
In a nutshell, although SAP has had a few other partners that have added some manufacturing functional nuggets to SAP Business One, none has exhibited the depth of functionality and global coverage that SoftBrands can offer with the Fourth Shift product. Fourth Shift has a very strong global customer base, including more than 400 customers in China (at one point, almost 75 percent of manufacturers in China that had implemented an enterprise resource planning (ERP) system were Fourth Shift customers, largely because it was the first ERP product to be certified by the local regulatory institutions). On the other hand, despite good products, SoftBrands's manufacturing revenue has been low lately for many reasons (e.g., fierce competition, saturated market, negative perception of the bankruptcy filing, etc.). The vendor badly needed a mechanism to reverse the trend of slim sales of new licenses for its manufacturing software products, as license sales constituted only about 15 percent of the overall manufacturing revenue during last few years.
Fourth Shift Edition for SAP Business One is a set of software applications based on the core Fourth Shift product that has been integrated with the SAP Business One software. The product, which has been sold commercially in earnest only since mid-2005, is designed to be an affordable, quick to implement solution with relatively full functionality for small- and mid-sized manufacturers. Using it, a dozen or so early adopter customers have reportedly been able to access real time information through a single system containing financial, customer relationship management (CRM), manufacturing, and management control capabilities.
Fourth Shift Edition for SAP Business One is based on flexible, open technology that allows it to change and adapt as a business grows. By embracing the concept of modular technology, the Fourth Shift product supplies a great number of middleware application program interfaces (API) for interconnectivity among its own and third party components, while also providing for flexibility and incremental deployment. The Fourth Shift 7 series also provides connectivity to other applications based on Microsoft standards, such as .NET and XML, which is considered appropriate for its target niche. This capability not only enables access to the distribution capability of SAP and its partners, but it also provides a significant opportunity to sell SoftBrands solutions to the divisions of SAP's extensive installed base of enterprise customers.
Challenges and Plans
While this product offering has generated significant interest from existing and new customers (even before it was fully-integrated and market-ready), SoftBrands will have to be careful not to focus all their energy on Fourth Shift Edition for SAP Business One. The danger is that Classic Fourth Shift, which still has the largest install base, could be neglected. Having said this, SoftBrands expects Fourth Shift Edition for SAP Business One to be its top breadwinner—first in North America, and then in other geographical regions as those versions are released.
To this end, in October 2005, SoftBrands unveiled its plans to make the solution commercially available in seven additional manufacturing markets around the world during the next two quarters. Thus, the product became available in Australia, New Zealand, Singapore, and Malaysia in the fourth quarter of 2005. In the first quarter of 2006, it will be launched in the UK, Ireland, and South Africa. It has been available for several months already in the US and Canada. Moreover, SoftBrands recently demonstrated its commitment to the German market by acquiring Infra Business Solutions, GmbH, a privately-held German software company that is a reseller and development partner of SAP Business One. SoftBrands expects to have a translated and localized version of Fourth Shift Edition for SAP Business One for Germany, Austria, and parts of Switzerland in the second half of 2006.
Infra provides SoftBrands an entry into the key German manufacturing market with a successful, profitable organization that has extensive manufacturing, consulting, and support expertise in the small to medium enterprise manufacturing segment. Its key product, Infra:Net, is a production planning system sold in the German, Swiss, and Austrian markets. The Stuttgart, Germany-based firm today serves approximately 380 active customers, and has 20 channel partners that provide sales, consulting, and implementation services. Infra reported annual revenues of more than $2 million (USD) in fiscal year (FY)2005.
To date, the Fourth Shift Edition for SAP Business One sales strategy has depended primarily on the existing SAP channels supplemented by the Fourth Shift channel to sell and support implementations, as there has not been a real sales force in place. For now, SoftBrands is primarily selling the solution through its direct sales force, but one should expect that more deals will eventually come through other SAP Business One channel partners. For instance, in November, SoftBrands partnered with et alia LLC, a Milwaukee, Wisconsin (US)-based referral partner, to extend its reach in the North American small and midsize discrete manufacturing markets. et alia is also an SAP Business Partner focused on selling, implementing, and supporting SAP Business One software products for small and midsize manufacturing businesses, and as such it is a natural partner for SoftBrands.
This concludes Part Two of the five-part SoftBrands' Recovery Softens the AremisSoft Bankruptcy Blow series. Part One discussed the company's background, Part Three will address the evolution and DemandStream products, Part Four will look at SoftBrands Hospitality, and Part Five will examine the company's market impact.