Cloud ERP’s Plex Has Record 2013, Aims Higher for 2014

With NetSuite continuing to grow at a hefty pace and Acumatica recently reporting an exceptional year (as well as Rootstock Software and Kenandy, although they started from a much smaller base of customers), Plex, a leading cloud-based enterprise resource planning (ERP) provider for manufacturers, reported another record year in 2013, adding 59 new customers and growing to nearly 400 corporate clients representing more than 1,100 manufacturing production operations worldwide (in more than 20 countries). The company also expanded into two new industries from its metal stamping and motor vehicle strongholds, aerospace and defense (A&D) and food and beverage (F&B) processing, and continued to build up its management team with key leadership additions.
Major new customers who signed on in the past year include Aerospace Technologies Group, Green Flash Brewing Co., JD Norman Industries, and Sanders & Morley Candy Makers. The vendor also expanded its footprint with more than 50 existing customers, adding new solution capabilities and powering new factories and divisions.
The Plex Manufacturing Cloud is now deployed in more than 20 countries with support for 8 languages. The company recently expanded its North American operations with new facilities in Michigan and California, and now has more than 365 employees. In terms of international expansion, Plex remained focused on North American-headquartered companies. That will continue to be Plex’ approach in 2014.
Plex 2013 leadership team expansion included naming Jason Blessing as CEO, Heidi Melin as chief marketing officer (CMO), and Karl Ederle as vice president, product management. Blessing is working across the entire Plex organization to accelerate growth, which can be seen in Plex’s 2013 results, and this effort will likely be reflected across the whole business in the coming year. The company is growing investment in research and development (R&D) significantly, enabling it to maintain strong customer-driven development while building more proactive product roadmaps, including some big investments in user experience (Ederle joined as VP Product Management to lead this effort for Plex).
Professional services, under Chris Bishop, continues to grow and mature. He has put in place new programs and a customer community, and continues to evolve the services offerings as Plex takes on larger and more complex organizations. Go-to-market is also getting a significant investment. Melin (formerly at Eloqua and PeopleSoft) has been working on increasing awareness of Plex in its core markets and building a demand engine to fuel further growth. In tandem, Plex is making investments in the sales team to up its coverage and support industry initiatives in motor vehicles, F&B, and A&D.

2014 Will Be Telling
I am sure that a lot of the aforementioned changes are going to make Plex more scalable, and a stronger candidate for an initial public offering (IPO), which is what this is reportedly all about. The next 12 months or so are going to be telling for the company: if it can ramp up the growth rate with all of the investment, great—it will get a higher valuation if and when it goes public. But if the growth rate doesn't spike up significantly (from the already decent growth rates of recent years), then all of this increased investment might appear kind of silly and gratuitous.
Plex has lately experienced a strong cultural change by going from a pull-yourself-up-by-your-bootstraps mentality to a Silicon Valley-crazy-money mentality when it comes to spending. It has also been a wrenching move from largely customer-driven product development (for a fee) to a more strategically driven development (roadmap-based). Plex cannot move completely away from customer-paid development, as there will always be a need for it. It is more about balancing it, and allowing customers to choose and wait if something is on the product roadmap, or pay if they want it sooner (or if it's not on the roadmap at all).
One might want to benchmark Plex to its aforementioned cloud ERP peers NetSuite and Acumatica, which seem to be growing and expanding much more aggressively worldwide, in large part via value added reseller (VAR) partners. Plex thinks it is an apples-to-oranges comparison, since VARs at that level are going to be attracted to smaller solutions that they can package up for smaller companies. As a pure-play cloud ERP vendor Plex is always going to be involved in relationships, and its interest is to grow via additional industries and larger organizations rather than going after a distribution play. Nonetheless, Plex’s partner program remains implementation focused with a small number of resellers. The vendor is focusing on the direct team in 2014, but its ecosystem is important and we may see some additional investment in third parties down the track.
Plex is also continuing to work up-market, since it has a number of large manufacturing customers who use Plex at a plant or multi-plant level where Plex connects into a legacy ERP backbone. This is an important opportunity for the vendor, and we should see the company continue to pursue that vigorously in 2014. To really scale, Plex might want to become a spoke ERP solution to an Oracle or SAP ERP hub, but there is already fierce competition in this two-tier ERP or hub-and-spoke setup (i.e., NetSuite, Epicor, Microsoft Dynamics, and others vying for being the spokes). Perhaps Plex should try to align with Infor as a spoke solution for Infor LN or Infor M3 ERP hub environments? In addition, Acumatica was smart to offer its system as a private label for Visma in Norway and MYOB in Australia. These leading local vendors could not viably rewrite their old systems into cloud and are OEM-ing Acumatica. Plex might want to pursue similar relationships with some local legacy manufacturing ERP providers.
Plex is going up-market where direct sales works better, but at some stage, in order to be taken seriously as a global ERP player, Plex will have to attract the likes of Accenture, Tata, etc. Since that approach would require more culture change and probably turnover of key resources, Plex is currently treading carefully there, taking it one step at a time.

Integrated ERP, MES, and QMS Still a Rare Offering
Plex pioneered cloud solutions for the shop floor, connecting suppliers, machines, people, systems, and customers with capabilities that are easy to configure, deliver continuous innovation, and reduce IT costs. The vendor still has a great foundation in the automotive industry, and the investment in marketing and industries is specifically designed to take the capabilities it has built into new areas. The results are terrific thus far, specifically in areas like F&B—businesses like craft beer, and even craft ice cream have been great opportunities for Plex. These are firms where the cloud fundamentally enables their business model, as they operate on a zero-IT footprint. One can configure Plex Manufacturing Cloud to work for, say, an ice cream maker, a metal stamper, and an engine builder, all on the same core. It is a true kicker that that an ERP product can support such diverse operations via configuration.
In addition, Plex competes differently than its cloud ERP peers (NetSuite, Acumatica, Kenandy, Rootstock, etc.) in that it has the prospective customer enter through the shop floor while the others typically start at the back office. I think there is room for all models right now, but Plex is uniquely capable of managing the shop floor, running the business operations of the small and mid-sized enterprise, and working in a two-tier model for global enterprises.
What Plex has is something special—not many other ERP providers (even the long-in-the-tooth on-premise ERP players) have what Plex has at the shop floor level. Via native manufacturing execution system (MES) and quality management system (QMS), the product has the ability to connect to the people, machines, and materials at the heart of the business, including connecting to the cameras that watch the parts racks fill up. And it can go all the way up and down the supply chain, and out to the back office. For a manufacturing business, there is really nothing like it, especially in the cloud. IQMS and ProfitKey might have integrated MES/QMS/ERP capabilities like Plex, but they are on-premise only, and targeting much smaller manufacturers.
Last but not least, based on its culture and track record, Plex keeps its customers happy (reporting over 90 percent customer retention rate for years). It will be interesting to watch whether Plex, with all those ingredients and the investments it is making, can grow even faster in 2014 and surprise a lot of folks.
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