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Competition from a Small Vendor

Written By: Predrag Jakovljevic
Published On: March 29 2006

Competition from a Small Vendor

In the grand scheme of things, it is obvious that the giants (SAP and Microsoft) are creating and bolstering the awareness of the need for systems usability. The previous article (Major Vendors Adapting to User Requirements) addressed the response of SAP and Microsoft to the user requirements detailed in Driving Factors in the Enterprise Applications Market. But we should also note that some lesser-known vendors have long delivered Mendocino-like features even more pervasively throughout their product suites. As far as small specialist providers are concerned, a case in point is the ongoing success of Sweden-based Jeeves Information Systems AB (JIS).

This is Part Two of the Major Vendors Adapting to User Requirements series.

Simply put, Jeeves develops and supplies flexible and technologically advanced business systems. This is meant to enable smarter business practices (bringing to mind the "Jeeves knows the answer before you know the question" motto) for user enterprises in the manufacturing, wholesale and retail, and service and maintenance sectors. Jeeves Enterprise can be described as a toolbox, emanating from the client's own, unique business processes, to which the system in turn can be adapted. This is quite a different approach from what is generally provided on the enterprise applications market today, such as regimented "best practices" or "processes-in-the-box."

In the fall of 2005, Jeeves Enterprise announced full integration with Microsoft Office 2003 using Microsoft Office Smart Client, the new technology recently developed by Microsoft for integration of Microsoft Office with third-party vendor business systems. This makes Jeeves Enterprise one of the first business systems in the world to be completely integrated with Office, given that SAP and Microsoft have only recently sent the first fifty Mendocino instances to beta customers for testing of the four scenarios mentioned in part one of this series.

Since the middle of the 1990s, Jeeves has worked closely with Microsoft, and their latest joint project has focused on integrating Jeeves Enterprise with Microsoft Office and, as in the case of Mendocino, consequently benefiting from each other's functionality. Integrating these two applications should elevate the future workplace to a new level, given that now users can, for example, work in Microsoft Excel and easily fetch data from Jeeves Enterprise without even having to open the Jeeves application. Also, although users are indisputably familiar with the Windows world, they are at the same time quite familiar with internet technologies too. Thus, Jeeves emphasizes other "cool" features like the ability to start chat sessions and voice over internet protocol (VOIP) phone calls (leveraging Skype, which is now part of eBay) directly from Jeeves. This is seen as a must-have down the track, if users want to truly collaborate in real time with anyone without any borders.

It should first be noted that, with less than $10 million (USD) in annual revenues (although the total partner ecosystem's revenue would come to multiple times this amount), Jeeves still operates at a far smaller scale than many of its competitors. For this reason, its partners often call Jeeves the best kept secret in the industry. Only time will tell whether the vendor will make the secret known, to what extent, and where. In the mid term at least, the vision for Jeeves is to become the top choice in business systems selection tenders, not only in Sweden but in the whole of Europe.

One of its greatest challenges is to turn its product- and partner-centric strengths into a commercial breakthrough within more foreign markets, since opportunity there is generally substantially larger than in the limited-size Swedish market. In these markets, Jeeves is still only in the early stages of market processing. With a slim market share, and global competition from the "usual suspects," Jeeves also encounters a swath of local players in the different markets (although these competitors can potentially be converted into partners). Furthermore, uncertainties in the world around them make prospective customers cautious, and the decision-making process remains protracted. Thus, the toughest competition today for all players consists perhaps of postponed decisions whereby customers retain their existing systems, while pricing pressures remain high.

And yet, there are several reasons for us to look at Jeeves, starting with its ongoing stellar financial performance, which some might confuse (or nostalgically associate) with the enterprise resource planning (ERP) applications market salad days of the late 1990s, which are yet to be repeated in earnest in the somber 2000s. While the company has been growing constantly ever since its inception, it has also been very profitable since 2002, outperforming almost every competitor, including mighty SAP, in terms of some financial metrics like revenue, or profit per employee.

This trend continued throughout 2005, during which most of Jeeves' markets showed signs of improvement, including its single largest market, Sweden, which has shown both increased sales and improved business prospects. Thus, the revenue for the first three quarters increased by 57 percent to 65.6 million Swedish krona (SEK), about $8.7 million (USD), of which approximately 80 percent consisted of licensing and maintenance revenues, which increased by a whopping 72 percent to 55.5 million SEK (about $7.4 million [USD]).

Based on current market trends, Jeeves' board recently maintained a forecasted goal of a 10 percent net margin, and an organic increase in software revenues of 15 to 20 percent remains. Jeeves' intriguing formula for success has thus apparently been working well in an industry where many, if not most other players, fail sooner or later.

Analysis of the Jeeves Challenge

While SAP and Microsoft acknowledge the challenges and the driving forces coming from the focused and innovative likes of Jeeves (who have apparently long been well attuned to user needs and market trends), they stress the need to see Mendocino (along with Microsoft Dynamics Snap-Ins) for what they really are, and for the overall market impact these products will have.

Jeeves certainly does not have anything nearly close to the breadth and depth of deployment that SAP (and even Microsoft Business Solutions) has. Being a more recently devised product than SAP, and incorporating more contemporary technologies, it is only natural to expect Jeeves to be pervasively integrated with Office. However, to describe Mendocino features as just "Office integration" might simplify the anticipated "big picture" effort and focus of Mendocino. Since one has to start somewhere, only the four scenarios mentioned above are incorporated, but SAP stresses that Mendocino is about eventually giving the Office user the power of most of SAP's highly involved business processes and data, in an intelligent, context-sensitive way.

In other words, Mendocino is about giving better and more intuitive access to business processes for companies running their businesses on a secure, robust, enterprise-class enterprise resource planning (ERP) system. While the underlying idea of simplifying life for users remains, the Dynamics Snap-Ins and Mendocino impact to the market, and ultimately to thousands, if not hundreds of thousands of users, should not be minimized. The depth and the scale of the "joint development" and "joint go-to-market" strategy of the two industry titans brings about quite a different story than what the likes of Jeeves might be bringing to the market.

Mendocino and Dynamics Snap-Ins solutions certainly have lots of similarities (such as their time and vacation management features), but the latter set of solutions also provides contextual business data lookup in Microsoft Office programs. Microsoft points out that another difference of Snap-Ins is that the product is a shared source initiative. The vendor wants to encourage its partners to build and customize these solutions for their customers, for specific roles and verticals, or to help Microsoft build more solutions that enhance productivity and empower information workers.

Some of the pain points that all the above vendors have tried to address with their respective applications include typical day-to-day tasks that information workers encounter, such as duplicating data entry tasks by tracking time-sensitive information in one place, then having to reenter it into an ERP database. Other prominent pain points might include having to copy and paste information from a database into a spreadsheet or e-mail, and having to switch between business management solutions and Microsoft Outlook to copy and send information. SAP and Microsoft will actively be looking at additional rich collaborative applications that they can ship with mySAP Business Suite, Microsoft Dynamics and Microsoft Office 2007 systems down the track.

 
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