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Epicor Picks Clarus' Bargain At The Software Flea Market Part 2: Challenges and User Recommendations

Written By: Predrag Jakovljevic
Published On: December 5 2002

Challenges

In October Epicor Software Corporation (NASDAQ: EPIC), signed a definitive agreement with Clarus Corporation (NASDAQ: CLRS), a provider of buy-side e-Business applications to the mid-market, to acquire substantially all of its core products, including procurement, sourcing, settlement and analytics written on Microsoft platforms, in an all-cash transaction for a purchase price of $1 million. The transaction is expected to close in Q4 2002, subject to Clarus shareholder approval. Epicor will provide service and support to the majority of Clarus' installed base of procurement customers, and it has been engaged in reselling Clarus' procurement product for more than two years. Epicor believes the acquisition should enable it to leverage its experience in procurement and sourcing, its integration expertise, as well as its .NET architecture to deliver an expanded suite of supplier relationship management (SRM) capabilities as part of its enterprise suite offering or as stand-alone offering.

Nevertheless, the job of gaining traction will by no means be easy for the merged companies, both being long in a conundrum of down-spiraling revenues. The competition will be fierce, primarily from IBM that, on top of an attractive hosted e-procurement offering alliance with Ariba called Leveraged Procurement Services, also features the group-buying contracts functionality generally lacking in most mid-market e-procurement products. One should not discount the Oracle's recent aggressive online offerings for small business either, with PeopleSoft and SAP crafting similar offerings down the track (see PeopleSoft Internationalizes Its Mid-Market Forays and SAP Tries Another, Bifurcated Tack At A Small Guy).

It is also quite puzzling why Microsoft stayed away from a paltry acquisition of a hopeful beleaguered partner. Has it been content with the recent over thousand times more expensive Navision acquisition and its subsequently chartered business applications strategy (Microsoft Lays Enforced-Concrete Foundation For Its Business Solutions), will provide the e-procurement application on its own (via, e.g., Microsoft Business Network), was the possible insignificant traction of the Clarus' partnership within Great Plains' global network of over 2,200 channel partners the reason, or maybe the giant has no problem with OEM reselling a product of its partner/competitor Epicor?

Furthermore, integrating the Clarus application to all major back office products, as well as to a broader set of trading services such as content management, suppliers' integration, procurement cards, pre-aggregated contracts and catalogs, and payment settlement services, remains a major undertaking for Epicor despite the promise of nascent Web Services.

Epicor has recently also made attempts to logically group and brand an unwieldy number of its products. In manufacturing, which would be approximately half of its customer base, Epicor has Vantage and Avante as its midmarket ERP products while the 'e by Epicor' suite includes the components for back office operations, CRM, business intelligence, PSA, and eBusiness.. This solution caters to non-manufacturing industries. The Manufacturing Solutions Group, which includes the Vantage, Vista, Avante, DataFlo, ManFact and InfoFlo products remain strategic to Epicor and will continually be enhanced both with core ERP functionality and with extended-ERP components such as enterprise portals and Web storefronts.

One may also note that some of Epicor's more advanced modules like advanced planning and scheduling (APS), have been sold via OEM agreements by other software vendors. The company will particularly strive to make the similar success with its Clientele CRM.NET and Clarus additions. The R&D effort with Clientele is, nonetheless, only a harbinger for what is coming for the next generation of all Epicor's product lines throughout next year and beyond, with new web-based technology that exposes all the business rules and logic (via XML and BizTalk) as web services, and one should expect that in the long term (although quite a long term) the suites will converge in this way.

Additionally, the wealth of product names and a still somewhat unwieldy slew of products, presents sales and marketing confusion for the company, both internally and externally across the globe. Therefore, as Epicor has a myriad of products in its portfolio that could benefit from integration with Clarus and/or CRM.NET, it must clearly articulate its plans and the timeline for integration for each of its products. Otherwise or it may face confusion and/or anxiety amongst both its current and potential customers as well as within its VARs. That would be the music to its direct competitors' ears, some of which have better viability and revenue momentum at this stage.

Competition

The competition is indeed flying from many directions since the company now competes in many diverse markets. To that end, in the traditional back-office market, the threat comes from the likes of Intuit and AccountMate in the small business accounting market, via its peers (e.g., Microsoft Business Solutions, ACCPAC, Exact Software, Best Software and Scala to name only some), to the Tier 1 vendors storming down the market. In the pure-CRM mid-market, that would be the likes of Onyx, Microsoft CRM, Pivotal, Kana, Salesforce.com and FrontRange. Not to mention that SAP, Oracle, PeopleSoft and J.D. Edwards will likely be faced in all the above markets as well.

Epicor still needs to undertake worthwhile actions with its products portfolio to further provide the cost-reduction ROI value proposition that has been so deeply lacking in mid-market e-procurement forays of many ill-fated e-procurement has-beens. For instance, on the sourcing side, one could envision the need to link the Clarus product more tightly with the product design and supply chain side, as to address the product lifecycle management (PLM) side of SRM.

On the e-procurement side, sprucing up the direct materials side could address some users' intricacies around better Web-based direct procurement execution and supply chain collaboration. While Epicor indisputably has to deal with the above challenges in a sunken market, by harnessing .NET possibly more zealously than its creator Microsoft, the company has a fair shot at remaining in the mid-market leadership race amongst a slew of formidable opponents.

User Recommendations

Organizations using Epicor back office applications that have an e-procurement initiative should react positively to this news. Existing customers should evaluate the Clarus platform as a way to add value to their existing applications whether with an impending integration effort now or by waiting for the company to supply a generally available integrated solution. For Clarus users, while the acquisition does not completely end the uncertainty, it should breathe a sigh of a relief given Clarus could not go any longer as an independent entity, and given there is a scarcity of eager buyers, as witnessed recently with the failure of e-procurement vendors Izodia and Metiom to salvage their technology assets. The catch 22 will be to obtain the firm delivery schedule of Clarus for all Epicor flagship back-office applications. Existing Clarus users should urgently clarify their support status (whether they belong to the above-cited majority' of supported customers) and the long-term product development and migration strategy with the new/old management.

Small and medium size businesses with less than $50 million annual revenues using either Epicor back office applications or other Microsoft-centric enterprise applications, and that have solid CRM and SRM product needs should react with an interest. However, enterprises that have integration needs outside of the Microsoft environment, with multiple-platform and strong scalability requirements, or need complex CRM and SRM functions such as product configuration, content management, personalization and relationship optimization, PLM, and direct materials procurement might want to look at more sophisticated offerings. Web Service interoperability between .NET and J2EE is still largely a figment of IT zealots' imagination.

Mid-market companies with up to $500 million in revenues that are within Epicor's industries of focus (e.g., Internet startups, hospitality & food service, financial services, software & computer services, metal fabrication, capital equipment manufacturing, and electronics) and companies with a need for a single-source functionality beyond core ERP scope, should benefit from including Epicor in the short list of potential candidates for the enterprise applications selection.

As for manufacturing segment, Epicor targets mid-market manufacturers across the board, covering discrete mixed-mode, make to order (MTO), make to stock (MTS), configure to order (CTO), engineer to order (ETO) and project manufacturing. Key vertical industries are aerospace, automotive, furniture/windows/doors, capital equipment, job shops and metal fabrication. Users from industries not mentioned above may benefit from evaluating some stand-alone Epicor product components (e.g., CRM, APS, e-procurement, and business intelligence application suite) on an opportunity-by-opportunity basis. This as well as obtaining Epicor's implementation guarantee could be leveraged against other vendors in a selection.

Existing users of Epicor products that face stabilization and/or discontinuation may benefit from querying the company's future product migration path, service & support, and/or scalability strategy. As for the newly added and/or anticipated functionality, users are advised to ask for firm assurances on the availability and future upgrades timeframes, and more detailed scope of enhanced product functionality. They should also inquire about any possible impact (or benefits) of migrating towards more advanced offering. Taking stock of current resources VB and C++ skill sets and assessing the effort to train these into VB.NET and C# is highly recommendable at this stage.

The current market trend is towards vendors that can provide comprehensive solutions for medium-sized companies with a quick ROI, and Epicor seems to have a fair shot at delivering that. Enterprises should nevertheless monitor the consistency between the announced strategy and the new parent company's actions in continuing to support all of the former products strategically. Interested companies should consider the added functionality from this acquisition for an addition to their requirements list. Some companies might find this combination as one holding significant value in terms of both cost savings and increased procurement efficiency.

Upper mid-market organizations using Epicor in the back office may consider analyzing their e-procurement/SRM initiative to determine if purchasing Clarus now will have more value than purchasing e-procurement applications (Ariba or other) through different channels. Include these factors when considering a wait and see stance with your e-procurement initiative:

  • The urgency and the complexity level of the e-procurement initiative

  • The organization's internal IT resource availability to integrate e-procurement applications with existing back office applications, if integration is not already provided by Epicor

  • The level of integration required between the existing back office and the new e-procurement applications

Finally, very detailed information about Vantage and e by Epicor products is contained in the ERP Evaluation Center http://www.erpevaluation.com.

 
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