Exact Software--Working Diligently Towards the "One Exact" Synergy Part Four: Market Impact Continued

Macola Becomes Exact Software

Exact Software, a Dutch-based provider of integrated accounting, payroll, customer relationship management (CRM), enterprise resource planning (ERP), and business process management (BPM) software solutions, and a division of Exact Holding N.V. (EURONEXT: EXACT) continues to expand its products' footprints and operations worldwide, lately with a particular emphasis on the expansion in North America. Two thousand and three was indeed a busy and transitional year for the vendor with the acquisitions of certain resellers, the subsequent openings of new US offices, and a launch of new products to the market.

Still, after nearly two decades of prominence, mainly within the mid-market of financial and accounting, HRM, project management, and logistics administration solutions with its flagship Exact Globe 2000 back-office product, Exact begun making big strides in the early 2000s to extend its reach into North America and into the manufacturing segments. It turned into a full-fledged comprehensive e-business software provider for SMEs. The first major step in that direction was the 2001acquisition of former Macola Technologies Inc., which almost instantly made Exact a $200 million (USD) player in the mid-market enterprise applications segment. While not really a household name in North America before the Macola acquisition, Exact has always been a force to reckon with in the lower end of the ERP mid-market in Europe, and occasionally, to a degree, elsewhere in the world.

Consequently, Exact's experience with Macola has so far been a case of a successful merger and assimilation effort. While many competitors have been experiencing largely flat or declining revenues and scaled-back research and development efforts, Exact has gone in the opposite direction, particularly in North America. Despite the tough economic climate, the company has since closed a number of deals partly because it is a bigger organization with broader geographic sales and support coverage. A weaker demand for enterprise applications worldwide has also been compensated by an increase in add-on, up- and cross-sales revenue from customers who have migrated to Exact Globe 2000 and Macola ES, and by brand new users of e-Synergy. For additional information on e-Synergy, see Part One.

Therefore in 2002, what used to be Macola adopted the name Exact Software North America, and contributed approximately 58 million to the top line (total revenue) in fiscal 2002, compared to less than $40 million (USD) prior the acquisition in 2001. With the subsequent Kewill acquisition as well as with relatively recent acquisitions of four best performing resellers, Exact Software has meanwhile opened several additional regional offices for local sales and support for all its products throughout the US. In North America, Exact now boasts more than 11,000 customers (almost exclusively within manufacturing), 11 offices, and over 130 channel partners.(For information on the Kewill acquisition, see Is Enterprise Market Consolidating? Exactly!).

Moreover, the combined entity has meanwhile offered an expanded solution footprint with the relatively recently unveiled extended-ERP suite dubbed Macola ES. The product is the next-generation successor of the Progression Series ERP product, which, via the integration with e-Synergy has meanwhile rendered many third-party products superfluous due to the natively provided HRM and CRM functionality inter alia. The suite leverages virtually all the Progression Series' functionality with certain advanced scheduling enhancements in manufacturing or multicurrency financial management consolidation and reporting capabilities and it has support for several languages; however, in particular it has enhanced user-friendliness, and built-in, native workflow and BPM capability. For example, the inherited e-HRM module tracks applicants, delegates tasks, counts absences and expenses, links to payroll, and so on.

Further, e-Synergy's document management capability allows for employees' resumes and skill-sets to be stored, which eliminates traditional dreaded shuffling through stacks of paper for HR administrators. Also, while Progression Series has had built-in job tracking and project accounting capabilities, such as setting up a project job, budgeting against it, and tracking transactions versus the budget, the Macola ES/e-Synergy combination offers a far better project oversight that includes scheduling, document management, and workflow tracking. This has brought about new opportunities for targeting contractors and service firms whose project accounting needs are related to tracking expenses for non-construction projects.

This is Part Four of a six-part note.

Parts One and Two detailed the event summary.

Part Three began a discussion of the market impact.

Part Five will continue to discuss the market impact.

Part Six will cover challenges and make user recommendations.

Single Product Strategy

Lately, Exact has been focusing its research and development efforts on a "single product" strategy that leverages the previously mentioned One-X architecture framework. One-X refers to the single database (i.e., SQL Server) and transaction table between Exact Globe 2000's or Macola ES's respective back-office products, which each have the e-Synergy front-office and BPM product. Both product combinations should provide customers with full integration of back- and front-office solutions, albeit with different focus and strengths and in different markets the Exact Globe 2000 and e-Synergy combination targeting non-manufacturing markets outside North America, and Macola ES and e-Synergy targeting inside. The idea is to eventually converge these three product lines to possibly create a unified global product in the future. Meanwhile, new versions of all acquired product lines have been developed on the same architecture, which should ensure long-term economies of scale, product integration of acquired brands, and product continuity for customers. To that end, Exact is using a common object repository to simplify development across its products, so that Globe 2000 and Macola ES could "borrow" modules from each other accordingly.

Therefore, in the near future, Exact will have another potential strength against most of its competitors: its eventual global nature. Unlike Sage/Best Software and MBS's forays, the advanced convergence of Exact Globe and Macola ES with e-Synergy could produce a single product line that operates on an international basis, whereas the others would still have multiple product lines stemming from acquisitions that they have attempted to paste together from around the world; however, these product lines are not able to work with one another. For example, Sage and MBS are not exactly uniformly global companies as their product offerings differ for different markets. Also, these vendors are still in a quandary about which of their numerous ERP products to integrate to their CRM counterpart — SalesLogix or Microsoft CRM, respectively. Also, not many customers can integrate the UK Sage product lines (e.g. Line 500) with the US Best Software counterparts (e.g., MAS 500), and the same holding for MBS' Great Plains, Solomon, Axapta, and Navision product lines. While these vendors could contend that separate products in separate countries is necessary to provide a best-of-breed localized approach, such a response might be perceived as a lame excuse resulting from a market share increase opportunity buying binge.

In any case, the corporate Exact's contribution to the matrimony between itself and Macola was the above-mentioned e-Synergy, a suite of diverse web-based solutions, such as CRM, HRM, professional service automation (PSA), project management, and extensive workflow management functionality. Although it admittedly is not as deep as some of the individual, best-of-breed CRM, HRM, PSA, or BPM products in the market, it offers most of the nifty functionality a small or medium enterprise may need without the superfluous integration headaches. Owing to its inherent workflow as an applications glue, e-Synergy furthermore often becomes bigger than the sum of its parts, since, by being able to manage the customer's web site and by including the buy side and the sell side of e-business, document management, and logistics functionality, it borders on the capabilities of still evolving knowledge management (KM) and BPM systems. The successful and quick integration of e-Synergy with former Macola's back-office solution to deliver Macola ES was impressive delivering more information to the desktop and across the enterprise and catering for better management of customer service for an organization.

One might even say that e-Synergy was a virtue of necessity because it was originally developed by Exact to give its globally dispersed offices better collaborate- and share-information in near real-time. Therefore, Exact has established a global infrastructure and network of offices offering direct support, sales, and services with the aim of providing customers a consistent level of service. This was effectuated by ensuring that all employees within the Exact's international organization utilize e-Synergy both as an internal automation and information system for monitoring these customers and for sharing real-time information about each of these multinationals. By further increasing its global network, its standard front- and back-office solutions and a real-time infrastructure, Exact has bolstered its position for acquiring multinational organizations as customers and for creating further opportunities for cross-selling to affiliates of these organizations in other countries. This approach has reportedly allowed Exact to build up a central knowledge base of potential international customers and their subsidiary networks. Currently, Exact International supports more than 8,000 international companies.

Giving an Edge to Its ERP Product Lines

Once the proof of concept had been made, Exact realized that the technology could provide an edge to its ERP product lines, Exact Globe 2000 and Macola ES, in extending the user enterprise's reach beyond the traditional, selected few power users within financial or manufacturing departments. As said earlier, e-Synergy automates a gamut of activities like document management; employee and customer relations; project management; workflow management; financial consolidation and roll-up; and supplier and partner portals. The web-based system can also be synchronized with third-party ERP solutions particularly targeting MBS Great Plains users that do not have a single database architecture, but instead use batch transfers that replicate data between e-Synergy and ERP product's databases.

Exact Software claims that it recently surpassed one hundred customers who have deployed e-Synergy in North America. The adoption of this sort of new breed of enterprise system with native BPM functionality might lead to new efficiencies for early adopter enterprises. Typically, traditional enterprise systems touch only about 25 percent of an organization, while the bundled tools offered by e-Synergy could virtually extend to every employee, bringing all employees into the process and tying them more closely to the company's business goals. In addition to catering to the core processes for service or manufacturing oriented organizations, there has long been a gap of uncovered remaining workplace processes within an organization. Namely, this gap surrounds IT-supported process optimization which include some of the following: organization of internal meetings; taking and distributing meeting minutes and managing all ensuing tasks; the management of internal orders for indirect goods and staples; the management and reconciliation of staff vacation plans, etc. One reason why these have largely remained untackled is that they have not been recognized as revenue generators. They are more cost generating processes that could accumulate to a substantial cost earmark per year.

Also, by tackling the automation of these tasks, e-Synergy represents a broad suite of products, which may still only be a figment of its direct competitors' imagination. Rather than being a typical enterprise application that "crunches" transactions using a relational database, e-Synergy goes a mile further to support longstanding processes within and outside an enterprise that entail real-time collaboration and document management. Therefore, the suite may indicate the emergence of a new category of software that tackles enterprise relationship management, groupware and workplace collaboration management, and so on. Some leading analysts have named this nascent category as smart enterprise suite (SES).

This is owing to the fact that XML and related internet standards have lately made the unstructured data environment semi-structured and more agreeable to IT support, since document management and enterprise content management (ECM) systems can nowadays store and retrieve unstructured data. Other technologies that should be credited for the emergence of like enterprise systems are portals, search engines, and categorization systems that retrieve any given information, and integrated report generators that view and report any data from structured and unstructured data sources. Look for Exact Software forays in directions that enable e-Synergy to launch any related application (native and third-party ones) based on a selected information object, and to launch defined business processes (workflows) across multiple systems.

This concludes Part Four of a six-part note.

Parts One and Two detailed the event summary.

Part Three began a discussion of the market impact.

Part Five will continue to discuss the market impact.

Part Six will cover challenges and make user recommendations.

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