While the ongoing consolidation frenzy is by no means the end of smaller vendors, the number of survivors is certainly limited to only a selected few dozen. Amid ongoing seismic consolidation tremors, smaller application vendors are left with only a few choices, such as going (or remaining) private albeit under a wealthy financial backer's wing that is also committed to invest in the acquired technology. Also, there seems to be hope for inventive smaller vendors, which will be focusing on a relatively small, tightly defined market with specific requirements that cannot be met with more generic large' products. Usually, these markets will be too small for the Big Five vendors to want to compete and will also have unique requirements which cannot easily be built into the more generic monolithic products offered by the Big Fives.
These boutique vendors will compete by having in-depth product functions and intimate knowledge of their market place or by offering services (in terms of content and/or location) not available from the Big Five or independent service providers. Smaller manufacturing enterprises are also often more comfortable dealing with a vendor of a size and corporate culture similar to theirs. Examples of these markets can be e.g., fresh meats, dairy producers, Tier 2/3 automotive suppliers, etc. Some of these thriving Boutique Vendors will actually be conglomerates of smaller divisions or vendors with a common owner. These might even be a current mid-range vendor who specializes in a series of smaller markets or even a sub-segment of a Big Five vendor.
note deals with two notable acquisitions involving smaller vendors:
Agilisys International's acquisition of Future Three
Systems Inc. (NASDAQ: MTMS) agreement to be acquired by an affiliate
of Battery Ventures VI, L.P. Battery Ventures
is Part Two of a three-part note.
One detailed the acquisitions.
Three will cover the Market Impact on Made2Manage and make User Recommendations.
Agilisys Market Impact
Thus, Agilisys appears to fit the above picture with its sharp focus only on two (for the time being) quite disparate industries automotive suppliers and process manufacturing and distribution. The preceding BRAIN acquisition has been perceived as perplexing and confusing by many due to the fact that Agilisys' and BRAIN's products and target markets have hardly had anything in common at the time of the merger, leaving any possibility of synergy between the two parties be very slim, and consequently leaving many conclude that the acquisition rationale was strictly an opportunistic move and a financial play of seasoned investors with a good nose.
The most recent Future Three acquisition seems to be diagonally opposite. Namely, market share enlargement and synergy seem to be the keywords here, since the acquisition should entrench Agilisys Automotive division as the leading plant-centric ERP and SCM provider for global mid-tier automotive suppliers. It particularly bolsters Agilisys Automotive's competitive position in North America for automotive suppliers, while it should also allow Future Three products to expand by cross-selling into the European market, which is former BRAIN's homeland, and where Future Three has long experienced the barrier entry and the lack of sizable investment backing.
hindsight, former ill-fated Germany-based BRAIN AG, which had to file for bankruptcy
in July 2002 (see The
Automotive OEMs Might Soon Contract 'BRAIN' Damage), has meanwhile found
a white knight in Agilisys, which has apparently provided it with much-needed
stability, and which will now be further enhanced with Future Three's proven
experience and savvy in providing order fulfillment systems to the North American
automotive industry. Former independent BRAIN had nonetheless long been regarded
as the No. 2 ERP/SCE (supply chain execution) software solutions provider in
most of the automotive supplier markets in Europe and the No. 3 in the US, whose
position is likely to be improved with the Future Three addition. Indeed, consolidation
in every maturing market segment creates a need for every contestant to become
one of the Top 3 players, and Agilisys Automotive seems poised to be one of
the future three' leaders in the automotive suppliers segment.
As for Agilisys as a whole, this acquisition should create a notable combined entity with annual profitable revenues exceeding $125million, an employee population of over 750 and customer installations approaching 3,000. Look for similar acquisitions by Agilisys to bolster the market share and product breadth of the other side of its business, i.e., process manufacturing. Agilisys' still fledgling process manufacturing client base (i.e., below 500) has also predominantly been North American, resulting in insignificant brand awareness and an undeveloped channel outside of the North American market, despite a strong focused offering for certain process industries.
most recent merger looks initially like a positive move for both companies and
their customers, since Agilisys further enlarges a foothold in the discrete
automotive manufacturing (which it has recently started with BRAIN) and solid
SCE product modules that it might embed into its own SCM suite and possibly
cross-sell into many industries (yet to be scrutinized, though). On its hand,
Future Three finds a committed investor and a strengthened management team,
more certain R&D budgets, enhanced multi-national product capabilities and market
access in the future, and possibly some supply chain planning (SCP) and customer
relationship management (CRM) capabilities from the Agilisys side (i.e., Agilisys
ERP, Agilisys SCM and Agilisys ART (Advanced Relationship Technology)
process manufacturing & distribution-oriented products, albeit it is not going
to happen very soon given disparity between the two industries within Agilisys'
fold), while both companies needed increased visibility and clout.
users should benefit from Future Three's bolstered financial stability, and
a likely products' streamlining between former BRAIN and Future Three, which
should help the latter overcome the perception of a legacy system, which has
long plagued it. Namely, until recently, Future Three only operated on the IBM
iSeries (formerly AS/400) platform and had previously
made several unsuccessful attempts to rejuvenate its product architecture and
to bolster its multi-national capabilities.
the other hand, as a result of its own earlier acquisitions, BRAIN had competed
(during the pre-Agilisys era) with its two automotive-focused ERP packages,
which are Xpert Manufacturing System, which runs on IBM's iServer
platform, and TRANS4M, which runs on UNIX and Microsoft
Windows server platforms. The two products also differ in their fit
to different types of automotive suppliers, in addition to platform support.
Xpert is better suited to mixed-mode manufacturing requirements, whereas TRANS4M
should appeal to manufacturers with a lean/repetitive production environment
(with its work-in-progress (WIP) visibility, pay-point operations, multiple
backflush methods, and other automotive industry endemic functionality).
Further, the former BRAIN North America subsidiary has long been focused on Web-based software capabilities and domain expertise in automotive supply chain communication/execution, as opposed to traditional ERP systems in various industries, which corresponds to Future Three's expertise too. The automotive industry has unique characteristics that make it highly conducive to Internet-based supply chain optimization and collaboration, given that, e.g., a car's or an engine's intricate bill of materials (BOM) results in many entities being involved in its making. Thus, both BRAIN and Future Three have long been dealing with helping automotive companies and their suppliers/OEMs cut through the maze of their needs within seemingly endless lists of manufactured parts, where checking and tracking every detail manually is simply a Sisyphus task.
Information transparency and supply chain integration are, therefore, the name of the game, and e-business technology, while not causing these requirements, is at least providing for their enablement. To that end, both BRAIN and Future Three have long been offering and mutually competing with suites of automotive-focused supply chain communication applications that integrate with multiple ERP systems. The platform agnosticism stems both from the need for stronger market competitiveness and from the homogenous back-office population within the customer base. While many existing customers may run on one of BRAIN's above ERP solutions, many others will likely have legacy systems or systems from another vendor that they are not planning to replace any time soon.
a result BRAIN NA has developed its e-Automotive Suite of B2B
communication and collaboration applications, which also includes SupplyWEB
Enterprise, a Web-based system for communicating procurement, shipment,
payment, supplier performance, and many other types of information, catering
thereby for almost every type of communication an automotive company has with
its suppliers. Moreover, with the SupplyWEB version 6.0, BRAIN has expanded
the Internet-based product's appeal by merging European and US/Canadian functionality
to better support manufacturers with plants on both sides of the Atlantic. SupplyWEB
6.5 enhancements further included expanded functionality in key areas such as
E-Kanban, added visibility in supplier managed inventories (SMI) and additional
application programming interfaces (APIs). Other global, multiple languages
ERP independent solutions would include ACmanager, an Automotive
Customer Manager portal application, and the above-mentioned AutoEx (formerly
BRAIN-eX), a TCP/IP Message Broker.
On its hand, Future Three too delivers many elements of SCE, Event and Exception Management (EEM) and Collaboration applications and services to facilitate interconnected supply chains for automotive, heavy truck, agricultural equipment and vehicle manufacturing enterprises. Even within many diverse ERP communities, one will often find Future Three software embedded as a release accounting system, which the vendor has long mastered. All the products are available through a flexible deployment model, either as an enterprise based system within the customer's facility or in an application service providers (ASP) model hosted and maintained by the vendor.
solution includes both buy-side and sell-side applications offering integrated
order management and fulfillment, event management and workflow, collaboration,
decision-support and visibility. To that end, Eclipz is a SCM
solution that should enable automotive suppliers to extend and manage the flow
of information with their suppliers. It is designed around the proprietary CAR
Model (standing for "Connect-Analyze-Respond"), making it thereby capable
of connecting thousands of automotive suppliers to manage the flow of mission-critical
demand and transactional information. The product supports a variety of ways
for customers to connect with their suppliers, including Internet, Virtual Private
Network (VPN), Value-Added Network (VAN), Automotive Network Exchange (ANX),
and even phone and fax. To aggregate all these multi-channel connection methods
into a single point of broadcast and receiving of information, the system further
features a strong transaction gateway that can accept and translate many different
signal types like X.12, eXtensible Markup Language (XML), and Comma Separated
Values (CSV), to name some.
addition, Eclipz provides tools to help customers manage their supply chains
more effectively through Event Management Console (EMC), featuring collaboration,
decision-support and supplier metrics. Further, AutoRelease
is an integrated Electronic Data Interchange (EDI), release accounting, shipping
control and invoicing system that supports over 200 trading partners with the
latest EDI transactions sets as mandated by powerful Tier 1 automotive customers.
Seamless integration between Future Three demand management processes and ERP
applications is provided through the Configurable Interface. Finally, the AutoScan
module, working in conjunction with AutoRelease, provides Bar Code label scanning,
printing and designing application for customers to be able to create and/or
verify information on-line for accurate shipping documents and Advanced Shipping
Although vendors like Future Three and former BRAIN, have long preached the advantages of automating demand management and fulfillment through release accounting for years, the culture and complex technology had initially been major hurdles in promoting EDI and efficient demand management into the lower-tier automotive supply chains. EDI transactions, like the 830 transaction, have been used to tell suppliers what to produce and when to produce it, but the success thereof beyond Tier 1 automotive manufacturers had long been plagued with the lack of visibility and timeliness of forecasts and customer inventory levels.
Common Issues Addressed
However, the pressures of the '90s on automotive suppliers to streamline manufacturing operations in order to reduce inventory and costs in general, and to increase the overall speed of production, have increased particularly during the current economic slump, and these issues are common to both BRAIN's and Future Three's users. With both SupplyWEB Enterprise and Eclipz, suppliers can log-on via the web for access to suppliers' latest inventory levels, allowing for supplier-managed inventory (SMI). Suppliers can view releases and purchase orders, view and respond to quality and delivery performance issues like Delivery Performance Reviews (DPRs) and Production Parts Approval Process (PPAPs), view overall supplier ratings, enter invoice detail and view payment information.
resurgent interest in release accounting has also emerged in the automotive
suppliers' world, since they have begun to quite care about their more influential
trading partners and/or consortium's needs. To that end, both BRAIN and Future
Three offer products to manage supplier relations, procurement, performance,
and keep manufacturers compliant with automotive industry requirements. Many
smaller automotive suppliers have reportedly felt stuck with the traditional
methods of using just electronic data interchange (EDI), which is demanded by
their original equipment manufacturers (OEMs). Issues like: "Does the system
support my trading partners (e.g., General Motors (GM), Honda, DCXnet
(DaimlerChrysler exchange), etc.)?"; "If yes, as part of that,
does it have fully integrated EDI, Barcodes, Payment Processing, and other customer
mandates?"; and "Is it specifically designed to the dictated standards of each
of my trading partners?", have shown up on the radar screen time and again lately.
that end, AutoEx is an uncomplicated solution to a complex problem of handling
the two-way communication needs and requirements of automotive suppliers and
managing the mandates of the OEMs. The module is a TCP/IP-based message server
that works with most back-end systems and replaces Bi-sync communications and
VANs. It is also ANX compatible, but not ANX dependent, and it moves and routes
data to anyone, anywhere, independent of file-type. AutoEx is specifically configured
to deal with renowned demanding trading partners including names like: DaimlerChrysler,
Delphi, EDS, Ford, GM, GXS
(GEIS), IBM (Advantis), Sterling
Commerce among others. This communication can be accomplished
via many protocols such as E-5, HTTP, HTTPS, FTP based on trading partner requirements.
analyzed the above astute product sets and combined install base, Agilisys Automotive
should give a pause to the automotive-focused archrivals like QAD
(with its eQ and MFGx.net supply visualization
collaborative offerings, in addition to the flagship MFG/PRO eB
ERP product) and to the likes SupplySolution (with the i-Supply
equivalent product). The newly formed division will also remain a thorn in flesh
of the likes of SAP, J.D. Edwards, MAPICS,
SSA GT/Baan, PeopleSoft, Geac
and the rest of the army of discrete manufacturing vendors that have long targeted
the automotive industry.
However, one should be cognizant of the likely product overlap and a need for some rationalization, product functionality, customers, markets, business models and people skills wise. That was not the case for the earlier acquisition of BRAIN, as there were no intentions of combining the two divisions except for some general & administrative (G&A) and some secondary marketing resources (i.e., web and graphic design) in the first place. As mentioned above, there might be some applications (i.e., parts of SCM, SCE and ART) that may still crossover with a handful of joint development resources, but it will be up to each vertical development and product strategy team to assess what may work for their vertical. Yet, in Agilisys Automotive division's case, one should expect inevitable merger growing pains, particularly with constituents of similar size that have also long been fierce competitors. A seamless automotive product line is not going to happen straight away, which may result in customers' initial disconcert and skepticism.
given its relatively recent inception as Agilisys, and owing to its two quite
unrelated divisions, Agilisys may mean different things to different people,
which does not really help mind share creation in the particular vertical segments
of focus. Especially when one realizes that many prominent brand names like
BRAIN, Future Three and former SCT Process' brands like the
Adage ERP product and Fygir SCM product (now
Agilisys ERP and Agilisys SCM, respectively) have been supplanted by still only
up-and-coming Agilisys overarching brand. Both Agilisys' divisions must therefore
communicate their successes and strategy to the marketplace, and must aggressively
invest in customer satisfaction, marketing and sales.
concludes Part Two of a three-part note.
One detailed the acquisitions.
Three will discuss the Market Impact on Made2Manage and make User Recommendations.