Ups The .NET Ante
- September 23, 2002
the end of July, Frontstep, Inc. (NASDAQ: FSTP), a prominent global
mid-market provider of business applications and services for discrete,
to-order' manufacturers, announced SyteLine 7, its extended ERP
suite architected on the Microsoft .NET platform. With the launch
of SyteLine 7, Frontstep is delivering a global, integrated enterprise
suite - including Extended ERP, Customer Relationship Management (CRM),
and Supply Chain Management (SCM) - on a single technology platform. Current
versions of SyteLine, Frontstep's flagship offering, are in use at thousands
of manufacturing locations worldwide.
7 represents a fundamental technology shift that takes advantage of the
vision and potential capabilities of Microsoft .NET, particularly the
SQL Server 2000 database, Exchange Server 2000, and XML
Web services. Through leveraging solutions built on .NET, Frontstep believes
manufacturers are assured that today's technology investments will provide
longevity, reliability and ease of maintenance with the greatest benefit
at the lowest total cost.
addition to the new architecture, Frontstep's SyteLine 7 includes key
advances designed to help manufacturers address today's complex business
requirements. Advancements have been made in the following areas: planning
and scheduling, multi-site capabilities, business process automation,
reporting, globalization, navigation and personalization. This latest
release of Frontstep's flagship offering should thus help manufacturers
meet the evolving requirements of their customers and compete successfully
today and in the future.
7 is currently in final field-testing by select customers and is targeted
for general availability in North America in September 2002. Frontstep
will begin rolling out SyteLine 7 to international markets by year-end.
Current versions of SyteLine will continue to be sold and supported. In
addition, Frontstep has developed a program to upgrade customers to SyteLine
7 should they choose to do so.
detailed information about SyteLine 7 is contained in the ERP
Evaluation Center at http://webtess2.technologyevaluation.com.
prominent product release precedes the August 5 announcement, when Frontstep
reported profitable financial results for the fourth fiscal quarter but
still not for full fiscal year ended June 30, 2002. Total revenue for
Q4 2002 was $22.7 million, an increase of 4% sequentially over the revenue
of $21.8 million for Q3 2002, but still a 21% drop compared to $28.8 million
revenue a year ago (See Figure 1). License revenue was $9.2 million, an
increase of 23% sequentially over the $7.5 million reported in Q3 2002,
but again, it was a 20% drop compared to $11.5 million revenue a year
ago. Operating income in the fourth quarter was $1.0 million and net income
was $487,000, as compared to an operating loss of $1.9 million and a net
loss of $1.2 million reported for the previous quarter. For the same quarter
in the prior fiscal year, the company reported an operating loss of $5.2
million and a net loss of $5.2 million. The prior year operating loss
included a special charge of $3.7 million relating to restructuring of
fiscal 2002, total revenue was $92.8 million, a 21% drop compared to $117.1
million for fiscal 2001. More painfully, however, license revenue was
$35.4 million, a 31% drop compared to $51.3 million in 2001. Still, the
reported net loss for the current year was $3.3 million, significantly
less compared to a net loss of $26.1 million for fiscal 2001 (See Figure
2). The prior year loss included restructuring charges of $6.4 million.
news of somewhat stabilized financial performance and revenue levels,
and of improving cash flows, comes at the heels of other recent major
events during the quarter. Frontstep signed 60 agreements with new customers
in the quarter and completed the final phase of its previously announced
$5.0 million Convertible Note transaction that makes available an additional
$3.5 million to support working capital and operating needs (since the
company already drew down the first $1.5 million in Q4 2002).
is Part One of a two-part analysis of recent news from Frontstep. Part
Two will cover Challenges and make User Recommendations.
one should not jump too swiftly to any conclusion given pervasive pessimistic
signals throughout the market, as to discern whether the company is in
for a real turnaround, it appears nonetheless, that it is past the horror
of the early 2000s (see Figure 1 & 2). More importantly, however, Frontstep
seems to have finally solved a big piece of its long-nagging puzzle of
developing a next generation product and of migrating its large and satisfied
user base. The company has long been in a conundrum of concurrently enhancing
its Progress Software-based flagship SyteLine product while developing
a more technologically viable and amenable product to its target market.
As Microsoft-centric technology and the .NET initiative have become mainstream
in the applications mid-market, Frontsteps decision to focus solely on
these has been prudent, given that, at the same time, Progress-based SyteLine
faced a legacy status only several years after its delivery, making it
less attractive to recent new prospects.
after stellar late 1990s in which Frontstep, a traditionally strong player
in the mid-market ERP space, achieved impressive growth, resolved some
functionality weaknesses (e.g., international capabilities of its financial
modules) in its own product and successfully partnered with and/or acquired
vendors that offered complementary functionality, the company has embarked
on a strategic technology transition from Progress to the Microsoft .NET
platform while feeling the malaise of the shrinking market and economic
depression. Further, the company has made efforts to also keep abreast
of the enterprise applications market trends by providing both front-
and back-office solutions, which, during the time of shrinking revenues,
has been excruciatingly painful. Still, it was a worthwhile effort, as
the company has delivered its entire product line, which includes ERP,
CRM, and SCM, on a single technology platform. An indeed notable feat,
given that many of its peers have mostly only recently embarked on this
technology transition path, or, in a better case, have managed to deliver
a module or so on the .NET platform, while it will take some significant
time and resources to have their entire product suites rewritten.
although the technology rewrite is important, it is only that the combination
with new functional capabilities in areas like advanced planning and scheduling,
flexible multi-site deployment, bills of material (BOM) workbench (i.e.,
material and routing information combined in a visual manner), operation
sequencing, and flexible business process management (BPM) should position
Frontstep well going forward.
on the technology front one can imply Frontstep is conveniently piggybacking
on Microsoft's push of its technology into mid-market enterprises, Frontstep
nevertheless remains a visionary vendor in terms of functional requirements
of the mid-market, by providing extended ERP and significant web-based
supply chain and front-office functionality in a modular manner, also
with a strong international presence. It has earned a reputation for being
innovative in all of ERP, e-collaboration, and supply chain terms going
back to its much-publicized 'customer-centric' nature of its product lines.
Frontstep functionality is aimed at synchronizing customer orders with
inventory and capacity, with an overall visibility throughout supply networks.
This may significantly lower operational costs and improve on-time deliveries
by automating inventory sourcing and manufacturing planning with web-based
demand and supply management across multi-site operations and suppliers.
Frontstep is offering its core transaction back-office systems (SyteLine
and, selectively SyteCentre and SyteDistribution), then
front-office functional modules purchased from Profit Solutions
in 2000, and supply chain functionality from its much older purchase of
Pritsker and Distribution Architects International (DAI).
In 1997, Symix also bought field service specialist Visual Applications
Software. Frontstep is also delivering its Frontstep Active Link
backbone to provide end-users with the ability to connect suppliers and
customers to its core transaction system, although the product might be
overshadowed by Microsoft BizTalk Server over time.
its recently enhanced functionality as another stab at natively delivering
solid SCM and CRM modules (see Mid-Market
ERP Vendors Doing CRM & SCM In A DIY Fashion), Frontstep is positioning
itself as primary business systems provider that offers comprehensive
enterprise solutions with integrated CRM and SCM capabilities, on top
of a strong manufacturing ERP capability and experience rather than as
a mere ERP vendor. Its focus has long not been entirely on the traditional
back-office functionality although that aspect of the offering has not
that regard, the Syteline suite (featuring ERP, CRM and SCM) for mid-sized
manufacturers, by and large offers support for customer service, order
processing, inventory control and purchasing, manufacturing production
management, production planning and scheduling, cost management, project
control and financials, sophisticated product configuration for sales
order management and manufacturing, advanced planning & scheduling (APS),
business intelligence, workflow automation, with business process definition
and execution, and advanced forms. Furthermore, Frontstep's Syteline ERP
7 ERP offers additional functionality such as an embedded APS engine into
materials requirement planning (MRP), which enables order-by-order planning
process rather than traditionally BOM-based MRP planning process, and
much stronger inter-suite integration, user interface improvements (e.g.,
all screens are workflow enabled, browser enabled forms, filter' restricted
access on a field level, etc.) alleviating thereby some functional shortcomings
of the past.
manufacturers and distributors have traditionally been pragmatic rather
than early adopters. Mid-market companies have increasingly been looking
for a single source for their core back office system needs and/or to
extend the existing applications to both customers and suppliers, in order
to maximize their investment and reduce the complexities of integrating
disparate applications. To that end, the following extended-ERP broad
offering from Frontstep, which is mostly provided natively, or in a tight
OEM fashion from long-term partnerships, might fit the description:
Business Intelligence (partnership with Cognos)
Business Process Management (partnership with Cobre)
Workflow Automation (partnership with former Keyfile, now
Forms (partnership with former JetForms, now Adobe)
(using Sterling Commerce translator/information broker)
from this, the company will bet its future on its CustomerSynchronized
solutions initiative, with view to achieve dominance in the make-to-order
(MTO) demand-driven manufacturing and distribution sectors. Modules include
Frontstep Intelligent Sourcer, Frontstep Point Promiser
(the promising engine for available-to-promise (ATP) collaboration across
trading partners), Frontstep Capacity Promiser (a constraint-based
planning tool for cross supply chain capacity promising) and Frontstep
APS, which extends to cascading supply chain synchronization. All
the above components incorporate Web services technology to simplify integration
and information exchanges with other systems. While Frontstep has been
promoting the concept of an integrated solution, including both ERP and
collaborative e-Business components, the company might selectively pursue
stand-alone sales of its above collaborative SCM components in a back-office
addition to strong extended-ERP functionality, at the heart of the vendor's
business model is Internet messaging and XML-based technology, and professional
services that enable it to connect to, and provide e-business solutions
for, many back-office systems (e.g., via Frontstep Active Link for application
integration, business process automation and collaboration). The strategy
may seem innovative in a market where customers may view ERP as a hackneyed
news, although still of a paramount importance as a pillar of all collaborative
applications. Frontstep could therefore attract new prospects outside
its large customer base, particularly enterprises with other competitive
back-office solutions in place, which are open-mindedly looking for easily
deployable Internet-based solutions.
might hold true also for Frontstep CRM, a manufacturing-focused
CRM solution, which is a combination of traditional prospect management,
product catalogs, product configuration, quotation creation, inventory
availability, order management, and support—all done over the Web—and
fully integrated with SyteLine ERP product. The above basic CRM features
are what the targeted customers likely need at this stage. An affordable,
natively integrated application with reduced implementation risk and innate
integration to Microsoft Outlook and Microsoft Excel will
likely strike a chord with the vendors' existing customers.
integration factor, as well as the vendor's extensive experience in the
manufacturing sector, may provide it a competitive edge against both larger
ERP vendors and CRM specialists with more general-purpose products. Lastly,
the company has made attempts to develop an indirect channel to supplement
its strong direct sales force in order to better approach the lower-end
of its target market. Frontstep has had a sizable indirect channel since
the mid 80's that currently contributes around 25% of sales revenues.
It targets enterprises with annual revenues up to $50 million primarily
via resellers/VARs, while the larger enterprises with up to $1 billion
per site/division are handled by its direct sales force.
concludes Part One of a two-part analysis of recent Frontstep announcements.
Part Two will discuss the Challenges Frontstep faces and make User Recommendations.