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Fujitsu Poised to (Inter)Stage Glovia's Comeback Part Two: Fujitsu's Support of Glovia

Written By: Predrag Jakovljevic
Published On: January 21 2004

Event Summary

In October 2003, a leading provider of extended ERP solutions for engineer-to-order (ETO) and high volume manufacturers, Glovia International, announced it formed a strategic alliance with Fujitsu Software Corporation to provide manufacturers, customers, and suppliers with improved collaboration and integration capabilities. Glovia International is headquartered in El Segundo, California (US), and is a subsidiary of Fujitsu Limited (TSE:6702), a Tokyo, Japan-based leading provider of international IT and communications solutions with consolidated revenues of $38 billion (USD) in fiscal 2003. The strategic alliance should allow Glovia to improve its customers' ability to collaborate with trading partners and reduce supply chain costs while enabling Fujitsu Software Corporation to further penetrate the manufacturing industry. Fujitsu Software Corporation, based in San Jose, California, is also a wholly owned subsidiary of Fujitsu, and delivers one of the world's broadest lines of application infrastructure software products, including the Interstage Suite and NetCOBOL.

Glovia is indisputably past its few restructurings and ownership-change hardships from the recent few years, and the vendor now has verifiable and clear manufacturing-oriented, extended-ERP product and service offerings, and strategies to execute. The extended period of transitions and restructurings has done a gross disservice to the seasoned vendor whose astute products have been available to manufacturers for over 30 years, and yet, nowadays only some might be aware of their long product history.

This is Part Two of a four-part note.

Part One detailed recent announcements.

Part Three will discuss the market impact.

Part Four will cover challenges and make user recommendations.

Glovia Background

Glovia's origins stem back to 1970, when it was founded as Xerox Computer Services (XCS), which then introduced Xerox Business Management (XBM), an in-house manufacturing and financial management applications. In 1984, XCS introduced XBMS application, an MRP II (manufacturing resource planning) and financial management software for high-volume discrete manufacturers with multiple plants, while in 1990, the vendor introduced Chess, one of the industry's first integrated client/server ERP systems and Glovia's progenitor. Fujitsu first became the Asian distributor of XCS in 1992, while McDonnell Douglas Information Systems (MDIS) acquired XCS in 1994, the same year Fujitsu also implemented the solution globally in over thirty of its factories. In the late 1990s, the vendor added a focus on different manufacturing environments and industry requirements. To that end, in 1995, MDIS jointly developed "Seiban" functionality (to be explained shortly) with Fujitsu. In 1998 it introduced projects and material supply solutions, while in 1999 it introduced automotive industry pertinent functionality.

In 1997, Fujitsu made significant equity in the entity by forming a joint venture with MDIS, whereby Glovia International was created. Following a few years of disappointing results, Glovia was fully acquired by major shareholder Fujitsu from the UK-based, former MDIS (now Northgate) in February 2000 (see GLOVIA to be Resuscitated (Hopefully)).

Fujitsu Support of Glovia

After several years of focusing on the manufacturing and field service-oriented, upper mid-market as the Chess division of former MDIS, Glovia as a part of Fujitsu has since produced a plan for launching its comeback attempt, which is built on its sharp focus and expertise within certain industries, improved new product interconnectivity, and quick and inexpensive e-business enablement. To that end, in 2001, it introduced an XML framework, advanced planning, and scheduling (APS) system, and web-enablement, while recently in 2003, as previously explained, it added collaboration and integration capabilities and enterprise-wide SCM functionality. As a result of its commitment and investment in Glovia as a strategic catalyst for Fujitsu's global growth and a vanguard in Fujitsu's effort to globalize its software and service business division, in 2003, Fujitsu elevated Glovia to a business unit from a mere business group level.

To put things into perspective, the Fujitsu behemoth, with close to $40 billion (USD) in revenues, approximately 160,000 employees worldwide, and $2.4 billion (USD) earmarked for research and development expenditures last year, consists of the following four principal business areas: 1) software and services (including IT consulting; application management; systems integration; IT infrastructure management; outsourcing; network services; business integration and systems management middleware; storage management software; business applications; etc.), 2) hardware platforms (including servers; storage systems; PCs and mobile devices; storage devices and peripherals; mobile and wireless systems, etc.), 3) electronic devices (e.g semiconductors; compound semiconductors; media devices; electromechanical components; displays; etc.), and 4) other products and services.

Lately, software and services have become the largest of Fujitsu's four main business groups, generating $16.8 billion (USD) in revenues for fiscal 2003, which was 43.8% of Fujitsu's overall revenue. For the first time, this group generated nearly 10% more in revenue than the hardware platforms group with $13.4 billion (USD) or 34.9% of total revenues. As a matter of fact, Fujitsu is currently the world's third-largest IT services group, trailing only IBM Global Services (IGS) and EDS. This remains a sort of a best kept secret given Fujitsu still remains best known for hardware (e.g., PCs, servers, disk drives, telecom switches, and mobile phones), not software and services.

In many ways, Fujitsu's recent revenues' breakdown shift resembles that of IBM, particularly given that IBM's business model was somewhat emulated by Fujitsu's strategic restructuring in 2002, which included reshuffling several of its businesses, the withdrawal of the DMR Consulting and ICL brand names, and introducing new software packages into US and European markets. Both giant companies are still known mostly for hardware, although their fastest growing business divisions are in software and services. Fujitsu indeed holds leadership positions in several key sectors of the IT, communications, and microelectronic markets. While globally it often trails the likes of IBM, EDS or Hewlett-Packard in the various above-mentioned market segments, the company remains the pride of its domestic Japanese market, either being the No.1 or No.2 vendor in all these relevant segments (e.g., IT services, IT management, storage software, PCs, servers, optical transport, routers, etc.).

During the last two years, Fujitsu Glovia has even become the second-largest ERP provider in Japan only behind the ubiquitous leader SAP, and recently toppling Oracle. Given its fiscal 2003 revenue was around $200 million (USD) in software and related services with a forecasted $250 million (USD) in revenues for fiscal 2004, Glovia's revenue is less than modest against the backdrop of its parent's total revenue and of tier 1 ERP vendors. However, Fujitsu projects $1 billion (USD) in Glovia's revenues by the end of the decade. Furthermore, Glovia is essential for Fujitsu's recently minted "One Company, One Solution" strategy, whereby enterprise applications are becoming the way for Fujitsu to penetrate North American and EMEA (Europe, Middle East and Africa companies). Also, sales of Glovia software generate additional multiple-fold revenue for Fujitsu in integration software, services, and hardware sales.

This concludes Part Two of a four-part note.

Part One detailed recent announcements.

Part Three will discuss the market Impact.

Part Four will cover challenges and make user Recommendations.

 
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