Geac Awakens On Its Deathbed
2: Geac's Response
On September 5, Geac Computer Corporation Limited (TSE: GAC), a
struggling Canadian supplier of enterprise management software, announced
that net income from continuing operations of Can$17.2 million in Q1 2002,
compared to a net loss from continuing operations of Can$43.2 million
during the first quarter of the previous year. While it may seem that
returning to profits by merely trimming fat and milking revenue from the
existing client base should not be worth writing about, positive results
in today's business climate are more than simply psychologically important.
The fact is many other vendors seem to have reached rock-bottom and not
all have survived.
is Part Two of a two-part note on how Geac seems to be recovering. For
a detailed Event Summary and Market Impact, see Part
Geac's past strategy of unbridled acquisition in a number of unrelated,
diverse fields combined with the overall weakness of the ERP market during
1999/2000 resulted in dismal organic growth, a disconcerted user base,
and disastrous results (See Figure 2). Sticking to its thrifty strategy
(acquire, cut administrative expenses and generate service revenue) instead
of taking decisive action to breathe fresh air into its arsenal of products,
also backfired on Geac and relegated it in the back seat of the enterprise
positive news is Geac's determination to execute the following three-phased
- To shore
up the business and return to profitability - achieved in Q1 2002 (July
- To bolster
human and financial resources, build and expand industry expertise,
and partner with selected renowned vendors for complementary products
- envisioned for Q2 2002.
- To prudently
acquire selected products to belatedly extend product functionality
and increase revenue opportunities from new accounts and from existing
customer base - to start in Q3 2002.
difficulties surely originate from the Y2K-based slump of the ERP market
in 1999/2000 and current economic slowdown, the catalyst was the poorly
executed acquisition of once prominent UK-based ERP vendor JBA in 1999.
The acquisition unfortunately stopped short of producing the great synergy
it seemed to have offered initially. As a result, in the post Y2K ERP
slowdown, former JBA's flagship System 21 sales dropped precipitously
and the product has all but disappeared off the ERP radar screen.
is also that Geac has not significantly enhanced System 21 (except for
Web-enabling it through Universal Commerce Adapter (UCA)
based on Jacada technology and for embedding an acquired RunTime
CRM product for the apparel/fashion industry only). Reverting to support
for only the IBM iSeries (formerly AS/400) and dropping
the support for Unix have additionally narrowed the market opportunity.
or not, Geac has seemingly been unable to successfully market its System
21 product. The bottom line - more agile competitors have functionally
leapfrogged a once very attractive product and captured the market share.
To that end, the news of System 21's reinvigoration and recent contract
wins is somewhat encouraging.
Geac's developers have apparently been busy recently re-architecting the
product to embrace e-Business features by leveraging the range of @ctive
Processes templates, which automate several business and development
operations. The first two Web-based products resulting from this initiative
that have been delivered are web.connect, for order management,
and service.connect, for field service functions. Geac also envisions
its new e-Business suite will amount to as many as nine applications,
known collectively as commerce.connect. All products will logically
use the latest IBM technology, including the proverbial Websphere
also plans to promote more vigorously its existing partnerships with Cognos
for business intelligence (BI), Applix for its iCRM solution
and with Frontstep for its SyteLine APS and SyteCenter
solutions on a global basis as both a component of its System 21 solution
offering and as a stand-alone application in select markets. By intending
to further expand the range of partnerships, Geac might partially allay
some customers' fears that System 21 functionality will increasingly lag
that of its major competitors. To that end, however, Geac also will have
to create a rock solid strategy for integrating its product suite with
multiple partners. The company may benefit from picking J.D. Edwards'
brains, and closely allying with a major EAI vendor in order to ease integration
with its partners (see J.D.
Edwards Chooses Freedom to Choose EAI).
partnerships are also intended to enhance Geac's StreamLine NT-based
ERP solutions for 50 users and more. Geac's customers will benefit from
being able to use Eden Origin, a tool that enables product configuration
via a Web-enabled interface. Through Geac's partnership with Preactor
International, small to medium (SME) manufacturers might benefit from
advanced planning and scheduling (APS) and finite capacity scheduling.
However, given that the above functionalities have become all but commodities
nowadays, Geac will have to work much harder on StreamLine's enhancements
if it is to match the functionality from many competitors, as most of
the e-business and CRM components are still lacking.
A proverbial problem for Geac has been its preference for acquiring new
products rather than pursuing in-house product development and/or true
strategic alliances. While the strategy might have worked in a number
of esoteric industries with a low penetration of competitors like hotels
& restaurants, real estate and construction, it is indisputably, a completely
different ball game in the global enterprise applications market in the
enterprise applications must be able to support dynamic business requirements,
and every vendor is compelled to add much more value to its products and
services portfolio to attract and retain customers, rather than mainly
investing in the existing bundle of disparate core products and hoping
for endless support revenues.
the crying need to change its faltering business model, Geac seems to
be taking a more vigorous posture in addressing its strategic options.
Look for more product strategy announcements in the near future if Geac
is serious about appeasing and shoring up its large customer base. One
is only to hope that Geac's renewed interest in alliances and acquisition
will be to the point of effectively enhancing prosperous product lines.
There is indisputably a sizable amount of work ahead of winnowing out
the remaining under-performing units/product lines. Nevertheless, there
is an opportunity too, provided Geac can regenerate a new growth strategy.
While Geac's balance sheet was boosted by recent events, a more positive
sign is the company's intent to become a true software-developing vendor,
not simply a software collector and dealer. The "catch 22" for current
and potential users is to discern Geac's corporate strategy viability
within the product line/industry in question.
will benefit from approaching Geac and informing themselves about what
the company plans for future service & support (or divestiture and/or
product stabilization?) of its individual products and what the ramifications
of migrating (or not) to its new product offering would be. Users should
vigorously question Geac on its future options and investigate alternative
solutions now to fully understand their situation and options.
SmartStream E (Expert) and M (Millennium)
series, which are IBM S/390 mainframe-based, will likely not receive
major functional enhancements owing to aging technology. The SmartStream
suite that supports client/server-based Unix and NT systems, the StreamLine
series of NT-based back-office products, and System 21 are the most likely
recipients of R&D funds. However, overlapping modules in SmartStream and
StreamLine will likely be rationalized to minimize duplicated R&D costs.
System21 and StreamLine are the likely core systems, both providing scaleable
and flexible ERP and e-business systems built on IBM middleware technology.
companies in a number of Geac/JBA's vertical industries of focus, including
apparel, electronics, food and beverage, and automotive supply, which
are considering a new ERP system should be wary of the System 21 offering
until Geac more clearly states its future plans. Although Geac/JBA's partnership
strategy is justifiable given the company's current state of affairs and
as it results in offerings that it may have otherwise never happened,
it places a burden on the company of having to rely on its partners' update
schedules. It is also problematic in terms of integration issues and potential
support difficulties. If vertical-specific solutions are all the customer
needs and are near a perfect fit, Geac/JBA is worth evaluating, but new
Geac/JBA customers looking to implement a comprehensive extended-ERP system
outside of Geac/JBA's traditional focus of ERP vertical industry applications
software may benefit from considering other options.
any case, make sure that you are feeling comfortable with Geac's declared
product strategy for your industry and keep a close eye on the future
developments. More comprehensive recommendations for both current and
potential Geac users can be found in Geac
Lives By Acquisitions; Will It Die By An Acquisition?