IFS To Be At Customers' (Web) Service Part 2: Market Impact & User Recommendations




IFS To Be At Customers' (Web) Service

Part 2: Market Impact & User Recommendations

P.J. Jakovljevic - July 3, 2002

Web Services

Web Services/service oriented architecture (SOA), which have lately been on almost every vendor's lips, do have a potential of becoming the latest evolution of application integration technology and/or a revolutionary new web-based application design model by enabling developers to create or enhance applications by connecting granular components that are recognized and accessed via platform-independent Web protocols. While Web services leverage the aged (and not well utilized) concept of objects' encapsulation and reusability, they may finally offer that extra mile by adherence to standards that are increasingly taking hold (see The SOAP Opera Progresses - Helping XML to Rule the World).

Further, Web Services components tend to be simpler in their nature, partly owing to the Internet standards, and they also tend to be higher-level abstractions, which implies more likely platform independence and "mixing and matching" opportunity by developers. Although initiatives such as UDDI still need to prove themselves commercially, the SOAP protocol and the basic idea of using open standards to communicate over existing infrastructure appear to be solid, and have already gained some acceptance. Having long mastered the area of objects/components, by adding Web services capabilities to the IFS Connect integration framework, IFS should offer its customers a compelling value proposition of achieving cost and time savings by using Web services for application integration. The concept may also help IFS penetrate autonomous divisions of some open-minded decentralized global corporations that are already Tier 1 vendors' customers at the HQ level.

In addition to its product technology evangelism, IFS has also been noted for its strong functionality across product design/engineering and manufacturing/shop floor (e.g., machine interfaces, wireless interfaces, equipment monitoring, finite scheduling, etc.) areas, and with a strong ability to satisfy maintenance and asset intensive environments (with, e.g., preventative maintenance, graphical maintenance workload, resource planning & utilization, and other pertinent features).

Nearly all manufacturing environments are catered to from engineer-to-order (ETO), configure-to-order (CTO), make-to-stock (MTS), repetitive, mixed mode/hybrid, and especially within complex, large scale project engineering setups. Having traditionally done implementations via its product delivery organization, IFS has also long exhibited a focus on product quality and customer satisfaction, manifested in a lasting relationship with each client. As a display of a high level of self-confidence in its fast and successful implementations and subsequent after-sales lifecycle/upgrades, the company boasts a long list of delighted customer references.

This is Part Two of a two-part analysis of recent IFS announcements. Part One covers the announcements and begins a discussion of the Market Impact.

Challenges

While the product with web-based component architecture and interoperability, sharp vertical focus, immaculate implementations and support & maintenance, and the attractive pricing should remain a winning combination, IFS should produce a few more cash flow positive quarters and to bolster its cash assets to persuade risk-averse customers notwithstanding. Moreover, even with IFS' presence in 45 countries, the challenge of international expansion and low brand awareness could even be augmented by the company's industry expertise and focus in different markets so far. Its vertical sectors do vary across the geographies, reflecting partly the company's still relative youth and its opportunistic mindset.

While IFS' US client base has been predominantly in selected discrete complex manufacturing industries, little has been known about the company's expertise in utilities and process manufacturing segments (e.g., pulp, paper & forestry) elsewhere in the world. In Europe, to that end, sweet spots include automotive OEMs and suppliers, the batch process sector, food and beverage, consumer packaged goods (CPG), general engineering, telecommunications, electronics, utilities, pulp, paper and forestry, and asset-intensive industries.

The conundrum, for penetrating the higher-end of the market though, could also lie in the fact that IFS's product is not particularly strong in terms of multi-national financials/consolidation, budgeting, HR/payroll, distribution/transportation, marketing campaigns, etc. Without these in hand, it is a tall order for any vendor to penetrate the enterprises with centralized mindset against the likes of Oracle, SAP and PeopleSoft. However, IFS does offer simple, rapid integration with Oracle, SAP and PeopleSoft financials and HR.

While IFS has been well-known for providing ERP applications to medium-to-large organizations, that make complex, highly engineered products, with project-based manufacturing processes and asset intensive operations, it has long tried to crack the U.S. Aerospace and Defense (A&D) industry across all company sizes. It has apparently achieved some success in that regard, by setting up partnerships -- BAE Systems-IFS, for the global defense sector, and GE Engine Service for commercial aerospace. In addition to implementing IFS Applications at its 60 worldwide sites, GE Engine Services is selling, marketing and implementing IFS Applications to the commercial aviation industry.

Likewise, the company plans to repeat the model of developing global and local partnerships with well-known companies in niche industries in different countries (e.g., ABB, IBM, Beijing UFSoft, Det Norske Veritas, etc.) for expansion, while product development focuses on deepening its functionality to retain its position in its chosen markets, and while broadening scope to capture more industries in the future. IFS also expects to offer more specialized best-of-breed solutions, with the above partners, where appropriate. Perfect example would be the recent alliance with ABB to deliver IFS Enterprise Asset Management (EAM) solutions, which could possibly render IFS a leading EAM player in the future. IFS will be using the cash infusion from ABB to the task of building IFS's EAM software on top of the ABB Industrial IT platform, which controls processes in power transmission, power distribution, automation, oil, gas, petrochemicals, and building technologies.

Another good example of IFS' plans to expand its comprehensive enterprise applications suite through internal development programs and strategic partnerships with leading suppliers would be an alliance with PipeChain, a supply chain execution (SCE) vendor primarily in the batch process manufacturing industry (see PipeChain Adds Pragmatism Onto Simplicity). IFS might also expand its presence in the world markets by establishing strong collaborative relationships with leading solution providers such as Cap Gemini Ernst & Young. This partnership will focus primarily on solutions for vertical industries such as energy and utilities.

Also, as the size of deals should increase in the future, IFS is also likely to become more focused on strategic partnerships with some of the large system integrators and consultants (e.g., Deloitte & Touche, Atos Origin) for coverage of the larger multi-national customers. While IFS' opportunistic 'can do' corporate culture and the responsibility for most of its own implementations have served it well during the early years of its ascendance, the endorsement of the above-mentioned partners should help it establish credibility more quickly in given markets than the company could ever do it on its own going forward.

Greater shift of focus on its still relatively undeveloped indirect channel, which has been a major success factor for many mid-market vendors, and which will be executed through a number of announced market/industry-based partnerships, could remedy IFS' predicament in the long run. Given a slower nature of traction building, until then, the company will have to exert possibly the last-ditch effort to improve its viability under its own steam.

User Recommendations

The challenges aside, look for IFS' increased visibility within its market segments of focus, as shown by its continued growth. The company has broadened its product offering and has anticipated well recent market trends, and, consequently, has been in the rear mirror of Tier 1 vendors. Time only will tell how well it will address its viability compared to its bigger brethren. IFS has picked up marketshare and continued new license revenue growth at a time when the larger companies are showing negative growth in the area of new license revenues.

To our belief, the recent events should vouch for a stable future. IFS' lackluster profitability in the past can be attributed to heavy investment in R&D and global market expansion, both of which have been curbed recently. Still, as corporate viability is of great importance, ensure that you feel comfortable with the IFS executives' assurances thereof. Also, bear in mind the maturity of the product and ask for significant proofs of concept.

Medium and large discrete manufacturing enterprises with strong ETO, EAM and MRO-oriented requirements should put IFS Applications on the short list. Other industries (e.g., utilities, process manufacturing, etc.) might benefit from evaluating IFS subject to their geographic location, as the company's industry focus varies significantly in different geographic markets. IFS' targets remain the upper middle market of $50-1 billion manufacturing sites (with 100 - 300 employees), although with rapidly increasing coverage of larger enterprises as well.

Its sweet spot companies are larger mid-size companies, that are technologically more enthusiastic about (and IT staffed) of the latest developments, although the low total cost of ownership (TCO), ease and consistency of use, vertical functionality, scalability and ease of integration, and resistance to pure 'best of breed' multiple vendors' solution are all too familiar issues. Larger global corporations, with diverse businesses and with complex multiple-platforms technology and scalability requirements, and with a need for strong central corporate financials, human resources and distribution functionality, may expect to find IFS Applications' unevenness across the entire functionality specter.

More comprehensive recommendations for both current and potential IFS users can be found in "Collaborative Commerce": ERP, CRM, e-Proc, and SCM Unite! A Series Study: IFS. Also, a very detailed information about IFS Applications is contained in the ERP Evaluation Center at, while the ideal IFS customers may recognize themselves in the IFS Vendor Showcase.

 
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