Infinium and Elcom Walk Down ASP Aisle

  • Written By: D. Geller
  • Published: June 23 2000

Infinium and Elcom Walk Down ASP Aisle
D. Geller and P.J. Jakovljevic - June 23, 2000

Event Summary, a wholly owned subsidiary of Elcom International Inc., and Infinium have each determined that the ASP model is coming with the force of a hurricane, and each is redefining itself in hopes of riding the winds to new markets. Infinium made a strong statement to this effect at its recent customer conference (see Infinium Putting Its Cards on the Table ) Elcom's directional shift began in May, 1999 with the announcement of Pecos Internet Procurement Manager (Pecos.ipm), the hosted, browser based instance of its Pecos Procurement Manager. The product reached general availability status in March 2000. In August 1999 Elcom engaged its first advertising agency for a multi-million dollar media campaign to promote its hosted procurement and digital marketplace solutions, In January, 2000 Elcom filed a registration statement for a secondary offering to support a financing arrangement with Cripple Creek Securities, LLC that may net Elcom up to $50 million in investments over an 18 month period. The funds are largely targeted toward the hosted e-purchasing and digital marketplace products.

The agreement with Infinium is the first in which Elcom's hosted solutions will be made available by a third party. The actual hosting services will remain under Elcom's control in the short term, with Infinium doing the heavy lifting of sales and creating marketplace solutions for its customers and their supply chains. However we expect that hosting for Infinium's customers will move to Infinium's control in the next few months.

Market Impact

While we believe it will take time for the ASP market to settle, let alone for companies to become winners (or losers), we certainly think that both companies have chosen sensible directions. However, that either company, or the two in tandem, can affect the e-procurement marketplace is not at all obvious. In fact, we find some of the strategic aspects of this partnership a bit foggy.

Elcom is aiming at middle-sized companies that do not have (or need) ERP systems. According to CEO Robert Crowell this was an explicit design decision for Pecos.ipm. Crowell also believes that by hosting the software themselves they have a competitive advantage because they are "a single point of contact and responsibility for our clients."

Infinium traditionally delivers financial, human resources, materials management, and process manufacturing software applications, predominantly for users of the IBM AS/400 platform. It targets mid-sized companies and divisions of larger organizations within about a half-dozen well-defined verticals. It is indisputably the leader within the hospitality & gaming industry. Having experienced a downturn in revenues in 1999 Infinium is pushing hard to reinvent itself. Transforming itself from an ERP vendor to a full-service ASP with system integration capabilities will involve a total change in outlook and culture - not an easy task, although certainly not beyond the capabilities of the company.

It is obvious why Infinium wants to build up a strong eBusiness division: Not only is the "e-" prefix a requirement for any company that wants to appear new and interesting, but it makes sense for Infinium to leverage its existing customer base. It must be particularly concerned about the hospitality and gaming industry, given the strong competition for that sector's e-procurement dollars from GoCo-op (see TEC's discussion of GoCo-op) and PurchasePro. However, given the utility of leveraging their existing ERP customer base it is less clear why they would choose Elcom, with its announced strength in serving customers without ERP systems.

To be fair, Elcom recently signed a license with OnDisplay® Inc., for use of its CenterStage® suite of products, which will include support for data interchange with ERP systems. Elcom hopes to use these products to make it cheaper and easier for customers to integrate with ERP products. However ERP integration has never been an easy task, and in Elcom's target space there are quite a few vendors to deal with, even ignoring custom modifications that may have been made by each user company. (There are other data exchange technologies in the license agreement in addition to CenterStage.) Whether OnDisplay's products will be used to integrate Pecos.ipm with Infinium's software has not been revealed.

In short, we believe that both companies are actively trying to determine the detailed implications of their new corporate directions. If the end result is a much stronger partnership - essentially a single integrated product offering - the result will be a potential challenger to such companies as Concur and Remedy. If this is merely a simple cross licensing agreement with no greater strategic implications, we don't expect it to effect a radical change on the competitive landscape.

User Recommendations

The users who stand to benefit the most from this announcement are existing Infinium ERP customers who plan to implement e-procurement systems before the end of the year. They should add Elcom to their list of potential vendors, whether or not they intend to implement an ASP solution, because any integration efforts are likely to benefit them. However we don't recommend that they make a decision for Pecos without carefully investigating its features, and we caution them not to assume that the integration efforts between Infinium and Elcom will be successful until there are successful beta customers who can serve as references.

Users in Infinium's target verticals will also be interested, given the potential that Infinium can carry over its expertise to helping them implement specific solutions. However, this is also an area where a wait and see attitude is appropriate, to give Infinium a chance to learn how to best apply the Pecos product to your vertical. Infinium also needs to develop both technical and business experience in building marketplaces that support full integration of a customer's supply chain partners. Until then, make your purchase decisions solely on the basis of what can be delivered when you need it.

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