Intentia Attempts to Become ‘Lean and Mean’

Intentia Attempts to Become 'Lean and Mean'
P.J. Jakovljevic - March 27th, 2000

Event Summary

In February, an enterprise application provider Intentia International announced the merger of Intentia's regional organizations in Europe, the Americas and Asia-Pacific into one joint organization named Global Operations. Lars Prochus, presently CEO of Intentia Europe, has been appointed COO of Intentia International and head of Global Operations. Mr. Prochus joined Intentia in early 1999 from Genencor Inc., Rochester, NY, where he was Senior Vice President of Business Operations.

"By merging our regional operations we are taking an important step toward achieving better global integration and faster realization of operational synergies", comments Bjrn Algkvist, CEO, Intentia International. "I am delighted that Lars has accepted the role of COO since his substantial international experience will be of great value to Intentia." Intentia's Global Operations will comprise worldwide marketing, sales, and service of Intentia's Movex enterprise applications and integrated e-business solutions.

A pruning of its U.S. organization preceded this event. As admitted on the company's Web site in January 2000, "The U.S. market for enterprise applications continued to be very weak during the fourth quarter of 1999. During the past year, Intentia undertook major steps in the expansion of its organization through large increases in sales personnel and consultants in an attempt to leverage the expected increase of license sales in the latter half of 1999. However, license sales were considerably weaker than expected. As a consequence of the lower demand for consultants during 2000, work-force reductions have been undertaken in order to better adapt to the situation, thereby creating a basis for a positive earnings development in the U.S. during the year. The staff reduction totaled approximately 60 people, leaving a staff of more than 350 professionals in the direct and indirect U.S. channel to serve present and future customers. The developments in the U.S. for Intentia will have a considerably negative impact on the results in 1999."

Market Impact

Fiscal 1999 was a difficult year for Intentia, with declining license revenue and a hefty loss of approximately $42 million. Management caved-in under pressure to curb further losses and decided to streamline its much-needed expansion and brand awareness promotion, particularly within the U.S. market. While Intentia's record of one of the lowest staff turnover rates within the industry has now been tarnished to a degree, we think favorably of management's decision to prune its bloated, dysfunctional global organization and to show a consistent face to customers worldwide.

We also believe that the Y2K induced slowdown is only partly attributable to Intentia's poor new license revenue performance. Another major factor is the fact that the company remains perceived as only an IBM AS/400-based product vendor. Intentia's latest Java-based, platform-independent product release has been experiencing relatively cold initial market acceptance despite its ambitious and exciting new product release schedule. This is attributable to a great degree to the company's bland marketing effort.

The current changes may be the first sign of management's departure from the touchy-feely corporate culture and modest marketing approach to playing hardball and achieving more noise in the market.

User Recommendations

We remain firm on our recommendations in TEC's note on Intentia (See TEC Technology Research Note: "Intentia: Java Evolution From AS/400" October 1st, 1999), that Intentia should be included on a long list of an enterprise application selection to mid-market and low end Tier 1 companies (with $50M-$1B in revenue) within the following industries: Automotive; Aviation; Furniture; Fashion; Food and Beverage; Paper; Pharmaceuticals; Steel; Wholesale and Retail. Further, we believe Intentia took the necessary steps not to jeopardize its delivery capability in the U.S. market while downsizing its operations. Potential clients in North America, however, should conduct thorough research on industry expertise and reference sites of a regional Intentia office or an affiliate service provider when Intentia is included in the selection process.

We also encourage existing and potential users to familiarize themselves with the company's ambitious new products offerings and their availability (e.g., Java-based platform independent Movex NextGen release, e-Commerce modules, CRM modules, business intelligence modules, ASP offering, etc.), since we believe Intentia will be in a position to better leverage its negotiating position with all vendors involved in a particular selection exercise.


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