Is Made2Manage Made2Survive? Seems So.

Is Made2Manage Made2Survive? Seems So.
P.J. Jakovljevic - March 2, 2001

Event Summary

On January 25, Made2Manage Systems Inc. (NASDAQ: MTMS), a provider of enterprise business systems for small and midsize manufacturers, reported fourth quarter and full year 2000 results. For the quarter ended December 31, 2000, total revenues were $9.6 million, a 34% increase from fourth quarter 1999 revenues of $7.2 million. Software license revenue was $4.8 million compared to $3.0 million in 1999, which represents an impressive 58% increase. Services revenue was up 15% to $4.5 million from $3.9 million 1999. Net income for the Q4 2000 was $123,000 compared to a loss of $735,000 for the Q4 1999 (See Figure 1).

Figure 1.

Total annual revenues for 2000 were $32.9 million, a 6% increase compared to $31.1 million in 1999. Software license revenue grew 9% to $14.9 million in 2000 from $13.7 million in 1999. The net loss for 2000, including all the write-down and other charges, was $2.5 million, compared to a net loss of $1.5 million in 1999 (See Figure 2).

Figure 2.

"We are very pleased with the revenue growth and profitability in the quarter. Our focus on growing the top line coupled with appropriate expense management is paying off," said David B. Wortman, chairman and CEO. "We are optimistic about our revenue growth for 2001 and anticipate that historical trends of higher revenues in the second half of the year will continue. However, we remain cautious as we monitor the effects of the economy on manufacturers in our market space. We continue to enhance and expand our product offering to ensure we remain a leader in providing comprehensive business management solutions to small and midsize manufacturers. This product expansion into areas of rapid growth such as customer relationship management, supply chain management and e-business applications is critical to our continued success."

Market Impact

While not yet out of the woods, as voiced in its CEO's cautionary message, Made2Manage seems to be on the mend. This has been a crunching time for smaller applications vendors and Made2Manage has had its fair share of hardships. During 1999 it boldly embarked on a strategy to provide e-commerce solutions for its target market - small-to-medium manufacturing enterprises (SMEs).

Throughout 2000, Made2Manage continued to complete its evolution from a vendor of traditional MRP software to a provider of 'one-stop-shop' business applications, including integrated front office, back office, business intelligence and e-business capabilities for its target niche. The company has long demonstrated a deep understanding of this market's dynamics and its requirements of inexpensive products, fast and simple implementations, and good service and support.

Further, the company's readiness to provide smaller discrete manufacturers with a number of portals that offer a broad range of collaborative, interactive, and communications applications, makes it even more attractive. These applications include collaborative engineering design, tools, trading exchanges, and access to information resources. Made2Manage has also been proactive in service and support cost reduction by harnessing the latest technology, like CBT (Computer Based Training), to deliver inexpensive users' training.

Its proactive grasp of the ASP opportunity is also praiseworthy, particularly in light of its peers' tardiness in that regard (for more information, see Small ERP Vendors Missing The ASP Boat. While manufacturers usually prefer to keep their ERP systems in-house, many may opt to use Made2Manage hosted applications for collaborative commerce, which is available through portal. Furthermore, its embrace of Microsoft's .NET technology and SOAP enterprise platform, which might possibly become the standard for future Internet applications in the SME market, is certainly commendable. Also, the company has been developing an indirect channel to supplement its direct sales force and to address its low international presence. Customers and resellers should benefit from the new "TEAM ONE" VAR program because it allows both internal and external sales groups to share consulting services, education and product configuration/customization services. All the above-mentioned initiatives have, to our mind, contributed to creating increased customer demand and acceptance of Made2Manage's offering.

However, the above moves should be backed up with substantial progress in extending multi-site and supply-chain management (SCM) functionality footprint, and in a delivery of tailored vertical solutions, in order to spar with the onslaught of its bigger competitors. Some of these current weaknesses may be mitigated by the next product release, Made2Manage 4.0, which will supposedly feature Explorer Link, Field Service and Multi-Warehouse capabilities. This release, scheduled for early 2001, will also support Microsoft's newest server software, SQL Server 2000.

User Recommendations

While it is unclear how many smaller vendors will survive the shrinking and more crowded market intact and avoid either bankruptcy or assimilation, Made2Manage has been making moves that should help it weather the storm. The company has demonstrated a deep understanding of the low-end of the ERP market dynamics and its requirements of inexpensive products, fast and easy implementations and good service. The innovativeness of its offerings to the SME market is attractive and should be taken into initial consideration.

More comprehensive recommendations for both current and potential Made2Manage users can be found in Made2Manage Systems, Inc.: M2M From A2Z For SMEs?

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