Edwards and Numetrix Ponder the Future as One
S. McVey - September 27th, 1999
in Toronto, Numetrix was one of the pioneers of the advanced planning and scheduling
(APS) software market. Founded in 1977 by Josef Schengili, the company introduced
its first major product, Schedulex, in 1978. An update to Schedulex in 1983
was one of the first finite scheduling tools to incorporate advanced algorithms
and offer graphical elements in the user interface. The company expanded into
supply chain planning in the early 1990s with the release of Linx, its optimization
software. Regarded as another first in the industry, Linx was the fastest selling
optimization product on the market at that time. The advances that followed
in later years further established its reputation for technological innovation.
Strategy and Trajectory
spite of a well-executed product suite, Numetrix has not grown as rapidly as
many of its competitors. In fact, total revenues have increased at a slower
average rate than the rest of the market over the last five years (Fig. 1).
Numetrix experienced a peak in 1997 (due primarily to a single, large contract),
but declined in the years following. Total revenues decreased from $34 million
in 1997 to $28 million in 1998 with an estimated $24 million in revenues for
FY 1999. In addition, losses of $8.3 million and $4.5 million (est.) were posted
in 1998 and 1999. Reasons why Numetrix failed to grow market share center around
a heavy-handed focus on product development and an insufficient emphasis on
sales and marketing.
years ago, Numetrix incorporated their existing products with a statistical
forecasting engine, resulting in the current Numetrix/3 suite. A solution for
Internet distribution and deployment collaboration, Numetrix/xtr@, was released
last year. The suite owes its completion to Numetrix's rabid development focus
that prompted it to cancel a planned IPO in 1997 and slash 58% of its sales
force immediately afterward. Due in part to a lukewarm response from institutional
investors, Numetrix abandoned another attempted IPO earlier this year. Instead,
Numetrix was sold to J. D. Edwards & Co. for $80 million (USD). Although J.
D. Edwards plans to operate Numetrix as a distinct business entity, CEO Schengili
and President Veerle Battiau will step down. J. D. Edwards hosted a forum in
late September that detailed their strategies to deliver solutions for supply
chain optimization and trading partner collaboration.
Product functionality: Numetrix's strong focus on product
innovation has produced arguably the most functional and technologically
stable supply chain application targeted for the process industries. Among
the high points: Schedulex's thoughtfully implemented linear optimization
routines and the high-level, strategic planning tool in Linx. Also to their
credit, Numetrix responded early to customer requirements for providing
visibility into financial aspects of the supply chain.
Experienced consultants: An emphasis on technological excellence
has produced a consulting staff with skills to match, though some expertise
was lost during corporate restructuring in 1997.
Highly referenceable client base: Those clients who have
installed Numetrix, primarily process industry companies (especially food
& beverage, and consumer packaged goods), report significant improvements
in critical performance areas of inventory control, order lead time, and
Marketing and business development: Numetrix has built
its technological leadership largely at the expense of its ability to develop
new business. Although J. D. Edwards inherits one of the most advanced,
feature-rich supply chain products, they will need to move quickly to develop
a matching sales and marketing strategy.
Strategic alliances and integration: Numetrix maintained
few partnerships with complementary software providers that would have increased
product value for customers. Robust interfaces to legacy systems are also
Product integration: J. D. Edwards must decide how best
to distribute its spending in R&D and marketing to avoid starving one or
more components of its newly extended supply chain offering. SCOREx, though
not targeted for the same niche as Numetrix, still has some potential for
Significant revenue growth will be difficult for J. D.
Edwards during the rest of calendar year 1999, as it works to integrate
sales organizations of Numetrix and sales automation software provider,
Premisys (65% probability).
For the next 12-18 months, the Numetrix suite will continue
to be sold as a standalone SCM solution. True functional and architectural
integration between Numetrix and parts of the OneWorld suite will not begin
to appear until 2001 (70% probability).
J. D. Edwards should begin to see clear revenue growth
from Numetrix licenses (> 5%) as early as next year. While competition
from other SCM offerings will be strong, J. D. Edwards should begin to penetrate
the SCM market by selling to their substantial customer base (5,000 corporate
licenses) (60% probability).
Integrate Numetrix/3 suite into its OneWorld software at
Functional: Work top-down to develop integration strategies
that incorporate the best parts of the existing ERP suite and new supply
chain optimization components.
Technical: Concentrate first on putting together a set
of applications that operate cohesively on UNIX, a platform native to Numetrix,
before replicating full integration on NT.
Sales and Marketing: Embark on an aggressive program of
cross-training to retain expertise in the form of acquired sales personnel
a dwindling commodity (~15% of total employees), because the 1997 restructuring
primarily eliminated sales jobs.
Resist the temptation to embed the Numetrix product deeply
within the "marketecture" of OneWorld to the extent that it ceases to be
visible. Early indications from J. D. Edwards suggest that it has learned
a lesson from PeopleSoft in this regard.
Capitalize on Numetrix's considerable advances in web-enabled
collaborative planning to jump-start extensions to their product suite and
industry coverage, as well as to enhance existing initiatives in CRM, Business
Intelligence and E-Commerce (see TEC's note, "J.D.
Edwards Creating OneWorld of Mid-sized ERP Users").
has always built their business around the technology and were committed to
satisfying customer requirements. Unfortunately, pursuit of technological excellence
to the exclusion of adequate concentration on sales and marketing is never good
in the long term not for the company or its clients. In general, users should
look favorably on the recent acquisition by J. D. Edwards, as it has given Numetrix
another chance to establish itself in the marketplace.
points to consider:
Numetrix was a very customer-driven software company. It
remains to be seen how much of that aspect survives the acquisition. Current
Numetrix users should seek some assurance that qualified maintenance personnel
will continue to be available for consultation.
Companies who were sold on Numetrix as a stand-alone SCM
product should not necessarily rethink their decision to buy, but they may
want to use the transition period to revisit other options.
J. D. Edwards' users who want a solid supply chain product
and can handle a bumpy ride may elect to adopt the Numetrix solution right
away. However, other solutions with a longer history of integration (such
as i2, Manugistics, SynQuest) may be less painful.