the final quarter of 2002, Lilly Software Associates Inc. (LSA)
(www.lillysoftware.com), a privately
held enterprise applications provider for small and medium sized manufacturing
and distribution enterprises, made a number of announcements of enhancements
to its product line. The details are covered in Part
One of this note. The Market Impact of those announcements are
discussed in Part
Three presented a Competitve Analysis.
Lilly may further end up in a sort of an identity crisis' due to its seemingly disparate products amenability to different market segments -- while the VISUAL Enterprise remains a perfect fit for small and mid-size enterprises, which typically require resellers/VARs, the VISUAL Enterprise for Distributors is seemingly able to satisfy even the needs of some multi-national corporations, encroaching thereby at the Tier 1 territory, and possibly a need for a direct sales force account management kind of relationship. The company will also have to walk on the tightrope of the obscure balance between functional depth and ease of use.
Additionally, its focus on the SME market might not fly with these companies, where it will have to overcome the market perception of a "small unknown ERP vendor". Incidentally, the company has to be careful not to spread its development resources too thin trying to maintain its multiple platform product configurations; on one hand, a multi-platform support creates additional opportunity (and R&D liability), but, on the other hand, the trend for the company's target market is towards the Microsoft technology, which the company is seemingly abiding by.
Furthermore, the product may still show inferior functionality in realms outside of to order' manufacturing functionality on the plant level and of distribution, such as the ivory tower' corporate level financial and human capital management (HCM) capability. Moreover, the product has only recently tackled the ability to control repetitive production with rate-based scheduling techniques, and in the medium-to-long run, LSA will be broadening its offering out to manufacturers and distributors with mixed mode and make-to-stock (MTS) strategies (as announced with the slated delivery of the automotive and biomedical vertical products).
Meanwhile, creating and managing individual work orders is still a requirement, and hence, it may still not be well suited for lean manufacturing/pure repetitive environments. Further, it offers only a limited standard costing method, cost simulation and planning tools compared to what most cost accountants are expecting in a "standard cost" system. The company has therefore taken a strong look at its Financials module and made significant enhancements in the areas of complex consolidation, euro support, and advanced multicurrency. VISUAL Financials includes a Euro conversion utility and a significant number of improvements to Value Added Tax (VAT) capabilities, but the most important addition is that companies can now perform Average Costing. In the past, VISUAL accommodated Standard and Actual Costing methods, but by including Average Costing, also known as Average Inventory Valuation, Lilly can now address the needs of manufacturers who operate within fluctuating price markets.
While VISUAL's multi-site and multi-national capabilities have also been improving (the product currently supports 10 languages), it still has some limitations in handling entities within complex distributed organizations it requires either a completely centralized set of activities for manufacturing and accounting or a completely decentralized one. As an example, there is no ability to perform some functions like production control on a decentralized basis and then to have centralized order entry and accounts receivable.
The product also still requires a single ERP database per one manufacturing entity, and it has not been designed for high transaction volume environments. Also, while the deliberate narrow to order' focus has resulted with many blessings, it sometimes can be a curse in case of a customer requiring more horizontal functionality to accommodate many different divisions with different manufacturing environments. The situation is similar, although on the opposite end, to QAD's vertical specialization mainly in non to order' environments, in both case resulting with a consequent poor overall showing in some comprehensive horizontal requests for information (RFI) responses.
is Part Four of a four-part note.
One detailed recent announcements.
Two analyzed the Market Impact.
Three presented a Competitive Analysis.
On the technology front, while Lilly has embraced the above-mentioned trendy Microsoft technology that promises a building-block approach to application development, and XML-based interconnectivity, its vast majority of customers still run on a fat client two-tier client/server architecture. Migrating these onto new, more advanced product releases and/or continued concurrent support of diverse product architectures might likely demand duplicated R&D resources, as Lilly has been ensuring a transition from rich GUIs to browser-based applications at customers' convenience. The company thus has a predicament to solve the conglomeration of its older-technology instances within over 3,000 customers, many of whom will need to upgrade to newer web-based architecture.
its functional astuteness is agreeable with the prospects, the company may also
be perceived as a laggard in terms of its product technology, given some of
its peers have been far ahead in porting parts of their applications onto .NET,
in delivering flashy portal applications, and in their forays to deploy wireless
devices (see Frontstep
Ups The .NET Ante, Epicor
Claims The Forefront Of CRM.NET-ification and Made2Manage
Affirms Its Technological Astuteness).
is also intriguing to consider why the company neither has multiple prominent
functional and technology independent vendor partners nor many ready-made applications
programming interfaces (APIs) to other prominent products, which may indicate
insufficient product interconnectivity. Although no other product is particularly
easier to interface to and/or fro, one gets the impression that Lilly's associates
feel the most comfortable within the VISUAL-only context. While the one-stop-shop'
mantra remains an attraction for SMEs, some mid-market enterprises may still
be looking for interoperability with other enterprise applications, at least
for the choice sake, e.g., in case of a need for more intricate CRM or eProcurement
functionality. To that end, as Lilly had long struck an alliance with Viewlocity
to facilitate interoperability with other ERP systems, that may now be questionable
given its recent merger with SynQuest and orientation on event
management (see Merger
Mania At Its Extremes).
The mitigating factor though is the vendor's decent approach towards not overselling its offering and declining to compete in instances where it does not seem its products fit. However, LSA's need to re-deploy the product on a new technology and to deliver the needed functionality for its new desired markets, will demand a continued hefty R&D investment, which may put a significant strain on the company's resources in the long run, particularly if the top line remains flat or possibly even declines. With .NET development, creating vertical industry products, and a healthy schedule of product enhancements to the core VISUAL Enterprise suite, its R&D department has a full plate.
Still, being privately owned brings an advantage of not being driven by short-term market expectations, and of riding through any economic ups and downs much more evenly. Lilly belongs to the group of vendors that do not burden a small manufacturer with any unneeded functionality or with a complex, spaghetti-like code base, as a non-manufacturing ERP vendor would likely have had to produce after deciding to expand into manufacturing, or as a manufacturing ERP vendor pursuing over dozen industries would have bloated its functionality in its rush to unsystematically satisfy any customer's functional request. It may be much easier job for Lilly to incrementally expand from its proven stronghold, than for these vendors to make sense out of its inherited functional bloat' and inability to disable any unneeded functionality for a certain industry due to intricate interdependencies throughout their compounded monster product suites.
Lilly Software's target market, single-site job shop discrete manufacturing and distribution companies and/or divisions of global corporations with up to $250 million-a-year revenue range, should consider VISUAL Enterprise components, being also aware of the competitive landscape. These companies generally have a limited IT budget, a conservative IT strategy, complex discrete job shop manufacturing and supply chain demands (strong capable-to-promise (CTP) requirements), and basic CRM and B2B e-commerce requirements. Lilly's sweet spot would be manufacturers with up to 100 concurrent users and having annual revenue of $150 million, although the product is far more scaleable. Although the vendor specializes in the to-order' manufacturing environment, the product can also work very well in other environments within discrete manufacturing. The company actually has a decent list of batch process manufacturing customers as well.
The industries that would most likely benefit from Lilly's products are aerospace & defense (A&D), electronics, instrumentation, industrial machinery, fabricated metals, consumer packaged goods (CPG), wholesale distribution, automotive and transportation equipment. Manufacturers that have a dynamic product mix, unpredictable demand, and some level of lean manufacturing philosophy should consider Lilly's DBR finite scheduling approach. Those opting for the TIP approach with even the risk/gain sharing proposition, should proceed cautiously by:
Stipulating unambiguously how measurements will be done, and the gain-sharing
Doing a pilot project proof of concept by having only a small part of the
contract scope subject to gain-sharing
Determining the maximum value of the payment to the vendor, in case of tremendous
benefits to you
Companies that require strong multi-site and multi-national capability, high-volume transaction processing, and white collar' functional depth at the corporate level may benefit from evaluating other offerings.
Mid-sized contract manufacturers with strong distribution requirements, distributing companies with value-added services, and third-party logistics (3PL) companies with up to $500 million in annual revenues may want to evaluate Lilly's VISUAL Enterprise for Distributors product. Small and fledgling job-shop manufacturing outlets (e.g., tool and machine shops) with less than $10 million in annual revenues that already have small business accounting package (e.g., QuickBooks Pro) but are in need of manufacturing oriented software functionality, should evaluate VISUAL Jobshop product.
Existing Lilly customers should review the above-mentioned enhancements with their local LSA affiliate with an eye towards extending the value of existing applications. Lilly customers with custom systems or products from other vendors should review the LSA's development capabilities in order to gain data integration between their various systems. Current users, particularly those running on non-Microsoft platforms, should also inquire about any possible ramifications (or benefits) that Lilly's .NET product technology strategy might have on their current investments (e.g., the product migration strategy).
detailed information about VISUAL Enterprise is contained in
the ERP Evaluation Center