MAPICS To Leap Forward In A Frontstep Way Part 2: Market Impact


On November 25, MAPICS, Inc. (NASDAQ: MAPX) and Frontstep, Inc. (NASDAQ: FSTP), renowned global providers of extended enterprise solutions for world-class manufacturers, announced the signing of a definitive agreement whereby MAPICS will acquire Frontstep, formerly known as Symix Systems and headquartered in Columbus, OH. This transaction should create one of the largest providers of extended ERP, CRM and SCM applications that are focused exclusively to solving the challenges of discrete and batch process manufacturers. The combined company will have solutions that have been implemented in more than 10,000 customer sites worldwide in only a handful of industries of focus. Both MAPICS and Frontstep customers should now be served by a much larger, global company with a heritage of continual delivery of practical business solutions, and excellent service and support.

Consequently, MAPICS will now initially have three key ERP offerings: Frontstep's SyteLine, MAPICS ERP for iSeries (the original venerable flagship MAPICS XA AS/400-based offering) and MAPICS ERP for Extended Systems (deriving from the acquired Point.Man), plus a plethora of ERP-adjacent products like MAPICS SCM (from former Thru-Put), an enterprise asset management (EAM) product called MAPICS Maintenance & Calibration (former Maincor EAM) products. Other recent solutions worth mentioning include a business intelligence (BI) product MAPICS Analytics, MAPICS Portal, and MAPICS PLM software, which utilizes Magik! product from a product partner vendor CEIMIS Enterprises, Inc. See Frontstep's strategic extensions on the following page.

Since its inception in 1978, the MAPICS ERP for iSeries product has evolved to a broad range of functionality for discrete manufacturing enterprises. With features such as rate-based planning, serial number traceability, and product data management (PDM), the product can handle make-to-stock (MTS), assemble-to-order (ATO) and less-intricate engineer-to-order (ETO) manufacturing environments. On the other hand, MAPICS ERP for Extended Enterprise has stronger MTS and repetitive manufacturing capability, including "pay point" processing, with the ability to report material, labor and/or overhead costs from individual operations within the entire routing sequence. An important differentiator should be the product's ability to support virtual manufacturing enterprises that outsource manufacturing operations to third party subcontractors.

This is Part Two of a three-part note.

Part One detailed the event and began an analysis of the Market Impact.

Part Three will cover the Challenges and make User Recommendations.

Expanding Into PLM, SCM, and CRM

Furthermore, MAPICS has used the last two years to bring reality to its endeavor of delivering the above-mentioned strategic extensions components that span the above two core ERP systems and take them further out to include supply chain and PLM collaboration. Although some of these come from strategic alliances (e.g., Access Commerce's Cameleon Product Configurator, SalesLogix CRM, FRx Reporting, and Magik! PLM), MAPICS emphasizes that all of these are OEMed, with MAPICS owning product upgrades and support so that the origin is effectively transparent. MAPICS has indeed maintained an active focus on additional partnering arrangements intended to help manufacturers move into a collaborative e-business land in a more controlled manner. To that end, its multiple partnership initiatives, like those with Vanguard Solutions Group for BI add-on modules, Best Software for its SalesLogix sales force automaton (SFA) product, and Access Commerce have been astute.

Like MAPICS, with its recently enhanced functionality to natively deliver solid SCM and CRM modules (see Mid-Market ERP Vendors Doing CRM & SCM In A DIY Fashion), Frontstep had also been positioning itself as a primary business systems provider that offers comprehensive enterprise solutions with integrated CRM and SCM capabilities, on top of a strong discretemanufacturing ERP capability and experience rather than as a mere ERP vendor. In that regard, the Syteline suite for mid-sized manufacturers, by and large offers support for customer service, order processing, inventory control and purchasing, manufacturing production management, production planning and scheduling, cost management, project control and financials, sophisticated product configuration for sales order management and manufacturing, advanced planning & scheduling (APS), business intelligence (BI), workflow automation, with business process definition and execution, and advanced forms.

The following extended-ERP broad offering from Frontstep, which is mostly provided natively, or also in a tight OEM fashion from long-term partnerships, would be comparable to the MAPICS above set:

  • SyteLine ERP

  • SyteLine APS

  • SyteLine Business Intelligence (partnership with Cognos)

  • SyteLine Business Process Management (partnership with Cobre)

  • SyteLine Workflow Automation (partnership with former Keyfile, now Lexign)

  • SyteLine Configuration

  • SyteLine Data Collection

  • SyteLine EDI (using Sterling Commerce translator/information broker)

Apart from this, the company had bet its future on its CustomerSynchronized solutions initiative, with a view to achieve dominance in the make-to-order (MTO) demand-driven manufacturing. sector. Supply chain modules include Frontstep Intelligent Sourcer, Frontstep Point Promiser (the promising engine for available-to-promise (ATP) collaboration across trading partners), Frontstep Capacity Promiser (a constraint-based planning tool for cross supply chain capacity promising) and Frontstep APS, which extends to cascading supply chain synchronization. All the above components incorporate Web services technology to simplify integration and information exchanges with other systems.

While, over the long term, MAPICS will be tempted to bring SyteLine and ERP for Extended Systems under common component architecture, there are expectedly no plans to immediately combine the products or force customers to migrate from one product to another. Still, while the three product lines will remain separate for the time being, there are many opportunities for the two former foes to mutually leverage. For instance, sales, marketing, and some aspects of support appear to have complementary nature.

MAPICS Business Model

In fact, MAPICS has long developed a strong business model that, given that some functional add-on's, as well as almost the entire sales and professional services (over 80%), have been executed by an extensive partners' network worldwide. This efficient model combined with the revenue generated from its several thousand service & maintenance paying customers have rendered the vendor a good cash producer and should position it well even throughout the 2000s.

MAPICS has also consistently scored above average in following key industry customer-service & support surveyed benchmarks: reliability, quality of support, vendor stability, overall relationship, ease of doing business, affiliate product and industry knowledge. It has a proven affiliate network of nearly 100 VARs with over 950 affiliates' employees in total and several call-centers around the world, and now has the growing in-house professional services for those strategic multi-site, multi-national companies that need the coordinated, standardized, world-wide approach. For the future, MAPICS plans to further realign its organization, with possibly over 30% of its implementation business being delivered internally within the next three years. To that end, while MAPICS primarily sells through a reseller channel, most of Frontstep's sales come from its direct sales force and should therefore complement MAPICS' above aspirations.

Also conversely, Frontstep has an indirect channel to supplement its strong direct sales force to better approach the lower-end of its target market. To that end, it has created a sizable indirect channel since the 1980's that currently contributes around 25% of sales revenues. The vendor targets enterprises with annual revenues up to $50 million primarily via resellers/VARs, while the larger enterprises with up to $1 billion per site/division are handled by its direct sales force. Consequently, look for the new merged company to eventually sell the entire product portfolio through both channels.

Marketing should also be an area of opportunity, as the MAPICS brand has been well-respected in the manufacturing software market, while Frontstep never really regained much awareness after changing its name from Symix, a few years ago, at the time that also coincides with the beginning of its protracted troubles. On the other hand, MAPICS should hereby shed its antiquated image (association with the ancient looking green-screen, AS/400-based product), since the addition of a .NET product should help modernize its image. It could also now get its affiliate channel both excited about the product portfolio and consequently bolster the channel's ability to sell rather than to defect to some other .NET camp. There could be a geographic synergy as well, given both companies' worldwide presence but complementary revenue contributors (i.e., Frontstep generating more new license revenues outside of the US lately (i.e. over 60%), and vice versa).

Moreover, the two companies have many years of experience developing applications for discrete manufacturing companies within many same industries of focus. While the products' technology platforms are indisputably different, the former competitors should be able to share a great deal of intellectual property around product designs and functional requirements for industry-specific configuration templates. Furthermore, while having a broad functional footprint remains important, MAPICS has recently departed from its traditional practice of pushing' the sale of the plethora of its components onto customers. Going forward, it will rather try to solve challenges for its customers and/or prospects in their quest of becoming world-class manufacturers. In other words, owing to its vast experience and knowledge of challenges and best practices within a narrow set of selected industries of focus, MAPICS will try to reverse-engineer the user's objectives into obtaining an optimal set of needed applications to fulfill these. The approach, which focuses on the customer's needs and will also possibly obfuscate any impending platform and/or product brand allegiances, has already been embraced by Frontstep.

Incidentally, a sharp vertical focus founded on strong horizontal back-office applications has long been both vendors' modus operandi. In addition to their focus on the following industries: automotive/transportation, industrial equipment, and electronics, Frontstep might contribute with fabricated metals or furniture & fixtures as a possible fourth focus segment. Fundamentally, the new entity's vision seems to be sound in that it will continue to stress discrete manufacturing functionality and service & support as its primary strengths and marketing weapons. While competitive costs (low and flexible software license pricing and implementation costs) and outstanding global service (proven fast implementations and customer loyalty) will remain important requirements for success, particularly in the lower end of the market, vertical focus will be the key factor for survival. Finally, the company can also capitalize on the very strong relationships that its constituents have with their major technology partners -- MAPICS will remain very close to IBM while Frontstep has successfully partnered with Microsoft.

This concludes Part Two of a three-part note.

Part One detailed the event and began the Market Impact.

Part Three will discuss Challenges and make User Recommendations.

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