Made2Manage Systems Inc., a former public provider of broad enterprise business systems for small and mid-sized discrete manufacturers, decided over a year ago to go private under wealthy Battery Ventures. The vendor has produced tangible benefits for existing customers (e.g., the vendor's stability and sensible delivery of product functionality with increased product quality). While the target market remains small and mid-size discrete manufacturers, that sweet spot has first been refined and then expanded in part by recent prudent acquisitions.
Although not necessarily unique to Made2Manage Systems, the strategy of taking a deep breath and reflecting upon how to proactively better serve existing customers, and building upon that with a combined organic growth and growth via acquisitions, seems to be a recipe for success these days. The enterprise applications market is indisputably a mature and fairly saturated field, and all players must accordingly adjust their investment strategies from those of the emerging and growing market in the 1990s.
Thus, Made2Manage Systems has lately concentrated on selling to its installed base, which, although not huge, is comfortably sizeable, given the vendor has no aspirations (if not even illusions) about any too aggressive growth or about becoming a global ERP force in a foreseeable future. Part of Made2Manage Systems acquisition strategy includes taking on a more global presence through acquisition of non-US companies that offer software, services, and support, particularly companies that sell direct into non-US countries, although not limited to that. Its growth strategy states that it plans to grow organically via new system sales, customer sales, and customer retention, and also growth via acquisition.
To that end, the vendor has conducted a thorough stocktaking of its strengths and weaknesses in addressing its existing customers' needs. Battery Ventures has selected Made2Manage Systems as a long-term investment, focusing on enhancing the value added to both current customers and prospects by first and foremost improving the profitability, stability, and operations of the company.
For the above reasons, many add-on modules that have recently been delivered and not yet truly pushed into the client base represent a true opportunity for new license revenues. There are strong indications from the announcements detailed in this note that the vendor has been strongly reconnecting with its installed base and has been having notable success in cross-selling and up-selling additional products, such as advanced planning and scheduling (APS), customer resource management (CRM), financial reporting tools, M2M VIP collaborative portal, and enhanced bill of material (BOM) functionality in the electronics industry. Given that success breeds success, after admittedly slower new sales immediately following the acquisition, the vendor has lately attracted even over sixty brand new accounts despite reduced (albeit more focused) sales and marketing expenses.
The vendor's emphasis on challenging its prospects to calculate their potential return on investment (ROI) by conducting what-if scenarios of benefits like reduction in administrative costs, better customer service (and thus higher revenues), more efficient shop floor personnel, lower material costs, and improved pricing (higher resulting margins) versus total costs of purchase (i.e., initial and future costs of software, services, hardware, and miscellaneous) might further resonate with the risk-adverse market and play well to Made2Manage Systems' confidence in its capabilities.
Yet, the vendor's rationalization strategy to have a clear single solution for each industry it targets might be best realized with the recent acquisition of DTR, which, although being a small, niche player, certainly has an appeal and stronghold within small plastics manufacturers. This is attributable to its specific functionality for finite scheduling and other above-mentioned issues unique to plastics, such as the ability to schedule tools and fixtures separately from the injection-molding machine. This is an obscure niche that has not been traditionally well served, with only a few dedicated players beside DTR, IQMS, and SYSPRO being some. Although a key success factor for small software application vendors is to focus on one or two narrow vertical markets, DTR could not have done it in the long run with its limited resources of only thirty to thirty-five employees. Therefore, if Made2Manage Systems, although itself a small player but with a mighty financial backing, seriously intends to provide better marketing, continue product development (by keeping most of DTR's staff in place), and increase support for current DTR customers, look for brighter future and growth of the former DTR business.
Made2Manage Systems also understands that it is more economical nowadays to obtain new customers by acquiring existing ones from a competitor than by pursuing brand new accounts via a pricey and time-consuming direct sales model. On the other hand, while customers want their enterprise applications providers to oblige them with new products and technologies, vendors in turn feel compelled to increase revenues and market share as to be able to justify funding of new product development.
This is Part Five of a five-part note.
Part One presented the event summary.
Part Two discussed the future direction.
Part Three analyzed the market impact.
Part Four covered quality management processes.
However, the above notable actions are only a harbinger for more serious development endeavors in order to remain competitive in the future. While the company's focus allows it to keep pace with trends in technology and customer requirements in its target niches, too narrow a focus comes with its liabilities as well. At least, some existing discrete mixed-mode manufacturing customers that might not now belong to the Made2Manage Systems' recently sharpened focus on the above four segments (i.e., the vendor has so far garnered some notable install base within other SIC groups too, such as 3800s—Instruments and Related Equipment, 3700s—Transportation Equipment, and 2500s—Furniture Fixtures) might feel somewhat neglected by the future product developments, and the vendor will have to walk a fine line between satisfying these customers and not losing its focus and overstretching its limited research and development (R&D) funds. The mitigating factor in this regard might be that Made2Manage Systems' refined product management process is open to all its customers, whereby the vendor balances the needs of its top four segments with the input it receives from all customers.
Further, in addition to its inferior size compared to most competitors, which may imply a negative viability perception these days when many believe that "bigger is better" despite impressive results of late, lesser financial resources, low visibility, and brand recognition (which are almost non-existent outside North America), and the product's limited global capabilities are the challenges the company has yet to overcome.
At least, one Made2Manage product is becoming multilingual capable, since the TMM product will soon include the earlier mentioned new feature called Language Localizer. As for the Made2Manage application, portions of the product support other languages. For example, the M2M Shop Floor Data Collection tool supports Spanish. To date, most non-English-speaking users have addressed the need for multiple languages through customizations or available personalization tools.
While this narrow focus has resulted in the delivery of the capabilities within the compact single product line depicted above (before DTR), it may still result in missed opportunities as companies are increasingly seeking true global providers for their supply chain management and collaboration requirements. Made2Manage Systems might lose many deals because of its inability to fully support prospects outside North America and in languages other than English.
It still remains a good practice for manufacturers that are selecting solutions to factor in costs, the financial viability of the vendor, local support, and many other criteria, which might not go to the vendor's favor, given a slew of bigger and more global competitors. Namely, Made2Manage global market awareness and presence remain quite insignificant, but it is not likely that the new management team will provide incentives to attract new committed resellers. On one hand, VARs typically come in handy to expand the vendor's multinational capabilities, localization, industry specialization, and provision of vertical extensions. On the other hand, there is the Made2Manage conundrum of poor experiences with VARs in the past and its conflicting decision to serve the customers more directly (and intimately) from now on. Thus, the more likely strategy would be to acquire an enterprise applications company in Europe with a direct sales channel. The new management maintains that the key to product development will be making the functionality needs of its customers and target prospects a first priority, which includes providing support for multiple languages, since this requirement exists in North America as well as for global opportunities.
Further, the DTR acquisition will stop Made2Manage Systems' traditional privilege of not wasting any time and duplicated resources on rationalizing multiple products, given its single product and single technology (i.e., Microsoft) strategy thus far, although the above SOA strategy should help in this regard.
Still, TMM it is currently limited to the Progress Relational Database Management System (RDBMS). Although it is one of the leading embedded databases for business applications around the world, with notable scalability and reliability, a lost opportunity due to some prospects' IT department religious insistence on the Microsoft SQL Server database cannot be neglected. Still, given that small manufacturers tend to stick to tried-and-true technologies, the dependence on Progress should not be a terrible liability, given Progress' recent bullish posture and notable technological advancements. This is bolstered by the recent moves of other prominent manufacturing ERP vendors that leverage Progress technology (i.e., Epicor, Encompix, and QAD), which have decided to allow their customers to keep their existing IT investment, while evolving at their pace.
For example, by adding the power of the Progress OpenEdge platform to a native Microsoft .NET UI, Epicor believes customers will be able to leverage the familiarity of the Microsoft UI, while benefiting from the flexibility and power of OpenEdge's operating system independence, low total cost of ownership (TCO), and support for multiple databases. Time will only tell whether this will be Made2Manage Systems' direction too, particularly if it is to conduct some limited product convergence and synergistic cross-product development going forward.
At the end of the day, while the gradual Made2Manage Systems product development strategy might be safer in the short run for both the customers and the vendor because it minimizes investment and disruption, the evolutionary strategy has limits in how much can be accomplished. The existing product becomes a limit on the amount of innovation that proves practical. There are no definitely right and wrong answers at this stage, and every vendor has to conduct its own soul-searching and justification exercise for the direction it chooses (see Rewrite or Wrap-Around Old Software?).
Made2Manage Systems' restored financial stability and its ability to enhance its products (both in-house and via acquisitions) and its determination on executing sound product and technology strategies deserves commendation. Current users are advised to follow the vendor's new product introductions and keep an eye on its future product strategy. The positive sign is the company's more manageable and narrower focus, as demonstrated by its most recent results. Still, the time for existing Made2Manage customers and partners to act is now, especially if they suspect that they might not remain within the vendor's core competencies, while they also foresee much growth and the need for enhancements on their side fairly soon. Still, the new owners' motivation in buying the product and vendor must have been the install base. Thus, showing interest and being vocal about the needs is these customers' part in keeping the relationship the way they want it.
Made2Manage Systems' offering should have an appeal to small and mid-size enterprises (SME) that are discrete manufacturers operating in mixed-mode, as well as with not terribly complex projects and repetitive manufacturing functional requirements. Its sweet spot so far has been manufacturers with revenues from $5 to $50 million (USD) (50 to 250 employees, although the system has recently been tested with up to 500 users). Preferably but not necessarily, single-site North America- and UK-based discrete engineer-to-order (ETO), make-to-order (MTO), make-to-stock (MTS), and assemble-to-order (ATO) manufacturing companies and their divisions with up to $250 million-a-year (USD) revenue range and up to 200 concurrent users per site, should evaluate the company's value proposition. Further, the organizations from the above industries seeking a web-based solution and out-of-box functionality with little or no re-engineering effort may want to inquire about the vendor's hosted application service provider (ASP) offering. Fast expanding, multinational, and companies looking for a cross-platform support and deeper vertical functionality may benefit from evaluating other products at this stage.
Certainly, manufacturers in the plastics industry should now find a deep vertical functionality within Made2Manage Systems. Existing TMM users should meet the new owners, and talk with the new management to make certain they know existing customers' expectations and plans, and as to ascertain the vendor's commitment to support their IT investment for a specified time (e.g., the support status, the long-term product alliances, product development, migration strategy, etc.). Both existing and prospective plastic processor users should keep a close eye on the vendor's actions, given that product enhancement and service and support strategy can sometimes change as early as three to six months after the acquisition, although Made2Manage Systems seems unequivocally committed to actively selling and enhancing the product at this stage. They should also try to understand the combined or not product strategy and look for opportunities in the new prospective product portfolio.
Generally speaking, in a highly volatile market, existing and prospective enterprise software users need to understand every new owner's strategy toward them. While you should talk to sales people and vendor executives, also look for more than mere words. Ask about why certain items you think you need are not available as standard offering. Ask about headcount changes, product release schedules, release contents, partnership programs, the future of exiting original equipment manufacturer (OEM) third-party products, etc.
More on a general note, existing customers of both languishing-once-troubled-but-now-stable or always-stable vendors alike, should address their concerns directly to the management and put contingency plans in place for ongoing support. Potential customers should proceed cautiously, buying components in a tactical manner and with a tangible, quick payback or ROI rationale. Stick to a series of smaller projects targeted at streamlining a specific business process. Keep it simple and smart (KISS), and be aggressive while negotiating risk allocations, price parity, and general terms and conditions. Fixed project prices (as opposed to time and material pricing), milestone payment schedules linked to deliverables, and a penalty clause for late deliveries (as well as a profit sharing incentive for early completions) should be a matter of course.
Very detailed functional and technical information about the Made2Manage Enterprise Business System 5.5 is contained in the ERP Evaluation Center at www.erpevaluation.com.