Made2Manage Systems 'One Year After': Reenergized and Growing Part Three: Market Impact

Market Impact

Made2Manage Systems Inc., a former public provider of broad enterprise business systems for small and mid-market 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 company's 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.

In August, Made2Manage Systems expanded both its domain expertise within the plastics industry and breadth of solution offerings for its plastics processing customers by acquiring virtually all assets from DTR Software International, which has been a privately held provider of manufacturing, distribution, and financial management software designed for the industry-specific needs of plastics processors. Made2Manage Systems hopes to now have a 1,900-strong customer base through DTR's 175 customers at about 600 sites.

Although not necessarily unique to Made2Manage Systems (if one is to be reminded of SSA Global, Infor, MAPICS, Epicor, Sage/Best Software, Catalyst International, etc.), 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. Prior to the acquisition, Battery Ventures had indeed conducted a detailed analysis of the vendor's operations, finances, and all services, support and product initiatives, while, like in any acquisition's due diligence exercise, it had looked at several of the alternative enterprise software companies before choosing to acquire Made2Manage Systems.

This is Part Three of a five-part note.

Part One presented the event summary.

Part Two discussed the future direction.

Part Four will present quality management processes.

Part Five will detail challenges and make user recommendations.

Impact of Battery Ventures

However, following the acquisition, a major difference in philosophy immediately emerged between the former and existing management teams on how to execute strategies going forward. Namely, while the former management deserves credit for stellar growth during the early and mid 1990s and for a delivery of functionally and technologically sound product (which has since 1986 evolved from a traditional Microsoft DOS-based MRP software to a nearly one-stop-shop' enterprise business applications on contemporary Microsoft technologies), many errors had been made during the last few years prior to the acquisition.

For one, there was the fairly little $30 million (USD) or so in revenues. Made2Manage Systems struggled to keep revenue stable enough (let alone growing) during the IT spending slump of the early 2000s, while it also was hard pressed to keep the balance between product-enhancements-induced costs (often without a proper validation of true customers' requests) and desirable financial metrics. Therefore, while the formerly public vendor had not apparently held back on the product functionality and technology aspect, profits long eluded it. Conversely today, under new management, the vendor touts better results in terms of relative profit margins and cash flow than hardly any publicly traded company in the space.

Further, pre-Battery, the products would often be delivered with expediency rather than a tried-and-true product quality and stability in mind. Enter the poorly trained and half-hearted non-exclusive VARs, and one could imagine a number of less than impressed customers. To make things worse, the product development folks would continue to enhance the products with the "winning new customers" mindset rather than with focusing on closing the dissatisfaction gap within the existing install base.

Consequently, the new management has instituted redefined product management and development priorities, with a focus on enriching software ownership experience (e.g., an improved ease of use or truly needed functional enhancements) rather than a flashy buying experience (and frustrations afterwards). This strategy is in tune with the general feeling of low customer loyalty and staying power of enterprise applications providers, which has forced even much bigger and mightier players to espouse their equivalent customer-retaining strategies with catchy names, such as PeopleSoft's "Total Ownership Experience (TOE)" (whose fate is now dubious under Oracle) or Lawson Software's "1,000 Days Manifesto". On the lower end of the market, WorkWise would be another object case of shoring up the install base (see A User Centric WorkWise Customer Conference).

One of the most significant decisions the new Made2Manage product management team has since made is to stop spending time and effort in futile "technology arms race" (i.e., trying to match its competitors on a feature-by-feature, one-upmanship basis). Namely, after conducting a thorough soul-searching exercise via surveying its customers, Made2Manage Systems has found out that this path only leads to functionality with limited appeal, and features that look nice on a marketing brochure or a PowerPoint slide show, but are short on substance. The vendor instead wants to focus going forward on delivering functionality that makes a difference to the majority of its customers and truly mirrors and supports their business processes in the most efficient manner.

Market Opportunity

Made2Manage Systems should thus have a good opportunity within its target market, which is still without a dominant vendor. Although the larger, Tier 1 and Tier 2 vendors have long been moving down-market, Made2Manage Systems' target segment is still largely below their radar screen. To again give the former management some credit, the new-coming management found great intellectual capital with which to work. Indeed, in the lower end of the discrete engineer-to-order (ETO), make-to-order (MTO), assemble-to-order (ATO) and make-to-stock (MTS) manufacturing realm, former Made2Manage management had found a market with good opportunities, and it developed most of the part-and-parcels it needed to defend its turf.

That is to say that former independent Made2Manage had, gradually, mostly by developing internally, and partly through acquisitions (i.e., a former supply chain management (SCM) vendor Bridgeway in 1999) or partnerships (i.e., Powerway for several quality management applications described below; Best Software for SalesLogix CRM, Abra HR Suite, and Abra Payroll Suite; ADP for payroll functionality; FRx Software, part of Microsoft, for financial reporting, forecasting, and budgeting functionality; Clippership and WorldShip for UPS and FedEx shipment capabilities; Pitney-Bowes for TranScape transportation management system [TMS], Synoptix for its Drill-Down Analyzer for financial controllers, and so on), garnered a line of integrated collaborative e-business, CRM, BI, data collection, and advanced planning and scheduling (APS) components within its core ERP solution.

In fact, the Made2Manage Enterprise Business System now offers a broadly integrated application solution for automating business processes including selling (including estimating and quoting) and product design; finance and human resources (HR); procurement, customer service and support; production and shop-floor control (including quality management); and scheduling, distribution, and logistics. Basically, it contains most of the functionality that any company would expect even from a top-tier enterprise applications provider.

Its SCM capabilities, which have initially stemmed from the Bridgeway acquisition, have meanwhile been extended beyond APS to cover near real-time forecasting, demand planning, and infinite and finite capacity planning and scheduling. M2M SCM 5.01, released early in 2003, offers enhanced planning and scheduling capabilities based on the proverbial Theory of Constraints (TOC) authored by Eli Goldratt, giving customers the ability to synchronize demand with the capacity to meet that demand, while remaining cost-effective. The method is particularly applicable to custom-built and custom-configured manufacturing environments often seen in the industrial and commercial equipment sector because their long lead times and high precision processes often produce bottlenecks and are not amenable to lean manufacturing practices (for more information, see Pull vs Push: a Discussion of Lean, JIT, Flow, and Traditional MRP).

To that end, TOC contends that every business operation has, or should have, one bottleneck (capacity constrained resource) that determines the overall operation throughput. By exploiting that resource and by adding buffers to "feed" it and keep it highly utilized, a business should increase its overall throughput, and, if it does while concurrently maintaining or reducing expenses, it will logically improve profit margins. Accordingly, M2M Advanced Scheduling uses an associated drum-buffer-rope (DBR) scheduling approach to help identify a facility's bottleneck resource (work center or drum), buffer or feed it to keep it running, and subordinate (rope) other resource's or work centers' schedules to that bottleneck. By leveraging powerful optimization algorithms and intuitive Gantt chart facility, users can optionally confine schedules by the addition of resources in the bottleneck work center, by adding any number of secondary work centers or by recording the availability of any kind of purchased items. The capable-to-promise (CTP) would be another major feature of the advanced scheduling module.

However, although not necessarily being at the forefront of providers for flow manufacturing with heavy production line or cell balancing and design capabilities, Made2Manage Systems has still garnered a number of applications that are adept for planning-heavy, scheduling-light environments with lean manufacturing prowess, and which have embraced the generally accepted lean practices, such as supporting standardization of work (through, for example, a graphical BOM builder to design "flatter" BOMs and thereby eliminate excess steps and movement of parts on the shop floor), focusing on quality (to be elaborated below), eliminating non-value-added activities and reducing inventory (e.g., special orders can receive raw materials directly into job and the finished product is shipped directly from the job against the sales order, without unnecessary issuing from and posting to inventory), vendor management (through, for example, open or blanket orders and automated data and file exchange), supporting demand-driven production (through Made2Manage Demand Forecasting module), fostering continuous improvement and visibility (through a number of BI and mobility tools, such as M2M Executive Information System or M2M Events & Actions [EA], which all help pinpointing problems and opportunities, drill down to the details, and take corrective actions if necessary), and so on.

This concludes Part Three of a five-part note.

Part One presented the event summary.

Part Two discussed the future direction.

Part Four will present quality management processes.

Part Five will detail challenges and make user recommendations.

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