Meridian Systems’ “Catch Up” Challenge in the Capital Infrastructure Industry - Part 2

Part 1 of this blog series covered the spectrum of Meridian Systems’ Proliance solution for Tier One, multi-billion-dollar global companies. It also analyzed Meridian's early bet on leveraging Microsoft Office Business Applications (OBAs), and harnessing the Building Information Modeling (BIM) technology collaboration that is revolutionizing the capital infrastructure industry.

Meridian, which promotes its business as the Plan-Build-Operate (PBO) technology solutions leader for Project-Based Organizations (another PBO acronym, and thus the “PBO squared” mantra), offers an end-to-end solution for building owners, construction and engineering firms, and public agencies in three flavors. These offerings respectively cater to high-end (Tier One), mid-market, and small market organizations that manage capital building programs and facility assets.

Meridian’s overall focus is to improve customers' revenue and profit growth by optimizing facilities, and by reducing construction and facility costs.  To that end, Proliance, which is a full-fledged infrastructure lifecycle management (ILM) suite on a native Web services-based platform, is aimed at Tier One high-end PBOs with over US$ 1 billion in revenues and over 500 full-time employees. In this market segment, where the competition comes largely from SAP and Oracle, and with the deals valued from $750,000 to $10 million, Meridian typically wins owing to its OBA strategy, ready BIM and enterprise resource planning (ERP) integrations, Web services-based platform, distinct PBO product breadth, and well-attuned business analytics (BI) tools for PBOs.

Different Strokes for Different Folks

This part will focus more on Meridian’s forerunner Prolog product for smaller organizations, and on the vendor’s upcoming fourth quarter of 2008 (Q408) release of Prolog Connect for the mid-market.

Prolog was originally introduced in 1993 on a client/server platform, and is in use today by more than 4,000 companies that have revenues from $10 million to $500 million, and from 10 to 100 employees. With typical contract values of less than $150,000, the product grew rapidly across small organizations in the architecture, engineering & construction (A/E/C) sector because of Meridian’s micro-vertical expertise and rich understanding of this space, a usable and intuitive user interface (UI), and easy customization by business users (versus information technology [IT] staff).

Prolog is best suited for the “Build” phase of Meridian’s PBO solution set, and includes more than 400 packaged reports.  It manages a wide breadth of activities including purchasing/bid management, budgets and cost management, contract and change management, correspondence management, design collaboration management, daily journal entries, jobsite tracking, and safety and quality programs. Usual-suspect competitors are Primavera [evaluate this product] and Autodesk Constructware (and occasionally e-Builder).

To modernize Prolog, and also appeal to larger mid-market companies, Meridian is releasing in late 2008 a new mid-market product, Prolog Connect, which provides  Web services and service oriented architecture (SOA) layer atop the Prolog's Project Portfolio Management (PPM) oriented product set.  Featuring OBA strategy, secure collaboration with internal users and external supply chains, and flexible integration, Prolog Connect is targeted to companies in the $500 million to  $1 billion revenue range or between 100 and 500 full-time employees (FTEs). When sold together, Prolog and Prolog Connect's typical contract price is expected to be up to $750,000.

Current State of Affairs at Meridian

Lately, Meridian continues to win with its PBO value proposition for ILM with deals across a broad segment of public and private organizations.  Keynote recent deals were:

Other notable deals for Meridian include the State of Connecticut, Los Angeles World Airports, and the City of Seattle.  Also of interest is that the company uses primarily a direct sales and support model for its upper-range Proliance product, and sells largely indirectly through system integrators (SIs) and value added resellers (VARs) in the small and mid-markets.

Meridian does not want to be in the ERP game, rather it wants to "connect in." Within the Prolog and Prolog Connect solutions the vendor has pre-built hard connections into major project-based ERP leaders including Deltek Systems. Proliance was built on Web services and in Extensible Markup Language (XML) to allow for multiple points of integration with other applications, including ERP, financials/accounting, document management, etc. Proliance includes its own asset management modules, but can also be integrated with other (more powerful) enterprise asset management (EAM) systems as required.

It is also interesting to note that from the beginning both ProjectTalk (the on-demand version of Prolog) and Proliance OnDemand were multi-tenant offerings (i.e., keeping many customers in one environment rather than dedicating one environment per each customer). Meridian determined early on that this was a much more economical way to achieve the economies of scale needed to reach profitability with its offerings. As for customers, there are many using both systems. Haskell, Hathaway Dinwiddie and many others are on ProjectTalk, while ISTHA and CBRE use on Proliance OnDemand

Market Opportunity (and Challenges)

While Meridian is based out of the US, it works with a wide partner network, including customers that are turning into VARs, and partners that are looking to sell to emerging markets.  A new Morgan Stanley report entitled “Emerging Markets Infrastructure: Just Getting Started” and published in April 2008 identifies that a sizable boom in infrastructure building is underway.  This PBO surge spans the realms of power and water, property, ports, airports, and is across both the government/public and private sector.

Morgan Stanley forecasts US $21.7 trillion in infrastructure spending in emerging markets over the next decade (at least before the onset of the global credit crunch). The report identifies a surge in market listings of owners, operators and contractors to build infrastructure/assets in emerging markets, and states the number of listed infrastructure-related entities therein is up from 230 to 354 (54 percent increase) over the last five years.  Morgan Stanley sees huge market capitalization -- increasing from $146 billion to $1.1 trillion over this same 10 year period.

But what about the big enterprise software competitors who also play in these markets, and who indisputably own the IT departments’ mind share?  Meridian’s President and Co-Founder John Bodrozic, quoted in Part 1 of this series, boldly says “bring it on” when queried about competitive consolidation, such as Oracle’s recent acquisition of Primavera.
"Oracle now has two products that do the same thing: Oracle Projects and Primavera, and the real question for installed users will be, “which one lives and which one dies” or will it continue its six year history of letting multiple products do the same thing (e.g., JD Edwards, PeopleSoft, etc.) but that have zero interoperability? Oracle's published Frequently Asked Questions (FAQ) document on the acquisition states that Oracle plans on integrating Primavera PPM to “Oracle ERP,” but never states which one of Oracle’s ERP products. With nearly 50 acquisitions in a few years, one wonders how any buyers or sellers can make sense of which products can and should work well together in which instances."

While I can understand the Meridian CEO’s confidence in his holistic ILM/BIM offering, I certainly would not dismiss the Primavera acquisition. At least, I agree with Vinnie Mirchandani’s liking of the deal and Oracle’s vertical industry-based acquisition strategy, backed by a coherent Oracle Fusion Middleware (OFM) strategy. Also, Brian Sommer has an impressive blog post on the PPM software space, besides what the deal might mean for Oracle and for Primavera customers.

In addition to its relatively small size and best-kept secret status when it comes to brand recognition, Meridian’s major challenge could be the fact that, since the ILM space is still new/evolving, there is a steep learning curve to explain it to customers. This is why the market is still often defaulting to more simplistic solutions that don’t do the job as well as Meridian does. It is akin to customers' silly practice of switching light bulbs to save money on energy when you have no insulation in the walls.

There are so many inefficiencies and even adversarial relationships in the industry that unneeded costs and poor practices are built in and accepted.  The challenge for Meridian is to build a greater understanding of the big picture impact of a complete PBO product line so that the market doesn’t continue to default to less complete ILM solutions like Primavera, Oracle, Skire, Tririga, etc.

Also, since the BIM/ILM connection is enabled via the partnership with Horizontal LLC, its competitors can emulate that over time (i.e., they can strike partnerships too). Thus, are there any other frontiers that Meridian could tackle next, in order to be ahead of the curve and continue to challenge the market with the “Catch us if you can” mantra? To that end, other potential areas are things like building new automated solutions for pulling data out of Meridian solutions to make the Leadership in Energy and Environmental Design (LEED) certifications turnkey, and exploring the latest construction delivery methods (e.g., private-public partnerships such as lease-leaseback for school districts).

Final Thoughts

In summary, Meridian offers a well-thought-out approach for small to large companies, with the right technical foundation for the future with a native SOA/Web services platform already in the market for the past five years. Additionally, it has integrated business functionality for managing ILM in the complete PBO spectrum. This scope includes the combination that both the market leaders and market pundits are missing:  PPM, Scheduling, Facilities Management, and BI. If you are a project-based organization engaged in holistic capital infrastructure lifecycle management, this is one solution you should certainly consider.

Therefore, dear readers, what are your views, comments, opinions, etc. about Meridian’s assertions and about the capital infrastructure market in general? We would also be interested in your experiences with this software category (if you are an existing user), and your general interest to evaluate these solutions as prospective customers.
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