PowerCerv Facing Another Stormy Season

PowerCerv Facing Another Stormy Season
P.J. Jakovljevic - September 12, 2000

Event Summary

According to its press release from August 17, PowerCerv Corporation, a Tampa, FL based mid-market enterprise applications vendor, announced the general availability of PowerCerv Vision, a process-mapping solution that creates a vast business knowledge repository and supports the PowerCerv Integrated Enterprise Response application suite by providing seamless graphical representation of processes between e-business, Customer Relationship Management (CRM), Enterprise Resource Planning (ERP) and Advanced Planning and Scheduling applications.

Comprised of four distinct components - Business Processes, Implementation Methodology, Total Enterprise Training and Data Migration - PowerCerv Vision helps companies document their internal processes, facilitates faster system installations and teaches users how to maximize the potential of their PowerCerv enterprise application solutions.

"PowerCerv Vision is a tremendous tool for our customers. It's an immense repository of practical business information that helps users learn proper operating procedures and teaches them how to maximize the capabilities of their PowerCerv enterprise solutions," said Roger Ciarleglio, PowerCerv's senior vice president of sales and marketing. "The software can literally walk someone through how to write a purchase order or how to set up and document a business process based on tried and true best practices."

On August 8, PowerCerv Corporation announced the general availability of three new e-business components of the PowerCerv eSeries - eCRM, eOrder and eDashboard. Each component Web-enables its respective core enterprise operations such as Customer Relationship Management (CRM), order management and business intelligence. eCRM, eOrder and eDashboard address key business operations for companies engaging in e-commerce. Accessible via the Web and any common browser, each component is integrated with the ERP Plus software suite to provide Web access to critical enterprise information, which supports PowerCerv Integrated Enterprise Response. Integrated Enterprise Response enables companies to extend their enterprise operations across the virtual supply chain and to successfully respond to customers, suppliers, partners and employees around the world 24 hours a day, seven days a week.

"Truly successful e-business requires collaboration. To compete and win on the Web, companies must open their enterprises and share information with their customers, suppliers and partners around the world," said Marc Fratello, PowerCerv's CEO. "eCRM, eOrder and eDashboard are self-service applications that help companies touch their virtual supply chains in a variety of methods. These new applications deliver benefits to online customers by increasing the number of touch-points and adding value via the Web. Also, our customers achieve the unique benefit of e-business solutions that are developed to integrate seamlessly into existing PowerCerv applications. The result, one tightly integrated system from one vendor that links critical front-office and back-office information to the world via the Web - while providing an easier implementation and lower cost of ownership. Today, supply chain-managed inventory, not just vendor-managed inventory, is imperative - it's the key to real e-business success. eSeries enables true e-commerce by delivering information and enabling collaboration across the virtual supply chain - eliminating boundaries of time and distance."

Earlier, on July 28, PowerCerv announced its financial results for the second quarter ended June 30, 2000. From continuing operations for the quarter ended June 30, 2000, the company reported revenue of $3.3 million and a net loss of $3.1 million, or ($0.23) per share, in comparison to revenue of $4.5 million and net income of $624 thousand for the second quarter in 1999 (See Figure 1).

Figure 1.

"Our license revenue grew significantly over our first quarter and is heading in the right direction, we know, however, that we still have a lot of hard work to do. We have taken a tough look at our company and made the changes that we believe we needed to make," said Marc Fratello, PowerCerv founder and CEO. "We have restructured our organization to take better advantage of our people and resources. In addition we have reduced our operating expenses and consolidated some of our operations to sharpen our focus. We have reduced our breakeven point significantly in an effort to be able to return the company to profitability. I feel that we are now appropriately sized to take advantage of opportunities in the marketplace and improve our execution. We are moving forward in extending additional B2B e-commerce capabilities into our enterprise solutions. These e-business initiatives will further enhance our Integrated Enterprise Response, which allows companies to respond to their customers, partners, suppliers and employees around the world."

Separately, on July 7, the company announced the resignation of Mike Simmons, president and CEO, effective immediately. Marc Fratello, PowerCerv founder and chairman of the board, became president and CEO. In addition, PowerCerv announced that it has reduced its work force by approximately 37 people as part of a company wide cost- cutting program.

Market Impact

PowerCerv has been going through its second major attempt to revitalize itself. The first one had happened throughout 1996/97 (See Figure 2) when the company did away with the unfocused strategy of serving many markets to focus on the discrete manufacturing mid-market with a single product suite - ERP Plus. As a result, PowerCerv divested several businesses that were not in tune with the new strategy including a general consulting business, an application development tools business, and reselling database software.

Figure 2

The nature of its current difficulties is indisputably different. PowerCerv ranks among a slew of Tier 2 and Tier 3 vendors that have been feeling the Y2K-caused pinch. Like its brethren, the company is now in for a stormy season as it continues to deliver new products and defend its turf from ever more intruding bigger vendors, while coping with depleting resources. PowerCerv CEO's openly grave message speaks in that regard. Its situation has been additionally exacerbated by its low presence in an already crowded marketplace, an undeveloped international distribution channel, high staff turnover, the lack of indirect channel to supplement its strong direct sales force, inferior service & support in the past, and an eroding financial situation.

Nonetheless, PowerCerv Corporation seems to have grasped the requirements of its target market (SMEs) that wish to acquire most of their business applications from a single source. To that end, it has continuously attempted to differentiate itself from its peers by providing combined ERP, CRM, APS, and business intelligence functionality, and technology that facilitates flexibility and supports distributed, remote applications deployment. Its product has long exhibited a componentized architecture, which is crucial for deployment of e-business products.

As witnessed in the latest announcements, PowerCerv continues to enhance its eSeries suite of e-Business solutions with the latest attractive components like eOrder, eCRM and eDashboard. eOrder provides the ability to do either business-to-business (B2B) or business-to-consumer (B2C) transactions over the Web. eCRM is the Web enablement of CRM functions. eDashboard is a customizable Web-based screen that tracks key business drivers important to executive officers such as CEOs and CFOs. Integrated Enterprise Response is the company's term for the focus that its enterprise application software brings to customers' minds.

The immediate future will show whether PowerCerv is facing a devastating hurricane or only a light tropical storm.

User Recommendations

PowerCerv's target market, primarily North American manufacturing and distribution companies with less than $250 million-a-year revenues, with light manufacturing requirements and that require integrated ERP and front-office functions, should certainly consider the company's latest value proposition, but avoid selecting it without looking at what the other vendors have to offer. Organizations with significant engineer-to-order and process manufacturing requirements may benefit from evaluating other products. The industries that would most likely benefit from using ERP Plus are electronics, consumer goods, machinery, and fabricated products.

Customers should insist on a contractual timeframe for delivery of a solution, and seek reference sites (preferably in their vertical market space), which have been successful with the product suite. Each e-business component should be put through its paces using a well-documented set of requirements, scripted scenario demonstrations, and rigorous reference checking.

Furthermore, companies outside of above-mentioned industries may benefit from evaluating PowerCerv products on a stand-alone basis for their e-business needs and leverage that information against other vendors in the selection. Current users may want to inquire about the company's plans regarding Internet marketplaces in their respective industries. However, any organization evaluating PowerCerv products should still exercise moderate caution and consider existing functionality only, until the company regains a consistently profitable financial performance.

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