QAD is one of those rare down-to-earth enterprise software vendors that is all about providing what the manufacturing user base wants: no gimmicks, just the software capabilities please (i.e., to increase competitiveness)! QAD Explore user conference events do not feature the “A List” band concerts or standup acts, and one will not meet many APICS-certified professionals in one place at any other enterprise resource planning (ERP) vendor event, except of course at APICS annual conferences.
The 30-plus year-old company is a seasoned provider of enterprise applications for global manufacturing companies specializing in automotive, consumer products, electronics, food and beverage (F&B), industrial, and life science products. Nowadays, QAD software is in use at more than 5,500 manufacturing sites in more than 90 countries. QAD's main product suite is called QAD Enterprise Applications (prior to 2007 the suite’s name was MFG/PRO) and uses year designations to denote versions.
A Silver Lining
Like most of its manufacturing customers, QAD has just witnessed a significant global economic crisis, which has affected industries and geographies very differently. QAD’s life sciences industry was relatively unscathed by the recession and the slow recovery, and it is a growth sector of late (currently at about 15 percent of QAD’s revenues). After a serious slump and near-death experience in North America, the automotive industry is near pre-recession levels, but the outcome of the recession is a different distribution model. Namely, China is now out-producing the United States (US) in passenger vehicles (while India is working hard on changing that) and QAD customers, many of whom are suppliers to automotive original equipment manufacturers (OEMs), have meanwhile adjusted their businesses to meet changing demand.
QAD has lately witnessed faster demand for its products in China. In Europe, QAD is seeing variable demand on a country-by-country basis, dictated by stability and growth or decline in prospects. As a whole, QAD’s business in North America, and its emerging markets, particularly Brazil, is picking up. Manufacturing activity has been relatively stable in the US, based on the Purchasing Managers’ Index (PMI), but there has been an uneven recovery in Asia-Pacific and Europe.
It is anyone’s guess what will happen in some markets where the austerity measures has even caused a double-dip recession. In any case, after a few tough years with flat revenues at best (and even some necessary staff reductions), QAD is back on a growth path. For the full fiscal 2012 year ended January 31, 2012, total revenue was $250 million (USD), and the company has 1,500 employees. The QAD Explore 2012 user conference apparently had several hundred attendees from 23 countries.
CEO’s Keynote Presentation
There is a somewhat clear division of tasks between the married couple who founded and still run the company. Karl Lopker is the chief executive officer (CEO) that is not only in charge of the company’s strategy and financial performance, but is also hands-on when it comes to go-to-market tactics, partner ecosystem, and customer engagement. QAD frankly admits that, while it has only very recently gone back to winning brand new businesses, the past couple of years were mostly about shoring up the vast current install base and protecting the company from customer departures to aggressive competitors of QAD.
This “protection” strategy has been executed in multiple ways. In 2008, QAD launched a significant enhancement to its core suite with the release of the Enterprise Edition (EE) of QAD Enterprise Applications. The 2008 release introduced global financial management capabilities after the 2006 acquisition of the Belgium company Soft Cell N.V. (for more info, see here).
After several years, many of which unfortunately coincided with the economic crisis and companies’ reluctance to implement new financial systems, QAD Enterprise Financials and the EE release are finally taking off, currently at a couple hundred customers. While the blessing here is for QAD to be able defend its customer base from an ongoing onslaught by SAP and Oracle (which have always had strong corporate-level financial management products), the curse is that QAD’s product offering is now split into the Standard Edition (SE) and EE.
This situation means taking care of new enhancements and upgrades on the more costly and resource-intensive two tracks. The reason for that is that Soft Cell’s architecture and table schemas were different from the MFG/PRO’s core, and so QAD has had to rewrite its core product into the newer Enterprise Financials’ architecture within the EE release. Most of the newer enhancements (discussed below) are being done for EE customers, in the hopes that laggard SE customers will be motivated to upgrade faster.
Customer Engagement for an Effective Enterprise
Karl Lopker reiterated QAD’s vision for a future in which all of its customers exist as an Effective Enterprise. QAD defines an Effective Enterprise as one “where every business process is working at peak efficiency, and is perfectly aligned to achieving a company’s strategic goals.” QAD attempts to do this by delivering solutions that promote efficient operations, deploying technologies that make applications simpler to support and easier to use and learn, and using implementation methods that simplify and reduce risk and effort.
This vision drives everything QAD does—its products, services, and processes—and starts with how the company engages with its customers. The QAD Customer Engagement Program, which Lopker instituted a couple of years ago, helps QAD customers identify opportunities that enhance the performance of their systems to better align with and support their goals. This consultative process, which QAD undertakes yearly at no cost to its customers, provides a roadmap to help its customers become an Effective Enterprise.
Discovery, the first phase of QAD’s Customer Engagement Program, is when QAD business consultants work with and interview the customer’s key personnel to learn more about the customer’s business. QAD experts focus on existing business processes and how effective they are to reaching the customer’s strategic goals. The focus is on quick wins (low-hanging fruit) and how to leverage the customer’s current information technology (IT) investment in order to build rapid growth opportunities.
QAD’s Discovery phase is aimed at being as nondisruptive as possible to the customer’s day-to-day business activities. QAD works with the customer’s project manager(s) to coordinate scheduling of his/her(their) personnel to review processes and their alignment with business goals. QAD consultants then measure performance against QAD’s elaborate key performance indicators (KPIs) for an Effective Enterprise. These metrics are on 10 specific functional areas—customer service, supplier performance, manufacturing performance, manufacturing schedule, IT effectiveness, supply chain effectiveness, inventory effectiveness, financial compliance, industry compliance, and asset utilization—and stem from QAD’s extensive experience in the manufacturing domain (for more details, see here).
Vision Workshops, Q-Scans, and Easy On Boarding
By the end of QAD’s Discovery phase, the vendor’s experts will have captured the feedback and key points necessary to prepare for the next step—the Vision Workshop. In this phase, QAD consultants present to the customer’s senior management team a Vision Report: their findings from the Discovery phase, and a summary of alternatives and recommendations for improvement—both over the short and long term. The Vision Report offers recommendations suited to the unique challenges of each customer, such as the following:
- Improve existing processes, via supplemental solutions training and/or personalization
- Implement new business processes (and new QAD solutions if necessary, but often by leveraging available functionality in QAD that the customer was unaware of and that come free as part of maintenance)
- Improve system performance, via new deployment options and/or infrastructure optimization
- Maintain compliance
In general, most companies have more alternatives for improvement than the resources to pursue them. The focus of the Vision Workshop is to mutually agree on key priorities, and to develop a Roadmap of initiatives to pursue over the short term. QAD may identify projects to start with directly from the Vision Workshop, or recommend further analysis of specific areas by conducting QAD Q-Scan assessments. The QAD Q-Scan, conducted by QAD’s consulting team, reviews current practices, costs, and objectives to create the Q-Scan Findings Report. The report clearly defines the requirements, value, and plan to move forward.
QAD collaborates with its customers to provide expertise, experience, industry knowledge, and resources to ensure their initiatives are implemented within a specific timeframe and a predefined scope and budget. The vendor works closely with the customer’s project manager(s) to align his/her(their) resources—people and infrastructure. QAD has thus far developed nearly 30 Q-Scans in the following groups:
- General—upgrade, performance, technical, analytics, learning, KPI, business process management (BPM)
- Process—design, engage, plan, make, source, deliver, service
- Enable—finance, transportation, asset management, electronic data interchange (EDI), lot/serial tracking
- Compliance—Materials Management Operation Guideline/Logistics Evaluation (MMOG/LE), Sarbanes-Oxley Act (SOX), Food and Drug Administration (FDA), 21 CFR Part 11, International Financial Reporting Standards (IFRS)
At the Roadmap phase, QAD’s team present a detailed plan for the deployment of the agreed-upon set of recommendations for a detailed work plan, resource requirements, change management control processes, and knowledge transfer. The implementation starts with QAD Easy On Boarding (EOB)— which follows industry best practices and QAD’s expert knowledge of implementing ERP solutions with preconfigured steps. QAD makes use of predefined templates, predefined roles, structured processes, and relevant software enhancements here. This outcome-focused process reduces implementation time to ensure QAD meets the customer’s timeframe and budget, and that its team is out of the customer’s hair as quickly as possible.
Other Moves to Protect the Install Base
The Customer Engagement idea came from the QAD’s ingrained belief that only good things can come from talking to customers. But despite QAD conducting the Discovery, Vision, and Q-Scan (if required) steps with the customer’s key personnel with transparency at every stage, the initiative was not readily accepted by QAD’s staff and customers alike. The first group did not feel motivated to invest its time and effort where new sales were not guaranteed. Indeed, QAD had pledged to identify opportunities for business process improvement by better utilizing existing systems, with no requirements to buy new software or pay for external services.
Customers were also not that keen on this offering—as it requires some investment of time (and disruption to the daily bread business), and there is always the skepticism of being inevitably sold to. But Karl Lopker kept his foot on the gas pedal here, and tied the sales and professional services staff’s performance reviews and bonuses to the number and evaluation of discovery and vision workshops (as a motivating lever). As for the customers, many have since realized the benefits without necessarily buying any new software—just by better leveraging their “shelfware” and new enhancements that they were entitled to (e.g., new QAD .NET UI enhancements, reporting enhancements, etc.).
In addition to the Customer Engagement Program, QAD has lately bolstered its consulting partner ecosystem, currently with 780 partner consultants, 500 of whom are QAD certified. QAD is now working on QAD Bid Site for consulting, where its professional services teams and those of its partners compete for new gigs in a transparent forward auction manner.
Deployment Choices Help as Well
With the launch of QAD Enterprise Applications 2007, the vendor pioneered hybrid deployment, with the customer’s ability to deploy the applications either on premises, on appliance (for remote departments in regions with no Internet access), or on demand/software as a service (SaaS). QAD customers appear to be increasingly choosing the on-demand solution for various reasons—not just for the price—the most cited of which is convenience, such as the need for a quick rollout of a new remote division or a newly acquired company.
Currently, about a few hundred customers are on demand, with QAD’s subscription revenues doubling in last fiscal year (still at a single-digit percentile, given the nascence of the offering). As the product’s penetration is growing, QAD projects a strong adoption. While the Progress OpenEdge platform is now fully multitenant, the QAD On-Demand offering is in a private cloud setup, which was often demanded by QAD’s security-sensitive life sciences customers.
Other Products—According to Pam Lopker
In addition, QAD has recently delivered more of its mobile business intelligence (BI) solutions, and unveiled its mobile computing strategy and BPM direction at QAD Explore 2011. At this year’s event, QAD’s president and product development visionary Pam Lopker gave a keynote presentation, outlining the following market influences on the company’s offerings:
- New devices: tablets, phones, touch, any device at any time, voice, gesture, location, motion
- Cloud: focus and efficiency, global access
- System intelligence: process measurement & configuration, cause-and-effect analysis, fuzzy logic, artificial intelligence (AI)
- Social networks: collaboration
To that end, QAD has recently been working on the following issues, in addition to the aforementioned deployment independence and openness (as IT systems are moving from being open to ubiquitous, physical to virtual, and on premises to on demand):
- Enterprise financials—internationalization (a single database instead of currently 47 localizations in various countries), compliance, flexible structures, dual currency, IFRS
- Analytics framework—browsers and reports, operational metrics, BI and dashboards
- BPM —visualize, task, and measure
- Mobile—Apple iOS, Google Android
To drill down into some of these topics, the vendor recently announced QAD Store à la iTunes, where a freely downloadable mobile requisition approvals app was demoed on stage. The store will soon feature about 40 so-called “collections” of QAD screens that are pertinent to certain roles (so that the user does not need to switch screens to perform a certain task) and “workbenches” (with all the relevant gadgets, tools, dashboards, etc., which are handy for the certain roles and tasks, e.g., purchasing manager). Partners and customers will be able to contribute only QAD-certified apps. QAD is working on enhancing the usability of the apps store, specifically on delivering a unified user interface (UI) that will be platform agnostic (mobile, desktop, Web, etc.) and will even be activated by voice and gestures (slated for the next 24 months).
Possibly the most impressive news was QAD’s foray into embedding BPM capabilities within its enterprise suite. The BPM 1.0 release was mainly about business process analysis (BPA), whereby QAD Process Maps were introduced in 2011. The BPM 2.0 is about a full-fledged BPM system, given that Progress Software has meanwhile embedded Savvion BPM within OpenEdge1. The technical requirements for using BPM 2.0 in QAD are Progress OpenEdge 10.2 b and QAD .NET UI 2.9 (or later releases). QAD plans to release about 15 process workflows by September 2012, and currently has six early adopter BPM-ERP customers.
QAD Business Intelligence (QAD BI) 3.0 has been available since September 2011, and works both on Android and iPhone, but currently has more features on Android, as it supports Adobe Flash (and QAD BI leverages Flash). The integrated framework by QAD entails the KPI Framework (to improve customers’ performance) together with the Analytics Framework (to maintain customers’ performance). In the future, there will be more Effective Enterprise KPIs, roles-based dashboards, and proactive BI (coming from the link with BPM). The so-called “E-mail Bursting” capability is slated for September 2012, whereby reports will be sent to relevant persons as attachments.
Pam Lopker ended her keynote presentation by revealing upcoming developments in the 12 months or so:
- Browses on tablets—the ability to browse and maintain screens, and not just do simple mobile approvals
- Social media—the upcoming QAD Buzz product will provide audit trails on maintenance screens in QAD, whereby users will be able to make activity stream comments (e.g., “Why did you change the ‘Order Policy’ rate to X?”; “Because of that and that reason.” )
- Operational metrics history—currently, the metrics are only for a point in time (snapshot), but will soon be able to be presented as trends over time
- Scrolling screens on the desktop UI—for the same feel as tablet UIs
So, to recap, QAD is a different kind of a major ERP vendor—one that is down to earth and not glitzy. It also feels like it’s a family-run business despite being a sizeable and long-standing publicly traded company. Due to the Lopkers’ majority ownership, QAD is a closely held company, enabling it to preserve its long-range business direction and vision, and not react to every stock market’s whim in a knee-jerk fashion.
QAD still continues to invest heftily in its product development (24 percent of its employees are developers). Karl and Pam Lopker, who have always been approachable, appear as motivated and enthusiastic about the company’s future as ever, and are not showing any inkling toward wanting some exit strategy. Quite the contrary, during her keynote speech, Pam Lopker mentioned that their daughter is now working at QAD in the user experience (UX) department. And it is likely that their second child will also join the company after graduating from computer science graduate school. One wonders whether the parents will pass the baton on to their children at some point—ensuring that QAD continues to be very much a family-run business.
Finally, QAD’s growth comes from organic customer expansion in its key industry verticals and from the delivery of incremental enhancements and new capabilities that enhance the customers’ business, whether created through acquisition or internal development. Additionally, QAD expects significant revenue growth through the continued adoption of QAD On Demand by both existing and new customers.
1Progress Software has recently announced the intent to divest 10 product lines including Savvion, but it will keep the right to Savvion’s source code within OpenEdge. Progress just does no longer want to sell Savvion as a standalone BPM offering (with a separate sales force and partner ecosystem), and wants to focus on providing cloud-based application platforms for vendors like QAD, Datasul, etc.
References and Recommended Reading
Reconnecting with a Tried-and-True Manufacturing ERP Vendor. November 23, 2011.
Meet the New (Revolutionized) Progress Software. October 19, 2011.
Experiencing a Different Corporate Culture at QAD Explore 2008. July 16, 2008.