Inc., headquartered in Carpinteria, CA, is a global provider of e-business enabled
enterprise resource planning (ERP) and supply chain management (SCM) software
and services to multinational companies of all sizes, with a special focus on
the mid-market. QAD is the tenth-ranked ERP vendor with $193 million in revenues
for the fiscal year ended January 31, 1999. The Company was founded in 1979
when its founder Pamela Meyer Lopker was offered a contract to write manufacturing
software for a sandal-making company in California, run at that time by Carl
Lopker, the current QAD CEO and Pamela's husband. After initial success with
its first project, QAD began customizing its product for other California companies,
working exclusively with HP computers.
Company grew steadily throughout the 1980s and 1990s, expanding internationally
and making its product compatible with more operating systems. In 1995, QAD
became one of the first ISO 9002 certified ERP vendors. In 1996, the Company
became part owner of Integral Datentechnik AG, a German data management system
maker. In the same year, QAD commercially released its flagship open systems
ERP application named MFG/PRO. The software was devised to control all main
business functions, from inventory and planning to purchasing and finance for
highly regulated industries, like food & beverage and medical. In 1998, the
Company formed an R&D site in Ireland to help develop eQ (formerly On/Q), its
global supply chain management software. The initial eQ module, Advanced Planning
and Scheduling (APS), was released in 1998. Another eQ module, Collaborative
Order Management, was released in 1999. Another product enhancement is the QAD/Connects
architecture, which is both an open architecture concept and a set of the following
connectivity tools: Q/LinQ, which provides a standard framework for data import/export
between MFG/PRO and eQ components and other ERP systems, an EDI Commerce tool,
and Network User Interface (NetUI) for the Java platform. The last piece of
the QAD product suite is Qwizard software, which is intended to reduce MFG/PRO
implementation and rollout training to employees. It includes a business modeler
tool, customizable implementation tools, interactive learning tools, and tools
to design and customize the visual interface of MFG/PRO software.
sells and supports its products through its 20 offices and 30 indirect sales
organizations located throughout the world. By fiscal year end 1999, the Company
had more than 4,000 customer sites in over 80 countries, and derived approximately
62% of its revenue from the international market outside of North America. QAD
went public in 1987 and currently trades on NASDAQ.
is very competitive in speed and ease of global multi-site implementation
(very often in less than 6 months duration per site) and its global service
and support capabilities (the Company was one of the first ERP vendors to
be ISO 9002 certified in 1995). Moreover, MFG/PRO has a very strong vertical
functionality focus, and has a deep focus on vertical sub-segments (See
QAD Inc. - Product Information).
QAD was one of the first mid-market ERP vendors to incorporate the concepts
of e-Commerce, Supply Chain Management, Customer Relationship Management,
and integration with other vendors' products (the Company was one of the
first vendors to adhere to Open Architecture Group standards). This provides
QAD a 'one-stop shop' capability and a sustained source of both new licenses
and service and support revenue streams in the future.
the Company keeps abreast of the latest developments, it tries not to alienate
its more conservative customers with abrupt new technology introductions.
A good example is its new thin Java client called Net UI, which supports
both a graphical user interface (GUI) and the character-based interface
that is still overwhelmingly popular with plant-level users.
Company's financial position has eroded significantly over the last 18 months
due to the combined effects of decreased license revenue and excessive R&D
costs (26% of total revenue) for its eQ system (see Fig. 1 & 2 - QAD Inc.
- Annual & Quarterly Results Chart). QAD's available cash resources of less
than $16 million are significantly diminished compared to $70 million at
the end of the fiscal 1998, while its market capitalization of approximately
$100 million is only half of its annual revenue.
attempt to capture Tier 1 ERP market share based on eQ's rich multi-national
logistics functionality was not successful, and it distracted the Company
from strong mid-market sales execution. Furthermore, QAD's precipitous fiscal
1999 restructuring, when 15% of personnel was laid off and a great part
of the R&D personnel were transferred to service and support roles, will
take at least another 12 months for the Company to achieve its desired effectiveness.
- More than 80%
of new QAD customers within the next 4 years will be companies with less than
$500 million in revenues (70% probability). At the same time, we believe more
than 70% of existing users will opt for Net UI (65% probability).
service and support revenue will contribute more than 60% of its total revenue
within the next 4 fiscal years (60% probability), based on the Company's
readiness to integrate its products with other 3rd party products. Within
the same period of time, we believe eQ products will contribute 20% of QAD's
license revenue (60% probability).
Conduct further ongoing cost and organization scrutiny and identify opportunities
for further cost reduction and organizational improvement. Sales & Marketing
and General & Administrative costs as a percentage of net sales are at an
exorbitant 60%, compared to the industry average of 37%, while the sales
revenue per S&MA employee and service revenue per service employee are one
of the lowest in the industry, respectively (See Fig. 3 & 4).
should be included on a short list in any selection within the following
industries: Automotive, Electronics, Food & Beverage, and Medical. However,
any organization evaluating QAD products should exercise moderate caution
and consider existing functionality only, until the company regains consistently
profitable financial performance.