Although encouraging, it might also be quite ironic that, during these days of general lethargy of the market, the rare good pieces of news, in addition to some usual suspect' software giant's upbeat financial reports due to their certain large oligopolies' heritage, have been coming from these reformed traditional ERP vendors, which, not long ago provided ammunition to some pundits to announce the obsolescence of ERP. This note examines four vendors once considered to exemplify failed business models.
SSA Global Technologies
is Part Four of a five-part note covering these four ERP vendors once considers
One and Two detailed specific vendors.
Three discussed the Market Impact.
Five will make User Recommendations.
These vendors are by no means without challenges, which are both common and individually specific. For one, many enterprises will still evaluate these vendors with caution (and sometimes even omit them) due to their past financial difficulties and lingering market perception. Further, taking an aggressive approach to establishing a leadership position in a selected few manufacturing industries means development of in-depth functionality and every single one of these vendors might be attempting to tackle too many requirements at once. Enhancing and upgrading its core systems with industry-specific applications, integrating new extended-ERP applications, and launching a new technology platform is indisputably a full plate for every vendor, not necessarily only for the ones in case.
Also, while the vertical focus is way to go, many of these vendors do also have an existing customer population within other industries (owing to the ERP heydays when the demand was chasing the supply and when generalist solutions were just fine), and these enterprises might feel stranded and even inclined to move to a vendor with a clearer vertical focus pertinent to their needs.
The competition has also intensified lately for all these vendors. Although some sectors like the process manufacturing and consumer packaged goods (CPG) target markets will have long been under-served by traditional ERP vendors who primarily designed their products for discrete manufacturing, the situation has been rapidly changing recently, with the process ERP market becoming quite cramped with competitors. Not to mention already thickly inhabited discrete manufacturing sectors. The recent revival of these vendors that are also direct competitors to each other, while hinting a strong opportunity, also reveals the internecine war all the players face.
both a pure process enterprise applications player like Ross and other discrete
vendors do need to be able to further differentiate itself from increasing competition
both from the larger players, particularly SAP, Oracle, J.D. Edwards,
PeopleSoft, Intentia, IFS, and QAD, which have recently
made significant in-roads in the relevant sectors, and from even a larger number
of mid-market enterprise applications incumbents. Although the stable financial
performance of featured vendors, somewhere even with eliminated debt, have been
an impressive feat, their current cash situation is merely pocket money compared
to that of its above formidable competitors. The market will therefore be watching
closely to monitor these vendors' progress, as they have apparently come out
these vendors' challenges take more individual tracks would be the state of
affairs of harmonizing their installed user base across a controllable number
of active software versions. If history helps us predict the future, most existing
vendors will not be able to pull off the smooth evolution from their current
architecture to next. The problem includes the issue of being limited by the
past, making it more difficult to truly transition to a new architecture (for
more information, see What's
Wrong with Application Software? It's the Economics ). Ross seems to be
in the best shape in that regard given its clear product roadmap and the least
percentage of customers on legacy applications. The vendor has gone to great
lengths to ensure that customers on older releases can cleanly upgrade to the
latest architecture and take advantage of the .NET benefits, to mutual interest.
Conversely, Baan, still has a lot of housekeeping to do given it admits that nearly 70% of its customers are still on Baan IV, owing to the unfortunate fact that the Baan business was hit with troubles exactly when it finally seemed to have delivered its most stable and mature product although technologically outdated, Baan IVc. The bifurcated releases of the core ERP products, Baan IVc and Baan 5.0 — with diverse vertical solution extensions, while necessary at this stage to keep old customers aboard, will eventually have to be merged into one code set for development and support. To that end, the Gemini product release is to provide a smooth simultaneous migration for customers of Baan IV and iBaan ERP, given this is an issue which Baan is very aware of and is specifically addressing. Otherwise, valuable R&D and service & support resources will continue to be diluted indefinitely by the requirement to maintain multiple code bases.
while the Gemini product migration strategy has been put in place and conveyed
to the market, it still reflects a year timeframe, during which time both releases
will be enhanced and supported, and during which the customers activity may
stall due to the wait-and-see' stance, as possibly indicated in Invensys'
recent revenue forecast. While Invensys' most recent decision to roll the former
Wonderware Protean and Prism process manufacturing
products into a business unit that was formerly known as Baan Process
Solutions, and now it is Invensys Production Solutions,
separate from the Baan organization, will get Baan off the hook regarding disparate
products' integration within iBaan that was devised almost three years ago (for
more information, see
Invensys Announces New Division - Baan Process), and should now allow Baan
to continue its focus on discrete manufacturing, it will not necessarily end
Baan's plagued viability perception. Namely, under the new setup within Invensys
Production Management Division, well over 80% of revenues now come from process
industries, whereas Baan has now been singled out as the possible discrete manufacturing
black sheep' in the family. Thus, Invensys will likely occasionally review
the carrying value of its investment in Baan, which will certainly not help
the market's perception of Baan's ongoing journey. However, with more than 1,000
R&D employees and by learning from the prior grueling product integration experience,
Baan may stand a chance to deliver the promise this time within the Invensys
family, given Invensys' hefty investment in Baan so far.
Varied Product Portfolio May Be a Distraction
it is needless to say that the varied product portfolio now under the SSA GT
and Geac banners will take serious pondering and soul-searching and may likely
act as a distraction from their primary products' strategy. It does not take
a rocket scientist to realize a number of potential product redundancies within,
e.g., the following overwhelming SSA GT set of product: BPCS, Infinium, CAS,
KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics,
MK Manufacturing, PRMS, SSA GT MAX+ and Warehouse BOSS. It, however, might indeed
take a rocket scientist to figure out how to fully integrate organizational
structure where employees are best integrated, service offerings best coordinated
and cross-selling opportunities best tracked and pursued. Geac has already had
its share of similar trouble, eventually resorting to a number of divestitures
of less-profitable and non-viable products (see Geac
Decomposes To Survive).
SSA GT has unequivocally said that it does not intend to discontinue any of acquired brands, but will rationalize the organization structure, as already seen in letting almost half of former interBiz' and ~20% of former Infinium staff go, which will have caused inevitable disruption in a short term. User companies will still need serious convincing that SSA GT will not stabilize' or even discontinue some brands. Moreover, even in the cases where the company has been showing close attention to its customers' wish lists, its crucial tenet of operation is profitability and setting realistic goals (the ROI justification works for the vendor as well). It does not appear very realistic to expect the equitably due attention to over a dozen products, though, as only the enhancements that will result in marketing value to SSA GT will pass.
of an unfocused, multi-product and multi-technology strategy in the markets
with diverse dynamics typically multiplies and overstretches sales, R&D, and
service & support resources jeopardizing the chances its products could stand
a chance of long-term success in their respective niches. Geac, Epicor,
Ross Systems, and SCT Corporation are recent examples of companies
where this strategy has failed: all have had to eventually resort to divestiture
and to a focus on core competencies. With SSA GT stating its insatiable appetite
to acquire more vendors to reach $500 million in revenues within next 12 months,
it might be flying into face of these negative experiences, and it may soon
have too much on its platter to handle.
while Baan might be in the best shape regarding the most native functional footprint
(except for the HR/payroll functionality), SSA GT, Ross and Geac still have
quite a scope of functionality to cover through external partnerships, which
gets increasingly complicated to track for several dozens products and their
multiple releases (see SSA
GT Beefs Up BPCS V8 Through Partnerships' Spree and Geac
Trying Its Luck in Partnering ). Again, Ross might be in a much mitigated
position, since, in synch with its focus on process industries, it has been
very selective with its partnerships. Ross claims to be motivated by fit, and
not size. Namely, for both SCM and CRM, it had the option to partner with companies
that offer stronger name recognition. Yet, it admittedly chose the companies
that provide the best combination of functional and technology fit for its customers.
The chosen companies (i.e., Prescient and Selligent) are also with complementary
approaches to partnerships.
Additional Integration Costs and Other Complications
the best-of-breed approach has its merits and is a necessity for some plant-level
applications that ERP vendors do not typically provide (e.g., data acquisition),
it inadvertently leads to additional integration costs and complicates service
& support arrangements. Interfaces between disparate applications like ERP,
SCM, CRM and/or e-business usually require significant tailoring, which should
now be multiplied by the number of newly acquired products and their different
product versions. The things might get even more complicated due to partners'
potential troubled performance and subsequent demises or change of ownerships,
like in the recent case of Applix iCRM, which happens to be
embedded within both Geac's and SSA GT's offering, albeit under OEM agreements
that give these vendors the right to source code. All the above can be a barrier
to future changes as further modifying already modified code is notoriously
time consuming, costly, and risky.
Geac seemingly has most of the outstanding work in terms of functionally bolstering
some of its previously neglected products and of figuring out a middleware and
web services framework for its users. Although it is functionally strong, Geac
System21 has, until recently, lacked some of the technology and buzzword must
haves' that have been natively provided by many of its rivals such as SAP,
Intentia, IFS and J.D. Edwards. Contrarily, Geac has
so far mostly talked' to the outside modern collaborative world through a plethora
of open APIs (application programming interfaces) and remained content (or forced)
to talk in terms of best-of-breed' connectivity.
function suites, like CRM, advanced web-based product configuration management,
business intelligence, and e-commerce are largely provided through partner alliances
such as with Cognos and Information Builders
for business intelligence (BI), Applix for its iCRM solution and with Frontstep
for its SyteLine APS and SyteCenter solutions.
By intending to further expand the range of partnerships, Geac might partially
allay some customers' fears that System 21 functionality will increasingly lag
that of its major competitors. The partnerships are also intended to enhance
Geac's StreamLine Windows NT/2000-based ERP solution for 5 to 150 users, which,
contrary to its System21 sibling, has not been known for its differentiating
core ERP functionality.
The proverbial problem for Geac has been its preference for acquiring new products rather than pursuing in-house product development and/or true strategic alliances. While the strategy might have worked in a number of esoteric industries with a low penetration of competitors like hotels & restaurants, real estate and construction, it is indisputably, a completely different ball game in the global enterprise applications market in the mainstream industries. Modern enterprise applications must be able to support dynamic business requirements, and every vendor is compelled to add much more value to its products and services portfolio to attract and retain customers, rather than mainly investing in the existing bundle of disparate core products and hoping for endless support revenues. Geac's fierce competitors have long grasped the reality and acted accordingly.
the crying need to change its faltering business model, Geac seems to be finally
addressing its strategic options, with the recent product strategy announcements
and the recent appointment of Timothy Wright as CTO, showing it is serious about
appeasing and shoring up its large customer base. One is only to hope that the
Geac's renewed interest in alliances and acquisition will be to the point of
enhancing prosperous product lines as required by its large installed base of
over 5,000 companies.
The Extensity and EBC Informatique purchases should seemingly provide Geac with enhancements to its multiple core ERP systems for a modest price tag. The companies have technological compatibility (a J2EE-based product architectures of Geac and Extensity, and IBM iSeries support for Geac and EBC), which should bode well for the applications integration. To that end, however, Geac also will have to create a rock solid strategy for integrating its product suite with multiple partners, and that strategy will have to be clearly conveyed to the market. More on a down note, Geac remains strongly service driven with less than 12% of its revenues coming from license revenues (compared to the 33% industry benchmark, estimated by TEC), with close to 80% coming professional services and 10% from maintenance revenue.
Still, Geac is now a financially conservative, stable but acquisitive organization that has remained profitable despite the general IT industry downturn. Like its fellow former ERP goners', Geac's future focus on its heartland of existing customers and industry verticals, while building out its technology to make its products more future-proof and keeping abreast of the competitive offering, seems prudent.
concludes Part Four of a five-part note.
One and Two detailed specific vendors.
Three discussed the Market Impact.
Five will make User Recommendations.