Vitality And Perseverance Of Former ERP 'Goners'
- March 20, 2003
Part One: Ross Systems & SSA Global Technologies
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 some reformed traditional ERP vendors, which,
not that long ago will have exemplified failed business models, giving even
ammunition to some pundits to announce the obsolescence of ERP.
Those vendors are:
- Ross Systems
- SSA Global
a five-part note covering these four ERP vendors once considered "Goners."
and Two discuss specific vendors.
covers the Market Impact.
outlines the Challenges they face.
makes User Recommendations.
most compellingly, on February 4, Ross Systems, Inc. (NASDAQ:
ROSS), a provider of enterprise management software and e-business solutions
for mid-market process manufacturers, announced a profit of $1.4 million for
its second fiscal quarter, which ended December 31, 2002, which represents a
193% improvement over $0.5 million in the prior year's same quarter (see
Figure 1). Total revenues for the quarter at $12.2 million increased 5% from
$11.6 million in Q2 2002 and 7% from Q1 2003. More importantly, software license
revenue in Q2 2003 increased 19% from Q2 2002 although it declined 7% from the
previous quarter. Conversely, both consulting services revenue and maintenance
revenue in Q2 2003 declined slightly from Q2 2002 but increased notably compared
to Q1 2003, which was as expected, since new customer implementations ramped
up during the quarter, and this trend is expected to continue. Net cash of $6.0
million this quarter increased $0.6 million over the prior fiscal year ending
balance and $1.4 million from the sequential quarter, while the company has
no long-term debt.
In September, the
vendor announced revenue for the fiscal year ended June 30, 2002 of $45.2 million,
a 1.6% growth as compared to $44.5 million in prior year revenue restated to
reflect the sale of the company's Human Resource product line on February
28, 2001 (see Ross
Systems Closes Ranks For A (Possible) Turnaround). Having experienced serious
financial difficulty in 2000 (see Ross
Systems Ends Year On a Sour Note and Braces Itself For Survivor's Game)
Ross has since
achieved a miraculous turnaround by posting six consecutive profitable quarters
while also constantly improving license revenues. Although a net loss of $9.6
million in fiscal 2002 that compares to a net loss of $0.8 million in 2001 may
seem pretty harsh (see Figure 2), it included a large $10.9 million, non-cash,
non-recurring charge for Q4 2002, which was due to the release of its next generation
of process manufacturing software and the related sale of a certain earlier
discontinued vintage product. Still, Ross often states, and most financial and
industry analysts agree, that it has had nine consecutive profitable quarters.
Technically, the vendor
declared a loss with the write-off last fall, but that was an aggressive choice
in its strategy, and it was done to take advantage of the increasing revenues
and profits. Thus, this might not necessarily be regarded as a negative occurrence,
and it might even be intriguing to determine the annual size of the write-offs
that other software companies are carrying because they might not be healthy
enough to get it off the books now. Moreover, despite a broken streak of profitable
quarters, there is particularly good news that software license revenue remains
driven by strong demand from new name accounts.
revenue breakdown lately typically averages 55-60% for the repeat business,
and impressive 40-45% for new business. In Q2 2003, however, new business license
revenue at 51% actually eclipsed repeat business license revenue at remaining
49%. To that end, customers with legacy products represent about 15% of the
total customer base and will continue to be supported as well as provided with
migration paths and incentives to move to the current iRenaissance
product line. Renewal rates for core product reportedly remain high and are
expected to offset further declines associated with the legacy products.
profitable, the vendor has concurrently added Supply Chain Management (SCM)
and Customer Relationship Management (CRM) capabilities to the iRenaissance
suite. Both new products have already been licensed in both North America and
Europe with some high-profile customers (see Ross
Systems Shows Poise in 'Big Easy'). Ross' alliance with Prescient
Systems for the SCM offering was earlier duly analyzed by TEC, (for
more information, see Two
Highly Focused Vendors Team For Their Markets' Good).
To close possibly
the last major outstanding gap in its offering, in August, Ross further announced
its partnership with Selligent (www.selligent.com),
a provider of CRM solutions, under which agreement, Ross Systems will integrate
the Selligent Sales, Marketing and Customer Care Applications
into its iRenaissance suite as iRenaissance CRM. Ross Systems
will market the CRM applications worldwide and also has exclusive rights to
market them to process manufacturing companies in North America since August
Ross has recently
also been engrossed in next release of its flagship iRenaissance product, including
technology and performance enhancements including Microsoft .NET
architectural framework features, CFR 21 Part 11 (Code of Federal Regulations
Title 21) regulatory compliance support (electronic records and signatures),
and the ability to run iRenaissance over the web. Although iRenaissance has
been run over the web by Ross' customers for more than two years now,
it previously required a client-side plug-in like most of the other ERP systems
require today. With the advent of Ross' new .NET-compliant architecture,
however, iRenaissance is currently deployed with a zero-footprint client model
allowing any computer with secure access to the Internet to access iRenaissance
via simply typing in a URL address. Ross cites its customers have already documented
significant savings in terms of deployment, maintenance, support and upgrades,
since the changes on the server are instantly available to all users, the ability
which has so bar been claimed only by PeopleSoft.
Also very recently,
in mid-November, Ross announced the availability of iRenaissance Validator
for pharmaceutical and biotechnology companies in manufacturing or clinical
trials. The product should reduce the efforts, costs, and risks created by increasingly
stringent FDA (Food & Drug Administration) regulations, as it provides the
master action plan, templates and test scripts needed to quickly complete the
IQ, OQ, and PQ (installation qualification, operation qualification and performance
qualification) processes, and clearly defines and thoroughly documents each
step in a proven process to predictably achieve and maintain validation. Owing
to its focus on Process Manufacturing, Ross continues to invest in industry-specific
applications for Food and Beverage, Life Sciences, Chemicals, Metals and Natural
Products. Ross' executives attribute this success to the company's
high degree of focus and the resulting success of its customers. The vendor
pledges to continue to execute on its strategy to provide the most targeted,
comprehensive and cost-effective enterprise software solutions for these industries.
recently and quite impressively, on February 27, SSA Global Technologies,
Inc. (SSA GT), www.ssagt.com
, a worldwide extended-enterprise solutions and services provider, announced
its Q2 2003 results. For the second fiscal quarter ended January 31, the company
reported total revenue of $64 million, an increase of 55% over Q2 2002. Software
license revenue, up a big 53% to $20.4 million, represented 32% of total revenue.
Second quarter earnings before interest, taxes, and amortization (EBITA), and
before nonrecurring charges were $14.6 million or 23% of total revenue. Cash
flow before debt service was in excess of $22 million. Solid financial viability
and performance continued while a near industry average research and development
spend was maintained (i.e., at 12% of total revenues). Although being a privately-held
company, SSA GT is working with its outside auditors, Grant Thornton,
to certify its financial statements under the Sarbanes-Oxley Act of 2002 in
light of recent widespread concern about corporate financial reporting practices.
SSA GT again delivered
relatively balanced geographic performance, contributing to the outstanding
results in a severe economy. North America delivered 47% of total revenue while
Europe, Middle East, and Africa (EMEA) accounted for another 30%. Emerging growth
markets Latin America and Asia-Pacific/Japan, where net new customer business
reportedly flourished, provided the remaining 23% of total revenue. Net new
customers reportedly accounted for 21% of software license revenue. The results
reflect one month of activities following the Infinium Software, Inc.
acquisition, which was completed on December 20, 2002.
protracted languishing and eventual demise of SSA GT's former incarnation,
Software System Associates (SSA) in 2000 (see
Belle poque Officially Ended With the Demise of Baan and SSA), over
a year ago, its remaining customers demanded financial viability from the new
SSA GT management. Strong FY 2002 financial results should therefore have confirmed
its renewed customer focus and sound execution model, which has afforded significantly
higher than industry average growth in an extremely challenging economic climate.
Even in continued economic uncertainty, the vendor is projecting fiscal 2003
revenue of $281 million, up 50% from 2002 levels of $187 million, including
both organic growth and the growth via a number of recent acquisitions.
However, this figure could
be much further boosted by acquisitions, as the vendor is targeting ERP vendors
with revenue of more than $20 million that will take it into new vertical markets.
Namely, SSA GT is reportedly in takeover talks with certain ERP software providers
worldwide to expand its market share as it continues its drive to achieve annual
revenue of $500 million by the end of the year, according to CEO Mike Greenough.
With $40 million in the bank and access to investment funds of $1.2 billion,
the privately-held company might have considerable advantages in the takeover
stakes over publicly traded companies that are constantly wary of the reaction
of investors to acquisitions.
its new parent, the former Infinium Software had been on an impressive comeback
trail immediately prior to its acquisition, both in terms of improving revenues,
cash position and profitability, and not in the least at the expense of delivering
new products (see Is
SSA GT Betting Infini(um)tely On Acquisitions?). Further, it may even border
on a miracle the fact that SSA GT, which has had its own share of trouble, has
even shown some success with managing such a seemingly unwieldy set of disparate
products coming from former Computer Associates' interBiz
division (see CA
Unloads interBiz Collection Into SSA GT's Sanctuary), considering that a
vendor of CA's stature was not able to do much with almost a dozen products,
some being of vintage '78 or '82 tag (which some may refer to the
medieval era of computing). To that end, recent enhancements within the latest
releases of PRMS 9.2, KBM 2.2, and Warehouse
BOSS 6.2 are ever more impressive given the market skepticism about
the viability of these.
Even the venerable
MANMAN product has had some enhancements in its version 12,
although this product faces the impending predicament of the HP e3000
hardware platform discontinuation in 2003. To that end, migration to MK
Manufacturing or to SSA GT MAX+ functionally equivalent
but more modern products might be a viable option for these customers, and might
prove that it was not necessarily an impulse purchase, and that SSA GT might
have some ideas as what to do with MAX after all (see SSA
Acquires MAX Hoping To Leap From Its MIN).
on March 10, SSA GT announced the immediate availability of BPCS
(Business Planning and Control System) version 8.2.
The enriched functionality of BPCS V8.2 reportedly supports specific business
needs and requirements for a variety of industry sectors, including automotive,
consumer packaged goods (CPG), electronics, food and beverage, general manufacturing
and pharmaceutical. The new functionality in BPCS V8.2 is market-driven and
includes core ERP and industry-specific enhancements that should enable SSA
GT customers to improve manufacturing capabilities, streamline business processes
and reduce costs, extracting more value from their initial SSA GT ERP investment.
Selected enhancements of BPCS V8.2 include:
For the pharmaceutical industry, e-Signature simplifies authorization
processes while ensuring Article 21, FDA CFR Part 11 compliance.
Management Dynamic weights and measures functionality allows
inventory to be viewed in dual units of measure. Dual unit visibility is essential
to successfully manage inventory in the CPG and food industries.
Manufacturing Enhanced lean manufacturing capabilities provides
more flexibility in scheduling and capacity loading.
Manufacturing and Control Enables organizations to link all
customer project information together for better overall tracking, planning
BPCS Version 8.2 is currently
available to clients in the following languages: English, French, German, Italian,
Spanish, Japanese and simplified and traditional Chinese, with additional languages