Ross Systems’ Renaissance Yet to Happen

Ross Systems' Renaissance Yet to Happen
P.J. Jakovljevic - June 13, 2000

Event Summary

As announced in the press release from May 17, Ross Systems' Chairman and CEO, Dennis Vohs will retire as CEO at the end of the company's fiscal year on June 30, 2000. J. Patrick (Pat) Tinley, has been selected as the new President and CEO. Mr. Tinley has over 22 years of experience in the software industry. During the last twelve months, he has successfully orchestrated the transition of the company to an e-Commerce solution provider.

"Pat has restructured the entire management organization to prepare for the drive into the B2B e-Commerce marketplace," said Dennis Vohs. "Pat has lead this process, built an excellent team and is the perfect executive to direct the company's efforts into this fast growing market. The new management team appointments include proven senior executives in sales, marketing, consulting and development, as well as in our European and worldwide distribution operations."

"Dennis has been instrumental in the growth of Ross from a $17 million dollar company in 1989 to $102 million last fiscal year and positioned the company as a premier supplier of e-business solutions to our process manufacturing customers worldwide, in fourteen languages and delivered in over fifty countries." said Pat Tinley. "Dennis will continue to serve the company as Chairman and is looking forward to a well deserved change in the scope of his business activities."

Earlier, on April 27, Ross Systems, Inc., a supplier of enterprise systems, announced financial results for its third quarter of fiscal 2000, ended March 31, 2000. Revenues for the quarter declined to $18.5 million from $24.4 million in the same period of the prior year. Operating expenses for the quarter declined to $22.0 from $26.5 million in the prior year. The net loss for the quarter was $3.9 million or $0.16 per share, including a $1.1 million non-recurring charge, compared to $2.4 million or $0.11 per share in the prior year.

"To take advantage of the significant market opportunity projected in the B2B e-commerce marketplace, the company has made investments in Fiscal 2000 to develop its e-commerce offerings and establish a branding and distribution channel for these products and services," said Dennis Vohs, Ross' Chairman and CEO. "The company also incurred costs in restructuring its worldwide sales and marketing organization in order to improve efficiencies and lower costs to accommodate these investments. I am extremely pleased with the management team that we have assembled to lead Ross' charge in the B2B market. We have made changes to improve every aspect of our senior management team in sales, marketing, and product development both domestically and internationally. Simultaneously, sales of enterprise systems, as has been reported by other companies within the industry, have been slow to return to levels experienced prior to the Y2K slowdown. As a result, the company has reported losses in two of the first three quarters of Fiscal 2000."

Market Impact

Behind managements' typical PR rhetoric lays the company's harsh reality of steadily declining revenues (See Figure 1) and a fair amount of R&D work in progress. The company introduced its iRenaissance ERP solution in December 1999, as well as its internet connection and navigation architecture, iRenaissance.Portal. However, the company's wholly owned subsidiary, Resynt is currently only in beta testing with its initial sell-side website application, PriceLink. Furthermore, the company only plans to announce to its customer base and to industry analysts its more complete e-commerce strategy, ranging from e-procurement to sell-side solutions, including trading exchanges and supply chain collaboration. Executing these initiatives with its ever-thinning resources will be a tremendous challenge.

Figure 1.

Ross offers possibly the best and broadest functionality for the process manufacturing mid-market segment, with a sharp vertical focus and good multi-national capabilities. It also offers financial and HR products for the healthcare and public sector market segments. These have proven to be significantly less profitable than its process manufacturing product line, and has in the past resulted in diluting the company's resources and focus. We believe the company will have to conduct a serious 'soul searching' and scrutinize its target markets. Giving each product line profit and loss responsibility may possibly help Ross close its ranks and weather the impending stormy period.

User Recommendations

We generally recommend including Ross Systems in a list of an enterprise application selection for mid-market companies (with $50M-$500M in revenue) within the following industries: chemicals, food & beverage, pharmaceuticals, forest products, and metals. Users from the healthcare and public sectors may also benefit from evaluating Ross' relevant product lines. This as well as obtaining the company's implementation guarantee could be leveraged against other vendors in the selection.

Any organization evaluating Ross Systems should consider existing functionality only, and, in the case of final selection, should inquire and negotiate incorporation of new applications components now at negotiated license fees, given its recent new product introductions. Moderate caution should be exercised now and a watchful eye should be kept at the company's future financial performance.

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