Software Associates, Inc. (SSA) is a leading global ERP software and services
provider. Founded in 1981 with headquarters in Chicago, IL, USA, SSA is the
seventh-ranked ERP vendor with $421 million in revenue in 1998 (approx. 2.6%
of the global ERP market). SSA initially grew by offering products for IBM's
AS/400 minicomputers. The Company then developed strong affiliations with software
and management consulting firms and provided them with training to market its
product. As a result, SSA today has the largest installed base of ERP systems
on the AS/400 platform. SSA's Business Planning and Control System (BPCS) product
line features more than 50 products that allow control over manufacturing, supply
chain management and financial applications, as well as e-commerce and application
development for industrial business. In 1996, SSA developed BPCS version 5.1
for UNIX users, but had very limited success. An improved version of BPCS (6.0)
was delivered in the same year, causing SSA's earnings to plunge, due to the
combined effect of stalled new license sales and the huge R&D budget overrun.
In 1998, the founder Roger Covey stepped down as CEO and was replaced by former
president William Stuek. Stuek attempted a few restructuring moves in order
to improve SSA's ailing financial situation without success, and the Company
suffered a hefty loss in 1998. In 1999, Stuek retired as chairman and CEO, and
was replaced by Robert Carpenter, former president and CEO of system integrator
Origin America. In the same year, SSA developed the NT version of its product
in cooperation with Hewlett-Packard, and released the latest version of its
principal product, eBPCS. The basic premise of this recently announced SSA strategy,
called SSA Portfolio, is to easily integrate its core ERP system with other
3rd party software. By the end of 1998, the Company had licensed approx. 18,000
system installations to more than 6,500 customers in more than 90 countries
worldwide. SSA's revenues are almost equally divided across North America, Europe,
and the rest of the world. The Company supports its clients primarily through
a worldwide network of over 40 branch offices. SSA went public in 1987 and currently
trades on NASDAQ.
is generally competitive in speed of implementation, total cost of ownership
(TCO), and price/performance ratio. Moreover, BPCS is a good functional
fit for some industries (See User Recommendations).
Portfolio strategy is to surround its core ERP products with best-of-breed
3rd party enterprise applications and provide system integration services
and support around them. This strategy differentiates SSA from its competition,
and we consider it to be prudent against the backdrop of SSA's current financial
and resource situation.
has been languishing for over two years, and its financial situation has
deteriorated rapidly in recent weeks (depleted market cap of less than $30
million, and debt of over $65 million). The trend of decreased revenues
and loss reporting continued throughout 1999 (see SSA Inc. Annual and Quarterly
Results Charts), with a particularly sharp decline in license revenue (down
57% in 3Q99, compared to 3Q98).
combined effect of bad corporate viability, problems with the BPCS product,
and SSA's lack of new extended ERP products, may convince some of its existing
customers to replace its outdated BPCS with a product portfolio from a more
viable vendor who can leverage a "one-stop shop" capability.
will gradually transform itself into a systems integration provider, as
opposed to a pure ERP vendor, within the next 3 years. By that time, we
believe service & support revenue will contribute up to 80% of SSA's total
revenues (70% probability).
believe that SSA will be acquired within the next 18 months (70% probability).
Potential acquirers could include Computer Associates (for which it would
provide an established service revenue stream), Siebel Systems or i2 (for
which it would provide back-end ERP capability), and Great Plains or Lawson
Software (for which it would provide a product with a strong manufacturing
and distribution functionality).
the most appropriate partnerships for enterprise applications beyond traditional
ERP solutions (Front-Office, Supply Chain, E-Commerce, Business Intelligence)
for each targeted vertical solution, and leverage those partnerships to
create sustained service revenue and regain the Company's profitability.
further ongoing cost scrutiny and identify opportunities for further cost
reduction. Despite the recent restructuring, the general & administrative
personnel count remain one of the highest in the industry, measured as a
percentage of a total number of employees (See Fig. 4). Furthermore, the
service & support employees as a percentage of the total number of employees
is only 37%. That ratio should be increased to at least the industry benchmark
of 44%, considering the Company's intention to significantly increase its
service revenues in the future.
companies (with $30M-$800M) in revenue within the following industries:
automotive supply, consumer packaged goods, food & beverage, industrial
products, and pharmaceutical, may want to put SSA on its long list for ERP
selection, due to its strong functionality and expertise in these respective
strongly advise any organization evaluating SSA to consider existing functionality
only, and be able to provide the majority of product support in-house or
through a 3rd party, due to SSA's dire financial situation.