Impact on SSA GT
August 18, SSA Global Technologies (SSA GT)
(www.ssagt.com), and EXE
Technologies, Inc. (NASDAQ: EXEE) announced the signing of a definitive
agreement under which SSA GT will acquire the embattled global supply chain
execution (SCE) provider. Under the agreement, a subsidiary of SSA GT will merge
into EXE Technologies and all holders of EXE Technologies outstanding common
stock will receive $7.10 per share in cash, which represents an 18 percent premium
over EXE Technologies' closing market price on August 15, 2003.
return for improved viability, EXE bestows on SSA GT a best-of-breed complex
SCE and WMS functionality that extends the SCM functionality it is getting from
its purchase of Warehouse BOSS and Baan (which
has traditionally partnered with many WMS vendors, particularly with LIS
and MARC Global). Like the previous few SSA GT acquisitions,
this merger too seems aimed at enlarging SSA GT's customer base, market share
and, more importantly, its predictably recurring support revenue and consequently
larger R&D pool. Both companies have notable customer bases with a wide geographic
spread (particularly in emerging markets that have been much less affected by
the recession). Also, several above-depicted EXceed modules, especially perpetual
inventory, planning, labor, task management, collaborative, and event management
applications might be a great cross-selling opportunity to existing SSA GT and
appears that SSA GT understands and listens closely (via Global Guide Groups)
to the needs of conservative ERP customers that are unwilling to dispose of
a good functional product even at the cost of its technological antiquity. Further,
it has a track record of strong functional development that preserves the customer's
current investment. Indeed, it is impressive that SSA GT has even shown some
success with managing such a seemingly unwieldy set of disparate products, particularly
coming from former interBiz, considering that a vendor of Computer Associates'
stature was not able to do much with almost a dozen products, some being of
vintage '78 or '82. To that end, recent enhancements within the latest releases
of PRMS 9.2, BPCS 8.2, KBM 2.2,
and Warehouse BOSS 6.2 are ever more impressive given the market
skepticism about the viability of these.
is Part Three of a four-part note.
One detailed the event and the market impact.
Two covered EXE.
Four will present the challenges and make user recommendations.
However, EXE's new custodian will still have work cut out for itself to regain the former SCE leader's glory, given a likely cultural mismatch between merged parties. Namely, EXE has traditionally placed more importance on its product functionality and technological prowess, but it has yet to achieve SSA GT's prowess in regaining and sustaining profitability. Given one cannot both have a cake and eat it, the vendor will be hard pressed to produce consistent financial results "a la SSA GT," which might mean another serious restructuring, while continuing to invest and evolve its products. On the other hand, this pool of developers is needed to handle the launch of a product leveraging convoluted agent-based collaborative models that might require a steep learning curve for both implementers and users of older product releases. The replacement will hardly be able to come from SSA GT's employees, which have traditionally been focused on core ERP and more traditional supply chain methods.
Further, there is a mismatch in terms of the industries served by EXE and SSA GT/Baan in the past. Namely, EXE could hardly claim more than 15 percent of its install base within manufacturing industries, which is exactly SSA GT's and Baan's core industry service area, with over 16,000 manufacturing customers that might be interested in SCE add-ons. It appears that a fairly low acquisition price (almost half of EXE's all-time-high revenues) and common financial backers (i.e., GAP has investment interests within both SSA GT and EXE) will have been more motivating factors for the acquisition than well thought-out industry or any other product-related synergies.
Consequently, SSA will sooner or later have to address technology and vertical focus disparities before its users of multiple ERP systems can take advantage of EXE's above functional strengths. SSA GT will eventually have to decide which manufacturing verticals and geographic regions it will target and decide which EXE products will be viable additions to which SSA GT's ERP products. If this strategy does not include a convincing focus on 3PL and high-volume retail sectors, which has already been a concern of EXE's customers even long before SSA GT entering the picture, this acquisition could be difficult for customers in these verticals to justify staying with the vendor. While SSA GT will likely leverage EXceed's potential of integration to many ERP products that the vendor recently acquired, except for a handful of Baan 3PL customers, almost no other SSA GT ERP product has focused on the grocery retail or 3PL vertical segments.
some manufacturing vertical sectors, like high-tech/electronics and CPG, are
supported on EXceed 4000 while the automotive is supported on the above-mentioned
EXceed 2000 product with a dubious future. The picture becomes even more blurred
given that EXE's technology stack, albeit supporting the wide range of platforms,
might be of little direct use to SSA's predominantly IBM iSeries
platform-based install base. Given the product's more robust features compared
to its smaller EXceed 2000 WMS sibling, SSA GT will likely attempt the EXceed
4000 product rewrite for the IBM WebSphere/J2EE (only some
time in 2004 at the earliest) as the primary manufacturing-oriented WMS platform
with data-based integration to SSA GT's major ERP products. In fact, SSA GT
has already developed an integration architecture that runs on a J2EE application
server and provides common integration for portal applications to legacy applications.
The infrastructure also enables integration to SSA GT extension products, other
software solutions and to future SSA GT product acquisitions. This infrastructure
includes the development of an integration broker, which provides an object
model, transaction services, and connectors to multiple systems. Still, EXE
enhancements to many SSA GT products might not take off in earnest in the short
term until cross-platform integration challenges are completely solved.
the varied and ever-growing product portfolio under the SSA GT banner has still
been taking serious pondering and soul-searching. It is a no brainer to see
a number of potential product redundancies within the following overwhelming
set of product: BPCS, Ironside, iBaan, Infinium, CAS, KBM,
MANMAN, Masterpiece/Net, MasterPiece/Net
HRMS, MAXCIM, MK Logistics, MK
Manufacturing, PRMS, SSA GT MAX+, EXceed, and Warehouse
BOSS. It, however, might indeed take a combinatory mastermind 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. SSA GT also must clarify the position and integration of competing
and complementary products in its fold, which gets complicated with every new
addition to the family. Particularly, there is the EXceed WMS and Warehouse
BOSS overlap, the latter one being an iSeries-based WMS product inherited with
interBiz' acquisition, and which makes it a better fit for SSA's BPCS or PRMS
customers with modest warehousing complexity requirements. The situation with
EXE and Baan bears both overlap and complementarities—given CAPS Logistics'
(a former division of Baan) stronger transportation capabilities, while both
Baan and EXE have some SCP capabilities.
SSA GT Strategy
GT has unequivocally said that it does not intend to discontinue any of its
acquired brands, neither will it integrate them any time soon, rather it will
develop them individually for the time being. However, it will likely rationalize
the organization structure, as already seen in letting almost half of the former
interBiz' and about 20 percent of the former Infinium
staff go, which will have caused inevitable disruption in a short term. While
Baan's, EXE's and Ironside's workforce exodus
is not expected to a such degree, except for the top management and administrative
staff, the pressure for that will build up over time in case of continued poor
financial performance. Thus, 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 return on investment (ROI) justification works for the
vendor as well, particularly when its CE has a strong accounting background).
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 and support resources jeopardizing the chances its products could stand
a chance of long-term success in their respective niches. In addition to Invensys,
Geac, Epicor, Ross Systems,
and SCT Corporation would be relatively recent examples of
companies where this strategy has failed: all have had to eventually resort
to divestiture and to a focus on core competencies. SSA GT is showing more of
an appetite to acquire more vendors in light of impending large-scale consolidation
Merger-Mania Spiced Up With Vendettas Leaves Customers Anxious), before
even putting these recent mergers well behind, it might be flying into the face
of these negative experiences, and it may soon have too much on its platter
SCP Need Continues
At the same, it would be too nave to dismiss the need for proper supply chain planning, because regardless of how responsive a SCE system may be, waiting for chaos to happen and only then trying to act (i.e., execute), would be equally disastrous as it has been with compiling nearly ideal plans (through cumbersome algorithms) and never doing anything about executing them or obtaining feedback about their outcomes. As supply chains become more dynamic and operate in near real-time, the lines between planning and execution continue to blur, which bodes well for their functional convergence. Companies need real-time information from execution systems to develop and adjust optimal plans, while the execution side should benefit from more realistic plans for some readiness sake, rather than to merely react after the fact in a firefighting fashion.
We believe that planning and execution will become much less inseparable in a trend that will see SCP, SCE, supply chain event management (SCEM), manufacturing execution system (MES), and analytics/enterprise performance management (EPM) (i.e., decision support tools and multidimensional analysis on information aggregated from all levels of the commerce chain, and an extensive sets of predefined performance indicators, as well as strategic planning/forecasting and balanced scorecard functions) coming together into an adaptive system. Leading SCE vendors will thus continue to move beyond their current SCE functionality, like EXE has already attempted, to more collaborative and optimized holistic SCM solutions, which will include more consistent functionality at all levels of the organization, including CPFR, order management/customer relationship management (CRM), warehouse/yard/transportation management, integrated business intelligence (BI) and performance measurement, as well as industry-specific functions.
Harnessing this technology should lead to the so-called "self-healing" or adaptive supply chain — when a software engine monitors all the numerous events taking place supply-chain-wide, identifies and escalates exceptions, sends notification, and reacts appropriately to those exceptions, ideally without human intervention. Hence, users will require the ability to adapt to the difference in process flows on a particular order-by-order and customer-by-customer basis. The ability of the tool to support workflow throughput during the execution cycle, including record locking as activities progress up the value chain, is particularly beneficial to organizations requiring the ability to manage and automate the SCE process across multiple organizations.
although EXE has made notable strides to bridge the gap between SCP and SCE,
it is still far from a true collaborative one-stop-shop solution. Continued
acquisitions, partnerships, and internal development will continue to accelerate
offering a much-richer level of functionality throughout the entire commerce
chain software market, as seen in the past with maybe not that fruitful partnership
attempts like those of EXE and i2 and of SAP and Catalyst,
albeit the reasons for suboptimal alliances' results would be outside the real
need for SCP and SCE convergence, such as poor performance of some of the vendors
in case (see Catalyst
International to Tread Water With SAP Through 2000 and EXE
and i2 Advance Relationship). Still, the result of tighter integration between
traditional planning functions and operation/execution systems will continue
to be pursued, as seen in the case of many major SCE vendors (i.e., HighJump,
RedPrairie and Manhattan Associates) closely partnering with PeopleSoft.
For that reasons, the rumors of SSA GT eyeing acquisitions of an embattled SCP
vendor like i2 or Manugistics are not far-fetched at all, especially given i2's
alliance with EXE in the past and their locations' proximity.
concludes Part Three of a four-part note.
One detailed the event and the market impact.
Two covered EXE.
Four will present the challenges and make user recommendations.