Smaller Vendors Can Still Provide Relevant Business Systems Part Five: Challenges and User Recommendations
P.J. Jakovljevic - January 28, 2005
Relevant Business Systems, (http://www.chainlinkresearch.com/parallaxview/articles/RightAid.htm), a privately-held San Ramon, CA-based provider of enterprise resource planning (ERP) solutions that helps mid-size and large aerospace and defense (A&D), engineer-to-order (ETO), contract manufacturing, maintenance repair and overhaul (MRO), and like project-oriented manufacturing companies to improve their business might be a true example of a focused niche vendor. Relevant, which has a focus in the above closely related markets, has thus recently captured a significant market and mindshare in the segment, particularly given that several US-based ETO-like companies have thereby decided to partner with the vendor by selecting the flagship Relevant ERP (formerly Integrated Financial & Manufacturing Control System [INFIMACS II]) system.
While the company's focus allows it to keep pace with trends in technology and customer requirements in its target niche, too narrow a focus comes with its liabilities as well. Namely, a well-defined and narrow target is indisputably the best course of action for any smaller vendor. Yet, to some, a smaller size compared to most competitors may imply a negative viability perception these days when many believe that "bigger is better". Further, low visibility and brand recognition (which are almost non-existent outside the US), and the product's limited global capabilities are the challenges the company has yet to overcome.
While the nature of the vendor's target market, which often may include US government security clearances and similar classified requirements (i.e., often the prospect requires the potential software provider to be American, whereby any code-supporting staff has to be US citizens), does not require an international focus, Relevant might still be losing some deals in less government-oriented sectors because of its inability to support prospects outside North America and in languages other than English. Thus, it had entertained the thought of starting the presence in Asia (due to Solectron as its high-profile reference), but the reality check has prevailed for the time being. The attempt at global expansion through some potentially synergistic partnerships (see PSI AG To Become More Germane Globally Via Relevant Partnership) has not resulted in much success either.
Yet factoring in costs, the financial viability of the vendor, local support, and many other criteria remain a good practice for manufacturers that are selecting solutions. One should never forget about the competition from large and more visible players like SAP, Oracle (including recently acquired PeopleSoft), SSA Global, Intentia, IFS, Glovia, Deltek Systems, and Cincom Systems that are entrenched within the higher-end of the market and have long begun addressing the required functionality for the target segment. Although the solutions from larger providers often come with some aforementioned caveats for the lower end of the market, such as typically requiring longer implementation time frames, more customizations, or a need to be configured for the business and industry entirely from scratch, the mindshare and brand recognition of larger vendors cannot be discounted.
The situation is not much easier when it comes to its usual direct competitors in the lower end of the market, such as former Lilly Software (now part of Infor Global Solutions), Jobscope, Made2Manage, Epicor (the Vantage product), MAPICS (the SyteLine product), Visibility, and Encompix. Encompix, for instance, also allows users to estimate and quote an overall project using "buckets" of time or dollars, which enables enterprises to perform actual rollups. In other words, companies can track orders and projects and compare their progress to the original estimate, as well as to previous iterative changes, all in the "bucket" form (e.g., total engineering hours or total dollars), which blunts Relevant's differentiation from many other systems that claim to be ETO-oriented but that can only track the current iteration (see Encompix—Thriving on Encompassing Complexity). Relevant may still keep Encompix at bay by targeting somewhat larger ETO companies and emphasizing its multi-division and multicompany capabilities, but the gap is likely to narrow in the future.
Also, many ETO prospects still have notable mixed-mode manufacturing environments, which handle a significant deal of widgets' and require certain repetitive manufacturing and inventory management functionalities, where Relevant may not be that competitive as in clear-cut ETO environments. The vendor has only recently more clearly aligned its sales and marketing efforts fully with the inherent capabilities of its product. Thus, at least some existing discrete mixed-mode manufacturing customers that do not belong to the Relevant's recently sharpened focus on A&D and MRO segments (e.g., at some stage, the vendor was also targeting door and window frames manufacturers, where it has garnered some install base) might feel somewhat neglected by the future product developments, and the vendor will have to walk a fine line between satisfying these customers and not losing its focus and overstretching its R&D funds. This is in spite of co-development relationships Relevant has enjoyed (and continues to enjoy) with a number of customers (two very large ones in particular), which relationships, together with other non-public arrangements, have enabled the vendor to support an aggressive level of R&D that would not normally be possible for a smaller software company.
Relevant might also have a sort of a positioning conundrum of not being big and mighty enough to compete head-on with larger vendors on one hand, but, on the other hand, still being more functionally capable than most of its competitors in the low end of the market. Incidentally, while its decision to embrace J2EE is prudent given a majority of its existing customers are on UNIX and Informix platforms, the riddle for Relevant might be the fact that the vast majority of its new and prospective customers are companies with less than $200 million (USD) in revenues and with a likely preference for Microsoft technologies that might not be too excited about seemingly more complex J2EE environment. At the same time, the need to technologically modernize the product and concurrently provide smooth migrations to existing customers, while investing lots of R&D funds in functional enhancements as to be ahead (or at least abreast) of the pack will also be a challenge. For more information on J2EE vs .NET see Understand J2EE And .NET Environments Before You Choose.
This is Part Five of a five-part note.
Part One contained the event summary and vendor background.
Part Two discussed the market impact.
Part Three covered project-oriented organizations.
Part Four detailed MRO and spare parts management.
Impact of Recent Acquisitions in the Market
The market must be intrigued by a number of recently acquired privately-held and focused vendors that are Relevant's peers, and some of which, like Lilly Software, have been at least a few times larger. Whether the reason for these acquisitions is the vendor's difficulties and hardships in the market or the founder's or owner's decision to focus on less stressful activities (e.g., golfing or fishing) is of less importance to consternated existing and prospective customers.
Having to deliver a number of functionalities through third-party solutions, which are natively offered by many of the above larger competitors, may deter some interface-wary customers. Thus, Relevant should try to provide as many third-party solutions as possible as a standard configuration, which should make customers oblivious to the origin of the module. The vendor also has to beef up or better advertise its product's interconnectivity and e-collaboration or product lifecycle management (PLM) offering given the pressure on A&D companies to eliminate traditional silos and enable information sharing between their design, production, and testing teams.
While a comprehensive PLM strategy (see The Many Faces of PLM) might be a tall order for Relevant to deliver on its own, some sporadic projects of integrating Relevant ERP with a project portfolio solution provider and with a product data management (PDM) provider like Autodesk should be parlayed into more strategic alliances. Encouraging news in that regard is that Relevant has spent nearly three years developing a web-enabled PDM product, whose delivery is expected soon. More initiatives with regard to lean techniques and radio frequency identification (RFID) enablement should also help the vendor keep abreast of the target customers' requirements, where it has been noticeable quiet so far.
While the product is also very focused for the A&D and MRO industries, which require strong teardown, repair depot, remanufacturing, and spare parts managements capabilities and which furthers the complex discrete manufacturing opportunity, the product is not functionally all-encompassing, especially in terms of asset management. Yet, broader enterprise asset management (EAM) software and computerized maintenance management systems (CMMS) continue to grab headlines as a realistic way to reduce expenses and increase revenues. For one, maintaining an adequate level of repair and service parts inventory based on forecasted equipment usage can prevent already limited funds from being over-allocated, just to achieve a false sense of security. Also, an effective preventive maintenance program can improve equipment utilization and availability, enabling production schedules to be achieved, especially when an exorbitantly expensive equipment replacement is not an option during depressed economic times.
Therefore, A&D companies require an ever broader suite of functionality ranging from a strong engineering foundation and customer service front end to support demand management, all bundled with a set of administrative and reporting capabilities and integration to financial and HR software, as to share information that drives operational efficiency, such as inventory control and labor control. Bad news for Relevant could be the fact that some of its possible competitors like Oracle, IFS, Intentia, SAP, and Ramco Systems offer more integrated capabilities like automated maintenance scheduling, tracking, and management; remote diagnostics; reliability centered maintenance (RCM); fleet or facility management and planning; centralized access to engineering data; parts planning, sourcing, valuation and category spend management; asset performance reporting, and so on. For more information, see EAM Versus CMMS: What's Right for Your Company? and Cincom Sticks to CONTROL of ETO and MRO.
Even if best-of-breed or bolt-on strategy could sometimes work in the Relevant's favor, the competition comes even there from the likes of Avexus, Manugistics (after its acquisition of Western Data Systems [WDS], see Manugistics Indulges In The Open M&A Season), Xelux, Pentagon 2000, the CORRIDOR product from CONTINUUM Applied Technologies, Mxi Technologies, Sinex, and so on. For a more complete list of vendors that have the aspirations for this field, see ERP Vendors Moving to Aerospace and Defense Markets .
Relevant seems to have a fair shot at delivering comprehensive solutions to project-based discrete manufacturers in A&D, contract manufacturing, and MRO organizations with revenues up to $300 million (USD). Potential Relevant customers, primarily North America-based, especially those with solid multi-plant and some mixed-mode or hybrid discrete manufacturing (i.e., both to stock' and to order') should certainly consider the offered product line, bearing in mind what the competitors have to offer. Relevant should typically raise the bar for other vendor offerings in the contest in terms of demonstrating their acumen for part and component traceability, WBS, project management, earned value reporting, MRO, and engineering revision-intensive environments. In other words, Relevant should fare well in the contest whereby multiple vendors would demonstrate how their solutions would manage all aspects of complex projects, deliver on-time and on-budget, generate early warning of project problems (e.g., exceeded estimate's time and cost), manage cash flow, provide confidence in estimates, shorten project cycle times, assess which projects are profitable or not, and so on.
On a more general note, companies who are project manufacturers, ETO, build-to-order, jobbing shops, or contract manufacturers should think carefully when selecting an ERP system. Given the maturity of the ERP market, its ongoing consolidation, and that fact that competitive advantage is hard enough for manufacturers to find, they should not compromise on their requirements. Especially small and mid-size enterprises should ask hard questions about the scope of an ERP system, and how it supports project based idiosyncrasies. After all, a new system should always be about improving the business and not a mere technology initiative.
The vendor that listens to your needs instead of telling you what "great things" its software can or cannot do, and which speaks your language and uses your terminology and vernacular is a good candidate to be a vendor that understands your business. Still, as a sort of a litmus test, prod each vendor to tell you what percentage of its sales would belong to your industry. Vertical focus indicates that software contains industry-specific features and that ERP vendors have certain industry expertise. Also, in implementing an industry-specific application, it is important to ensure that the application provider's implementation team includes members with in-depth knowledge and experience in that industry. Vendors geared toward certain industries should have solid integration skills or strong relationships with systems integrators that have industry-related expertise. This should significantly streamline implementation time by eliminating a lengthy vendor or integrator learning curve.
Often, buying a completely integrated solution is not an option when the companies have either an accounting or project-management system in place, which they will not simply rip-and-replace. Thus, prospects should assess the contesting vendors' flexibility to integrate to legacy and other third-party applications, and to keep up with new versions or upgrades to both solutions. Built in interfaces to commonly used third-party products like MS Project, MS Office, AutoCAD, Crystal Reports, etc., should be questioned, possibly during software demonstrations.
Very detailed information about the Relevant ERP product is contained in the ERP Evaluation Center at http://erp.technologyevaluation.com.