Software, Inc. is a leading worldwide supplier of mid-market business
applications exclusively optimized for Microsoft SQL Server on the Windows
NT/2000 and BackOffice platforms.
in 1980, with headquarters in Findlay, Ohio, Solomon Software has been
experiencing a steady growth over the last few years. It is a privately
held company, with estimated revenues of $60 million in fiscal 1999. It
currently employs over 400 people, and has experienced less than 10% employee
turnover in recent years. From a founder-driven company of 20 years ago,
with a traditional focus on accounting software, the Solomon Software
of today is run by professional corporate management and offers a much
broader and deeper product portfolio.
designs, markets, and supports its flagship product Solomon IV, a financial
and business management system for small to medium enterprises (SMEs).
Solomon IV is a suite of over 50 standard modules, running solely on Microsoft
SQL Server and Windows NT/2000 platforms. It comprises the following series
of products: Financial, Project, Service Management, Distribution, Manufacturing,
and e-business. Since 1997, Solomon has acquired selected independent
developers and launched partnerships, which have significantly broadened
its product line. During 1998 and 1999, the company released its distribution,
manufacturing, service, project management, and e-business products.
In 1998, Solomon opened four regional Solomon Technology Centers (STCs)
in North America to support its distributors. These centers provide applications
and installation support for its indirect channel in order to provide
efficient service & support for customers and some economies of scale
for distributors at the same time.
Strategy and Trajectory
on the low end of the mid-market ($2 million - $250 million in revenues),
Solomon serves its worldwide base of more than 12,000 customers in 400
different industries in more than 100 countries exclusively through its
extensive network of independent sales and support organizations. The
company has over 20 affiliate offices worldwide and derives approximately
25% of its revenue from the international market.
present, the company seems satisfied to continue in the SME markets, focusing
on maintaining and enhancing existing functionality of its Solomon IV
solution. Over the last two years, Solomon has accelerated the release
of new functionality and attempted to create a new market perception of
not being only an accounting software provider, with a sole focus on product
flexibility. We expect the company to continue expanding Internet deployment
and CRM capabilities. Solomon also plans to invest in alliances with ASPs
to further its penetration into this increasingly popular marketplace.
will continue its sharp focus solely on Microsoft technology, coined in
"the power of one" motto (one platform - Windows NT/2000, one database
- MS SQL Server, one development environment - MS Visual Basic, etc.).
The company has not developed a vertical industries focus though. We expect
Solomon to continue providing breadth of horizontal functionality in an
integrated business application delivered through a strong indirect channel.
We also expect the number of STCs to grow both in the U.S. and worldwide.
Vertical specialization will continue to depend upon the particular distributor's
has established strong recognition and penetration within the lower-end
of the Small-to-Medium Enterprises (SME) segment of the ERP market. Its
single-code product, with the same look & feel for both small and midsize
customers, differentiates the company from its competitors (e.g., Great
Plains, Epicor, Sage Software, Navision, etc.) that currently offer separate
products for the lower and upper ends of the mid-market. Furthermore,
its sharp focus solely on Microsoft technology, coined in "the power of
one" motto (See Vendor Trajectory and Strategy), presents an attractive,
risk-free option for frugal mid-market customers.
its competitors, particularly Great Plains, may have a more extensive
partner channel within the industry, Solomon's indirect channel is more
nimble and focused. This is due to its single-code product portfolio that
reduces the deployment and support requirements for its entire market
segment. In addition, Solomon supplements its distributors through its
Solomon Technology Center (STC) network. These provide for global service
consistency and additional leverage for the channel.
IV is very competitive in speed of implementation (from only two weeks
to four months duration), feasibility of customization, total cost of
ownership (TCO), and price/performance ratio. The product architecture
has been devised entirely from scratch within the Microsoft context, which
provides for flexibility and ongoing agility.
we cannot disclose more detailed financial data because the company is
privately held, we can state that Solomon Software has been a viable company
and has exhibited a solid long-term financial track record and low staff
to its late expansion into the ERP world, the company has been trailed
by its reputation of a best-of-breed accounting software vendor. While
Solomon has accelerated its delivery schedule of new functionality, it
will be hard pressed with tight "time-to-market" constraints. The following
intended functionality delivery schedule would be a tall order for even
much more resource abundant competitors:
- Repetitive build and MRP modules of the manufacturing suite (planned
for release in Q2 2000)
- Replenishing, commissions, and shipments modules of the distribution
suite (planned for release in Q3 2000)
- Employee utilization and time & billing of project suite (planned
for release in Q3 2000)
- Additional e-business functionality (planned for release in Q2 2000)
- Object model of the system tools suite (planned for release in Q3
situation is further aggravated with the lack of human resources (HR),
and advanced planning & scheduling (APS) suites.
addition to the product functionality gap, Solomon IV does not exhibit
much of a vertical focus. Solomon distributors offer vertical solutions
on an opportunity-by-opportunity basis only, which we believe is insufficient
to satisfy the stringent requirements of a highly competitive market.
Solomon has established its worldwide presence, particularly in Latin
America and the Pacific Rim, it is going to be challenged with combining
its country-specific variants of applications into a single, global product
in order to be selected as a global strategic partner. Double- and multi-byte
character sets (DBCS & MBCS) are currently not supported, while the full
Euro currency triangulation support is planned for release in Q3 2000.
We believe that these are at least two years late to market.
privately held deprives the company of the significant capitalization
for marketing, R&D and acquisitions, and the visibility that is inherent
in being publicly traded. This is particularly true in light of its ambitious
new product release schedule. Furthermore, more conservative CFOs may
cast a wary eye on Solomon's immunity from financial statement disclosure,
given that corporate viability increasingly gains in importance for software
a highly competitive environment, we predict that Solomon has the potential
to reach US$100 million in revenues within the next 3 years (60% probability).
This is based on the prediction that, within the same time period, more
than 60% of its revenue will come from existing customers, which will
want to either replace an old Pervasive-based product with MS SQL Server-based
Solomon IV or add new modules to a current Solomon installation (75% probability).
to increasing competition and visibility from its publicly traded competitors
with significant resources, we believe that the company will have to decide
to go public within the next 18 months (60% probability). Failing to do
so will put Solomon in a very disadvantaged position compared to its competitors
against the backdrop of its above-mentioned R&D capital requirements.
believe that, within the next 12 months, the company will have to either
acquire (35% probability) or partner with (65% probability) vendors whose
products would significantly enhance its human resources, and complex
manufacturing and scheduling capabilities. The potential alliance candidates
for complex manufacturing functionality are ShopPro Software and MAI Systems,
while and Mangrove Software is a candidate for HR alliance.
we believe that within the next 3 years, no single ERP vendor will reach
more than 20% market share within the SME market segment (80% probability),
Solomon faces the danger of losing its Top 10 vendor position within the
SME market if it does not deliver new functionality within the above timeframe.
This is based on the assumption that a slew of other vendors will emulate
Solomon's focus on Microsoft technology within the next 12 months (70%
probability) and deprive it of its current strongest advantage.
should put the wheels into motion to becoming a publicly traded company
without much delay. The company is one of the larger privately held ERP
vendors, and we believe that the independence of Wall Street volatility
carries much smaller specific weight than the need for additional R&D
capital and market visibility. However, Solomon should have a cautious
approach in presenting its IPO case, e.g., as an e-commerce vendor rather
than a traditional accounting vendor.
should further fortify its strong position within the Small-to-Medium
Enterprises (SME) market segment in the following ways:
- Expand business in its existing customer base, by upgrading older
versions of software and by offering new extended ERP modules and enterprise
- Conduct a detailed scrutiny of current geographic coverage in order
to identify any room for further global expansion, bearing in mind its
existing global/multi-national product capabilities.
- Deliver more new, focused, and pre-configured vertical solutions
(e.g., Clubs, Communication, Construction, Convenience Stores, Cross-Industry,
Electrical Service and Repair, Entertainment, Equipment Rental, etc.),
and offer application outsourcing while making every effort not to alienate
its VARs by cannibalizing their profit.
committed to new product features and expedite the introduction of additional
enhancements (See Vendor Challenges), possibly through strategic product
alliances with other vendors. We also encourage the company to consider
undertaking a more aggressive marketing campaign concurrent with these
developments. Its visibility is overshadowed by a spate of high-sounding
press announcements by its main competitors.
generally recommend including Solomon in a long list of an enterprise
application selection to the lower-end of the mid-market companies (with
$2M-$250M in revenue), which are staunch users of Microsoft technology
and have significant financial accounting, project management, distribution,
and service requirements, while currently not needing complex manufacturing
functionality. Companies looking for a holistic, broader functionality
and a particular industry focus from a single vendor may benefit from
evaluating other products at this stage.
organization evaluating Solomon Software should consider existing functionality
only, and, in the case of final selection, should negotiate incorporation
of new applications components now at negotiated license fees, in expectation
of Solomon's future product introductions. Potential clients should also
conduct a preliminary research on industry expertise and reference sites
of a regional Solomon value added reseller (VAR) when Solomon is included
in the selection process .