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Symix Systems Front-Steps Into Greener e-Commerce Pastures

Written By: Predrag Jakovljevic
Published On: October 25 2000

Symix Systems Front-Steps Into Greener e-Commerce Pastures
P.J. Jakovljevic & A. Turner - October 25, 2000

Event Summary

Symix Systems, Inc., a leading mid-market enterprise applications vendor, announced that it will seek shareholder approval at its annual meeting on November 8, 2000 to change the name of the parent company to Frontstep, Inc. Following approval, the company's common stock will be traded on the NASDAQ National Market System under the symbol "FSTP."

The company currently operates three primary sales and service channels and an e-business consulting practice. The first channel, which will continue to operate under the Symix name, offers a comprehensive business system solution - e-business and ERP - to manufacturers through the company's existing global direct sales force and business partners. The second channel, which operates under the Frontstep name, markets the company's e-business products through third-party channel partners such as consulting and services firms, enterprise software resellers and ASPs. A third channel, also operating under the Frontstep name, consists of a specialized staff that sells and delivers e-business solutions to distribution companies and trading exchanges. An e-business consulting practice - brightwhite solutions, inc. - provides strategic e-business consulting and deployment services.

"This name change to Frontstep signifies our new business model, the new products and services we offer and the new opportunities we are pursuing," said Stephen A. Sasser, president and chief executive officer of Symix. "We have defined and are delivering a complete suite of e-business products and services based on a network-centric, collaborative model. We've established new sales channels, and we're offering new methods of software delivery and pricing for customers. We've also added new e-business consulting and services capabilities. We remain committed to our manufacturing enterprise customers and are excited about the new capabilities we offer them. We will continue to extend the capabilities of their business systems to capitalize on the new opportunities and technologies surrounding the Internet."

The company claims to have already enjoyed a number of e-business successes. It forged partnerships with e-procurement leader Commerce One and application service provider Agilera, and delivered products based on those partnerships. It signed on more than 10 e-business partners to resell the Frontstep E-business Suite - including resellers and implementers of competitive ERP systems who will use Frontstep software to provide e-business solutions for their customers. The company delivered e-business solutions or initiated projects with more than 100 customers, including several trading exchanges and "dot-com" companies. It also raised $13.6 million in funding for its e?business initiatives from Morgan Stanley Dean Witter Private Equity Group and Updata Venture Partners.

Earlier, on September 7, Frontstep, Inc. and MOMENTIX, a provider of Internet technology solutions for trade shows, announced a strategic alliance. As part of this relationship, MOMENTIX will integrate Frontstep's eCRM technology into its suite of Web-based trade show management solutions. The new MOMENTIX offering will be marketed as DigitalCustomer, a Web-based customer management system built specifically for the trade show industry. With DigitalCustomer, trade show managers can more effectively manage a show's sales, marketing and operational points of contact.

Also, on August 9, Frontstep announced that Emerging Vision Inc. has chosen Frontstep to provide supply chain and transaction processing for Emerging Vision's trading exchange. The exchange, still under development at that stage, is designed to facilitate business-to-business (B2B) exchange of goods and services in the optical industry. Emerging Vision will use sales, purchasing, and accounting software from Frontstep to process transactions initiated on the trading exchange. Emerging Vision will also use Frontstep's workflow automation solution to integrate these back-end functions with front-end applications on the exchange, as well as with buyer and supplier systems. The resulting integrated B2B information systems will provide an effective supply-chain network for Emerging Vision's trading partners. Emerging Vision will also use Frontstep's CRM software to support its own marketing, sales, and customer service efforts. Frontstep will be working closely with other well-known industry leaders, including Rare Medium, Microsoft and webMethods, to develop critical components of Emerging Vision's B2B optical portal.

However, On July 27, Symix Systems, Inc. announced disappointing financial results for the fourth fiscal quarter ended June 30, 2000. The company reported a net loss of $9.5 million for the quarter, including non-recurring charges of $3.0 million for divested operations. This compares to a net income of $30,000 for the same period last year. Total revenue for the quarter was $31.1 million, compared to $37.8 million for last year's comparable quarter. For the fiscal year, the net loss was $10.1 million on total revenue of $129.0 million. In the previous fiscal year ended June 30, 1999, the company realized a net income of $4.0 million on total revenue of $129.1 million (See Figures 1 & 2).

Figure 1.

Figure 2.

"We are disappointed in the overall revenue performance for the quarter. A significant amount of anticipated traditional enterprise software sales were deferred beyond June 30," said Stephen A. Sasser, "Software revenue for the quarter declined 24 percent from last year's comparable quarter to $15 million because of depressed market conditions for traditional enterprise systems. We are making the changes necessary to focus resources on the most important aspects of our business, those areas that will drive future growth and return the business to profitability in the second half of the current fiscal year. We are on track with our e-business plans and are gratified by the initial market acceptance of what we have articulated and delivered to date."

Symix has also made several structural changes to reallocate resources to core e-business initiatives. The company has discontinued efforts to enhance, market and sell the Mongoose software-development toolset. In the fourth quarter ended June 30, 2000, Symix sold its FieldPro standalone field-service management software subsidiary, including the source code and customer base, maintaining the right to incorporate the field service functionality into its e-business suite. Non-recurring charges associated with these restructuring efforts were $3.0 million.

"This is a critical time for the company, and we are focusing our talents, efforts and financial resources toward the execution of our e-business vision," said Sasser. "We are aligning the business to ensure our success as a leading B2B provider in our manufacturing and distribution markets."

Market Impact

After stellar 1998 and 1999 in which Symix, a traditionally strong player in the mid-market ERP space, achieved an impressive growth, resolved some functionality weaknesses in its own product and successfully partnered with and/or acquired vendors that offered complementary functionality, the company has recently felt the malaise of the shrinking ERP market. However, it has made every effort to keep abreast of the enterprise applications market trends by providing both front- and back-office solutions with the initial release of eSyte, its family of e-Business applications, in November 1999. This new venture into its non-traditional markets was not unexpected. Symix, like many of its traditional ERP competitors, has been negatively affected by heavy investments in new e-business product offerings even as the sales of traditional ERP products decline.

Symix has traditionally focused on delivering extended enterprise management systems to mid-market manufacturers and distribution companies via direct sales channels. In January 2000, it created an e-business subsidiary, Frontstep, to accelerate delivery of B2B products and services to additional target markets via new sales channels, including application service providers (ASPs) and online trading exchanges. Through the brightwhite services group, the company plans to provide the design and deployment services required by customers to plan, build, launch and advance an e-business strategy. Symix reliance on its direct sales and undeveloped indirect channel, which has been a flaw in its otherwise successful mid-market strategy in the past, should thereby be mitigated to a degree.

Symix has been one of the more vibrant vendors dedicated to the industrial mid-market. The company has long introduced its concept of Customer Synchronized Resource Planning (CSRP) to expand its back-office ERP functionality and focus on customer needs by acquiring Pritsker Corporation, an APS vendor, in 1997. Symix Systems' initial benefits from on-time release of its fully integrated supply chain software (CSRP) have recently been counteracted by competitors' similar offerings. As an example, MAPICS has abandoned the OEM agreement with Symix in favor of the Pivotpoint Thru-Put product it recently acquired.

Besides its flagship traditional ERP product SyteLine, suitable for certain discrete manufacturing markets like industrial equipment, specialty vehicles, electronics, packaging, fabricated metals, and furniture, Symix offers a number of other products. The company launched SyteCentre, an ERP suite for mid-market repetitive consumer goods manufacturers in February 1999. For now, SyteCentre is only available in the US.

In June 1999, Symix purchased Distribution Architects International (DAI), a supply chain management vendor, and added the SyteDistribution distribution management suite to its products. The product features sales order management and forecasting, inventory management, distribution planning, warehouse management, and business intelligence functionality, and has been designed to work closely with eSyte. As mentioned earlier, in November 1999, Symix introduced eSyte, a suite of e-business products and services created for mid-market companies. It is soon to be re-branded into eStep.

e-Syte (soon to be eStep) Business Products

eSyte is an e-business, Internet-enabled suite targeted at manufacturers, which integrates back-office systems, including Symix's SyteLine and SyteCentre. It also integrates most ERP, CRM, APS, supply chain, business and financial systems. It is an impressively comprehensive suite of web-based products, either as stand-alone or complementary to both SyteLine and SyteCentre. These e-business products include:

  • eSyte Customer Center provides a storefront to sell products and services. It offers complex order management and fulfillment capabilities, including sophisticated product catalog features, product configuration and available-to-promise (ATP) capabilities. Other notable features available with the Customer Center module are: product search, request for quote (RFQ), catalogues with pricing and updated inventory, and order status forms.

  • eSyte Channel Center (including eCRM) provides Internet channel support for sales representatives and dealers. Through multiple customer views from the Customer Center, the Channel Center provides the sales organization with order management, product configuration and ATP capabilities aimed at a manufacturer's suppliers. Channel Center also is a web-centric CRM solution providing marketing automation and sales and services management.

  • eSyte Procurement Center provides Internet procurement for company-wide purchasing. Through its relationship with Commerce One, a leader in global trading exchanges, Symix delivers Commerce One's eProcurement software, BuySite, and access to Commerce One's MarketSite, the largest trading network of buyers and sellers in the world. The Procurement Center also can provide access to other trading communities such as E-Steel and works.com. It is envisioned that users will have a range of B2B service providers integrated into their ERP desktops to allow for automated supply chains and production lines. They can then search for more suppliers and get volume discounts when sourcing raw materials, place and confirm purchase orders and process them.

  • eSyte Supply Chain Center provides real-time, Internet-based synchronization of manufacturing, distribution and external supply to customer demand. The system streamlines the planning process by providing real-time order promising, dynamic synchronization, real-time intelligent messaging and analysis in both single-site and multi-site, multi-ERP environments.

  • eSyte Intelligence delivers the infrastructure for collecting Web and enterprise data. Through its relationship with Cognos, Symix provides multidimensional analysis, business performance reporting and business modeling.

  • eSyte Active Link provides messaging and workflow through e-mail to effectively support a collaborative environment within the enterprise and outside the enterprise with customers and suppliers. By leveraging advanced workflow and data transfer technology, XML and SOAP technology and Microsoft's BizTalk Framework, Active Link connects, automates and streamlines work processes between the Frontstep E-business Suite and the transaction enterprise business system. The Frontstep E-business Suite is independent of the transaction enterprise system and therefore can be integrated with non-Symix ERP systems through its messaging capabilities.

After each module is integrated with a back-office system, discrete manufacturers, their customers and suppliers, will be able to use the Internet to order materials, initiate manufacturing processes and deliver products. We predict that more than 20% of Symix future revenue will be driven by eSyte within the next 18 months (60% probability).

How Frontstep Fits In

Responsibility for delivering new e-Business systems lies within a new Symix subsidiary called Frontstep. The Frontstep organization, announced in January 2000, has been busily rounding out its e-Business product and strategic consulting service offerings both through acquisitions, internal development and partner relationships. These products and services have still been brought to the manufacturing markets under the Symix brand name. Here are the most prominent events during the organization's hectic first few months (Note that some of them have been studied more thoroughly in pertinent TEC news analyses):

  • On February 10, Frontstep acquired Profit Solutions, Inc. (PSI) and its eCRM applications. The new Web-based product provides marketing automation, sales management, service management, and business intelligence functionality. (For more information, see Symix Expands Its Product Offering While Remaining Profitable)
  • On February 18, Frontstep announced a partnership agreement with Commerce One, a leading provider of e-commerce systems. Under terms of the agreement, Frontstep customers can access Commerce One's MarketSite Global Trading Portal to buy or sell products and services worldwide, and leverage new purchasing management capabilities.
  • On March 28, Frontstep signed agreement with Agilera.com, an ASP provider, to provide e-Business applications in a hosted environment.
  • On April 3, the company announced the eSyte product suite. (For more information on the above-mentioned events, see Symix Systems' Slips Into Red During Its E-Commerce Transition)

We believe the company has aptly articulated an e-commerce vision that should have an appeal to its mid-market users. In a nutshell, the mission is to deliver tightly integrated traditional ERP systems (not confined to only Symix' ones) and new e-Business components. The company's focus on the mid-market in make-to-order and configure-to-order discrete manufacturing has not been changed, however. While Symix has been promoting the concept of an integrated solution, including both ERP and e-Business components, the company is also pursuing stand-alone sales of its e-Business offerings, both to manufacturing companies using a different back-end system, and to organizations outside of the manufacturing industry, to a lesser degree.

System Architecture

Moreover, Frontstep/Symix seems to have grasped underlying e-business customer needs and business process intricacies while most of its competitors have yet to figure those out and are mostly at the stage of providing simple Web storefronts. Its comprehensive e-business offering, individual parts of which have been described above, is generally available. Very notable is the underlying Digital Supply Chain Network Architecture (DSCNA), an open and formal framework, envisioned to provide many-to-many workflow and messaging middleware functionality, both within an enterprise (internal suppliers and customers) and beyond enterprise borders (external business partners). The architecture consists of the following nine layers:

  1. Semantic layer - provides the meaning of an entity or message;

  2. Content layer - determines what an entity or message is;

  3. Application layer - determines what the status of an entity is;

  4. Process layer - determines what to do with the entity or message;

  5. Directory layer - determines where to send the entity or message;

  6. Transport layer - determines how the entity gets to its destination;

  7. Communications layer - determines which network entity uses, ISP or VAN;

  8. Storage layer - determines how the information is stored; and

  9. Physical layer - determines which devices are used to move and access information.

Frontstep has identified and defined the essential processes to conduct on-line commerce. By understanding the transactional underpinnings of e-commerce it has built a methodology to support a robust commerce solution. Frontstep's eSyte (eStep) solution combines business logic with the strength and brand of Commerce One's applications on a Microsoft platform. Further, embracing XML and an Application Service Provider distribution model the solution is poised to scale as the industry evolves. Should the company choose to publish its transaction architecture, it would serve as a strong educational tool within the market place.

Frontstep Challenges

Brand Recognition: Symix' recent name change to Frontstep will require a strong marketing initiative to inform new and existing clients about the company.

Public vs Private exchanges: Digital procurement solutions are becoming more prevalent in multiple industry verticals. However, organizations must decide if a public exchange, a private sales network or a combination of the two serve the company's needs. This will require additional planning and resources.

Evolution of Standards: As with B2B transactions, the adoption of mutually understood data and standards improve efficiency. Should new or modified versions of existing standards evolve the solution set will need to accommodate the changes. This requires continuous attention and possible application modification.

Microsoft only solution: While API's and XML promise to deliver technologically agnostic solutions, mass adoption of a Microsoft only solution may still represent sticking point in some organizations.

Frontstep Strengths

Focused solution: Frontstep has developed a technically proficient solution utilizing robust tools on a single platform.

Tight integration among partners: By choosing brand name, industry accepted partners the application suite leverages proven technology.

Well-defined transactional methodology: Frontstep has identified and defined digital transactions down to their elemental levels. The creation of business rules to accommodate the transactions combine to make a powerful/adaptable commerce solution.

ASP-delivered solution: Delivering their solution via the Internet lowers the threshold of entry and offers potential clients increased options.

Overall Analysis of Symix

While there may be a reason for concern due to declining revenue, undervalued market capitalization and a tainted profitability track, there is no real cause for Symix users' jitters. We concur with Symix' justification of its loss and also believe it had no choice but to extend its foothold in the coveted small-to-medium (SME) ERP market segment and to fill the gaps and/or diversify its product portfolio. We also believe that these moves have been prudent and in tune with the current ERP market trends. We also agree with Symix' plans of enhancing its core ERP product and continued emphasis on integrating eSyte components with other back-office systems. The openness and interconnectivity are one of the most important tenets of competitiveness within the SME market in the new Internet economy.

However, the entire company will be faced with some notable challenges.

First, it will have to execute full integration of the newly released applications with a slew of its back-office products if it wishes to mine its large customer base.

Second, the new products will further complicate the manageability of Symix' portfolio of product suites that currently run on disparate platforms. The Frontstep E-business Suite, SyteCentre, and various supporting modules for both SyteLine and SyteCentre such as advanced planning and scheduling (APS) and sales and order configuration, are written in C++ programming language, operate in a Microsoft Windows NT operating environment and use SQL as a database. On the other hand, the core enterprise system, SyteLine, operates in either a Windows NT or UNIX operating environment and is written in PROGRESS, a proprietary programming language licensed by Symix from Progress Software Corporation. Dependence on Progress Software's continued viability makes Symix SyteLine product development future rather vulnerable and we are aware of its efforts to converge its products so that they run on identical platforms in the foreseeable future.

Third, the company faces the challenge of delivering its very ambitious undertakings as planned and creating greater market recognition (mind share) for eSyte outside of its current customer base. The company will have to give a serious thought to how to best utilize its current sales & marketing resources to sell its major product lines. Symix might have to attempt to create mind share within the industries it had not targeted in the past (e.g., healthcare, hospitality/service, financial services), given that its current narrow manufacturing focus does not grant a significant future growth. There is an ever-increasing competition in the Small-to-Medium Enterprises (SME) market within the discrete manufacturing segment of the ERP market, with the intrusion of Tier 1 ERP vendors into an already crowded space. Time will tell whether Symix will be the one that will be Stepping at the (fore)Front of the pack.

User Recommendations

Existing Symix' customers should certainly consider the new offering, but avoid selecting it without looking at what the other vendors have to offer. We recommend identifying your clear e-business strategy and conducting a thorough comparison-shopping, at least for the negotiation leverage sake.

As for potential customers, We generally recommend including Symix Systems in a long list of an enterprise application selection for mid-market companies (with $30M-$500M in revenue), based on its broad product portfolio and understanding of its target markets' needs. Symix should be included on a short list in any selection within the SME market where discrete make-to-order manufacturing and distribution modules are the main pillars of an enterprise application. The industries that would most likely benefit from using Symix products are industrial & consumer electronics, industrial equipment, consumer products, fabricated metals, and furniture & fixtures, containers & packaging, and consumer goods.

As with all new releases, users should employ a critical approach in their evaluation of eSyte and require all potential vendors to demonstrate specific business processes. Though demonstrations do not guarantee a trouble-free implementation, they can go a long way toward helping users understand how the software might behave in their environments.

Future clients are also advised to request the company's written commitment to promised functionality, length of implementation, and seamless future upgrades, particularly for recently announced partnered offerings. One area of otherwise good overall Symix' service & support that the company has not always performed well in the past is new release quality. The company's readiness to provide a number of reference sites where the installation of its partnership-enhanced product has gone without major glitches would additionally alleviate existing anxieties within users' community.

The following are only some of the issues associated with enterprise applications integration (EAI) that users should be aware of: different security systems and keys, package interfaces that do not provide the information in a preferred format, systems may operate in different time zones and be geographically dispersed, scalability, performance, disaster recovery and contingence.

Current and potential users may want to inquire about the company's plans regarding Internet marketplaces in their respective industries. While the Symix technology platform is expected to make it easier to connect the components to the Internet as well as to third-party applications, and the new platform makes use of XML and industry specific communication standards, being all things to all people is very unlikely. Companies outside of the above-mentioned industries may benefit from evaluating eSyte components on a stand-alone basis for their e-business needs and to leverage that information against other vendors in the selection. Remotely hosted Internet solutions may offer cost effective applications to small or mid-sized organizations, bearing in mind necessary customizations' ramifications.

 
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