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The Case of A Boutique Vendor's Benefits of Focus - IRM Corporation

Written By: Predrag Jakovljevic
Published On: January 6 2003

Introduction

A tightly focused vendor, IRM Corporation (www.irm-net.com), has fine tuned its products, services, its sales process and even its commercial terms to match the realities of its sole market food manufacturers who sell to the foodservice and vending markets.

The Company

In the article "Boutique Vendors Bring Big Value" we discussed how focus can create highly specialized solutions that better serve their niche markets. Our recent meeting with IRM would be an excellent example. The company has provided the service of data collection and cleansing for the field merchandising market since its founding in 1970. In recent years, it has, however, further focused by targeting only foodservice and vending industries and by adapting to the changes of how the market has been served by also evolving its product technology.

The seasoned management team and a long history of working in and serving these markets have lead to in-depth knowledge of the target customer's business environment. That environment includes razor thin margins that have led to these manufacturers and their distributors taking a conservative approach to management. A target customer would be a food manufacturer/producer that sells branded products (vs. private labeled products) to foodservice/vending operators (e.g., restaurants, schools, entertainment, convenience stores, etc.) via multi-tier national distribution and by employing a field or broker sales force. These kinds of customers (e.g., Sara Lee Corporation, ConAgra Foods, DFG Foods, etc.) desperately need reliable sales, marketing and margin data analysis, which is typically not readily available from their back-office systems.

With this insight, IRM has tuned its products and services and the commercial relationship to best serve the analytical and workflow applications needs of the above food manufacturing companies that must deal with customers (i.e., food service distributors) that, all alike, work on thin margins and have a conservative style.

Products and Services

To that end, IRM offers sales and marketing solutions that include applications for transactional sales analysis and trade marketing. The applications accept data from both the customers system and the food distributor's systems. This data includes sales transactions from both sources and trade marketing information. With this data, IRM aggregates manufacturer shipments with multiple distributor shipments by site to drive end-user/operator analysis, category management and purchase rebates based on actual purchase history.

This information is presented to field sales with its flagship Sales Discovery System, which is business transaction analytical software. This system eliminates the need for paper-based sales reporting and resides on a portable field salesperson's notebook computer. The system appears to be easy to use and highly customized to the specific needs of the field salesperson, with flexible and dynamic views and filters. Sales, deal, margin, inventory, and other information are presented across all company, customer and product hierarchies in various time brackets. An appropriate authorization security system tunes the data available to the individual. PromoAssist is IRM's web-based solution for managing and tracking promotional activity within the channel.

PromoAssist expedites the request, submission, approval, confirmation, and payment processes associated with all promotional activity (e.g., spending analysis, payment history, multiple promotions' views (i.e., by date, by status, by region, by distributor, and more), etc.), without the need for any paper forms or documents. It provides workflow for approvals and analysis of the promotional events, and it also integrates with other IRM services to combine promotion with Sales Discovery analytics.

Other IRM products further assist in increasing the effectiveness of the field sales force. TopSales performs data warehousing, multi-source disparate data collection & processing (e.g., integrity validation, cleansing, matching/aggregation, etc.), as well as calculation with analytical reporting and trade payments and banking functions. Ntelli.Net is a secure web portal for field sales force's access to the above productivity tools.

Business Model, Terms and Conditions

We were very impressed with the way that IRM addressed the reality of the business environment of its customers. The company has embraced commercial terms and a sales process that is unique but may serve as a model for the future of technology in other markets. The conservative food manufacturing businesses are concerned about cost, time and risk. To address the cost concern, IRM provides a hosted model on a subscription basis. No set-up fees are involved, which avoids upfront investment in equipment and software and limits start-up cost to training.

The time to implement is extremely interesting and possibly unique. As part of IRM's sales model, the application is actually installed and proven before a formal proposal is given and a contract is signed. This means that the time between contract signing and the application going live is virtually zero. Only user training remains, and to speed user training and lower cost, web based Webex training is available.

The risk concern is addressed in several ways. First, the risk that the software will do what is required is addressed by IRM actually installing the application before the customer makes the decision to commit. This allows the buyer to see the application, with its almost live data, to fully understand what the application does, how it looks and how the users will interact with the system. Second the financial risk is minimized by both the low monthly cost and a contract that is extendable on a month-to-month basis. Not only is the money at risk reduced, but also no long-term commitment is required.

With IRM's sales process and terms, our observation is that it is lower risk and lower cost to actually sign up with IRM than to conduct a traditional evaluation. Further, quick payback and proof concept beforehand have always been door-openers, even before these days of little room for failed IT investments.

IRM's Challenges

Still, while IRM management projects significant growth and the size of the chosen market should allow for this growth, several obstacles must be addressed. First, the company has a very long history of serving this market but a limited experience within the business software applications technology business or the business model. This introduces an execution risk and a question relative to its long-term profitability. Second, growth must be funded. The subscription model provides predictable revenue but may not provide adequate funding for rapid expansion.

The month-to-month contracts put pressure on IRM to continually meet its customers' expectations. A fall off in service level or a competitor who does a better job can have immediate impact on IRM's financial position.

Although a challenge for IRM, this pressure is a plus for its customers, as IRM must work hard to meet its customers' on-going and changing needs. Although IRM is focused on a well-defined niche market with specific needs, the company is not without competition. Other, larger and better-known competitors (i.e., analytics providers like Cognos and Brio, and a slew of traditional ERP vendors targeting the food industry like Ross Systems, SAP, SSA GT and so on) are both in its market today and more will likely enter it more seriously in the future. While IRM's focus and business model gives it some advantages (see Fatal Flaws in ERP Software Create Opportunity for Niche Software in CPG Companies) , the company must stay aware of these competitors and maintain its current domain expert advantages. Should it continue to penetrate these vendors' customer base (it has already done so by garnering 50 high-profile customers, some of them being mentioned earlier), it is only a matter of time when the likes of Cognos will produce industry oriented analytic product or when ERP vendors will address the analytical needs the entire distribution channel.

Like many smaller vendors, IRM lacks significant marketing ability. Its tightly defined market makes it easer to reach potential buyers, however, IRM needs to invest in sales and marketing to better reach this market, outside of a mere 'word of mouth' approach at this stage.

Summary

Being tightly focused, IRM serves its target market well. Food manufacturers serving the food service and vending markets are urged to put IRM on their short list. Further, we suggest that they take a test drive with IRM as a short cut to spending the time and money associated with evaluating more traditional vendors. IRM's hosted solution seemingly offers a low-cost, low-risk and fast way to start analyzing your business outside your factory's four walls. Test the company's focus to determine if it is germane and if it will yield value to you without frills.

About the Authors

Predrag Jakovljevic is a research director with TechnologyEvaluation.com (TEC), with a focus on the enterprise applications market. He has over 15 years of manufacturing industry experience, including several years as a power user of IT/ERP, as well as being a consultant/implementer and market analyst. He holds a bachelor's degree in mechanical engineering from the University of Belgrade, Yugoslavia, and he has also been certified in production and inventory management (CPIM) and in integrated resources management (CIRM) by APICS.

 

 

Olin Thompson, a principal of Process ERP Partners, has over 25 years experience as an executive in the software industry with the last 17 in process industry related ERP, SCP, and e-business related segments. Olin has been called "the Father of Process ERP." He is a frequent author and an award-winning speaker on topics of gaining value from ERP, SCP, e-commerce and the impact of technology on industry.

He can be reached at Olin@ProcessERP.com.

 
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