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The Change of Guard at Plex Systems

Written By: Predrag Jakovljevic
Published On: January 28 2013

Given that in mid-2012 Plex Systems, the first software company to build a full-fledged cloud-based manufacturing enterprise resource planning (ERP) solution, was sold by Apax Partners to Francisco Partners and Accel Partners, it was not too surprising to hear about the early 2013 appointment of technology industry veteran Jason Blessing as the company’s chief executive officer (CEO). Such appointments and company stewardships typically come at a time when a company is entering its next growth phase or is being taken to the next level.

Blessing joins Plex Systems from Oracle, where he was senior vice president (SVP) of application development. Previously, he held a variety of executive roles at Taleo, including general manager of its small to medium business (SMB) unit and, most recently, executive vice president (EVP) of products and technology. Taleo, a pioneer in cloud-based talent management solutions, was just recently acquired by Oracle. Blessing has also held a variety of executive positions at PeopleSoft, Oracle, and Price Waterhouse during his 20-year career in enterprise software. He is a graduate of the University of Michigan, which represents a coming back home of sorts, given that Plex Systems’ headquarters is in Troy, Michigan.

Blessing Came From Oracle

The change in CEO seems to be a natural step for the new ownership that agrees with Plex Systems’ strategy in general, but wants the company to undergo more rapid expansion. Former Plex CEO Mark Symonds, who has done tremendous work during the company’s formation years, was well liked and respected by virtually everyone. He reportedly agreed to an amicable transition, which was also helpful. The new ownership reportedly spent several months searching for someone that would fit the culture, and who also had strong Michigan ties and strong experience driving a company this size up to the next level. Of course, anytime you get a new CEO you expect there might be some turnover at the VP level and middle management level, but I don’t expect anything radical or ominous.

I wouldn't say the board pushed Symonds out, especially given that Plex has been a growing (30 percent in 2012) and profitable company for some time. The company has built the most complete cloud offering for manufacturing, Plex Online, at precisely the time when manufacturers have become comfortable moving this critical component of their business to the cloud. Not many competitors can match Plex Systems’ “shop floor to top floor” technology for ERP, manufacturing execution, quality management, supply chain management (SCM), and business intelligence (BI).

It’s About Growth, Stupid!

But in the end, the board preferred to have someone with a proven track record—especially a track record in Silicon Valley—running the show. In my opinion, this is a very typical move for a West Coast investor to make. As said earlier, generally the investors like the ongoing strategy, but want Plex Systems to grow even faster. If they can get the vendor to accelerate its growth to say, 40 percent a year, and double its size in the next few years, they can expect an incredible rate of return on the money they put into the company.

But while the investors’ math is painfully simple, how will Plex Systems reach that coveted next level? The most obvious course of action is by more aggressively investing in sales and marketing. Actually, there is some strategic product development that the new owners are helping Plex Systems with as well. But mostly it is a channel, partner, and/or geographic reach issue that they can help the vendor address immediately, which the previous owners were unwilling or unable to help with. But Plex Systems will have to watch how best to add more sales people and recruit more resellers. In a Starbucks analogy, you can only add so many stores in, say, NYC and have them all be profitable. By the same token, when territories get too small, the better sales people leave and then revenues start to slow.

In addition, the ability to enter new countries and regions is not that easy and the ramp up often takes longer than expected. An industry contact told me his example of trying to put a great US SCM product into Northern Europe. As most of the SMB distribution in Northern Europe is not done by freight companies, but rather by relatives with vans, hardly anyone saw the value of those strong SCM capabilities.

The question is thus whether Plex Systems can grow fast enough organically without some major acquisition. The company has never acquired any other software company, and with the way that the vendor guards its product image, the ability to add an acquisition without a complete rewrite of the acquired product will be hard. I have had several discussions with the company’s product managers, and they are very rigid about the product’s look and feel. If it is not in tune with the native Plex Online functionality, both the Plex Systems staffers and customers are likely to reject an acquired product.

Any Other Alleys to Explore?

Plex Systems has a solid position and install base (about 600 companies) in the metal stamping, fabrication, auto suppliers, and food industries, but has been struggling with cracking the life sciences because of the validation requirement (certifying and freezing processes is hard in a multitenant cloud with the vendor continually adding new functionality). What other industries can the company tackle to expand that needs native quality management system (QMS) and manufacturing execution system (MES) capabilities? Plex Systems’ QMS is strong, particularly traceability capabilities, but its MES might not yet be at a best-of-breed level to be able to play in areas with complex MES requirements.

To be fair, it may not necessarily be a feature issue with MES. Two common issues are familiarity with the apps that are specific to each distributed control system (DCS) and amount of code in the DCS or equipment that relies on the legacy DCS naming conventions. The cost to map every possible local value back to the global MES is complex. It is often easier to map to OSISoft PI (Plant Information) data back to global values for BI/reporting purposes. Another issue is that MES/DCS products and field teams seem to be tailored for specific verticals. For example, Rockwell Automation in standard chemicals products, Honeywell in reaction (torque sensor) products, Siemens in highly regulated industries, Apriso in aerospace & defense, etc.

In summary, the climate for cloud ERP in manufacturing is friendly, and Plex Systems also has much room to grow by simply expanding in many markets outside the U.S. where it hasn’t really been established thus far. Still, QAD, Infor (ERP SyteLine), Epicor, Microsoft Dynamics, SYSPRO, and other mid-market ERP vendors are also coming out with their cloud offerings (in addition to the traditional on-premise choices), and are much more established in the market. With cloud ERP entries coming from many directions, including NetSuite and salesforce.com’s ecosystem (e.g., Rootstock Software, Kenandy, AscentERP, etc.), it will be interesting to watch how Plex Systems will reach its desired hyper growth.

Recommended Reading

Forbes.com
Plex Systems' CEO Jason Blessing on the Future of ERP and Software-as-a-Service (SaaS). January 24. 2013.

TEC
In Conversation with Rootstock Management. January 10, 2013.
NetSuite Espouses a Hybrid Cloud in Its Two-tier ERP Approach. October 24, 2012.
QAD Raises the Blended Cloud/On-premise ERP Bar. January 8, 2013
The 11th Vendor Shootout for ERP: Observations – Part 2. September 20, 2011.
 
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