The Name and Ownership Change Roulette Wheel for Marcam Stops at SSA Global Part Three: Last-Ditch Effort by Invensys

The Last-Ditch Effort in Early 2004

SSA Global announced it has acquired Marcam, a provider of specialized, operational-level enterprise resource planning (ERP) solutions for process manufacturers, from Invensys plc, the global automation and controls group with headquarters in the UK, and from which SSA Global also bought Baan about a year ago. This occurred after Invensys made multiple attempts to capture the process and regulated products industry (detailed in Part Two).

Early in 2004, in its last-ditch effort, Invensys decided IPS would return its Protean and PRISM process ERP products to the Marcam brand. As one could deduct so far, for this business, the "name change roulette" had been spinning for some time, stopping briefly at a number of names including Wonderware, Invensys Production Solutions, Invensys Production Systems, Baan Process, and so on. Until SSA Global likely renames it under its banner, the name has now temporarily settled back to its starting point, Marcam. While discussing the new name with previous Marcam executives at the time several months ago, we learned that things appeared to be slowly moving in the right directions in other areas as well.

Namely, in the fall of 2003, Marcam presented yet another refined plan to regain some of its lost luster, and by early 2004 it had executed on that plan with commensurate results. The plan restated Marcam's focus on mid-market manufacturers primarily within the food and beverage industry, and over time within the pharmaceutical and chemical industries. The mid-market demand for process ERP was expected to grow in the food and beverage sector because of regulatory requirements such as the FDA Bioterrorism Act and track-and-trace capabilities for mad cow and foot-and-mouth diseases. This focus was consistent with Marcam's history, overwhelmingly made up of user companies from these industries. Key to the plan was investments in sales and marketing to address both installed customers and potential new deals, since the protracted low morale and employee exodus had created a situation with virtually no sales and marketing resources (at that time, the headcount was down to approximately 150).

Nevertheless, the new management team managed to build what appeared to be a strengthening sales and marketing team at the time (short-lived though from hindsight), with direct sales in North America and EMEA and indirect sales focus in Latin America and the Asia Pacific region. Marcam then also claimed improvement in key sales pipeline metrics, since leads and active prospects, closed business and average sales price have all doubled every month (from October 2003 to January 2004), although the starting figures were next to nothing, demanding a few more months to determine if these metrics would convert into true revenue.

Marcam then also claimed a number of recent new account wins for its Protean product plus some new account activity for PRISM, its all but antiquated product. That was attributed to Marcam's choice to use proven track-and-trace functionality and strong reference accounts to regain some success with manufacturing-centric mid-size food and beverage firms. The team even succeeded in acquiring new customers in the meat and poultry and brewing sub-segments in EMEA and North America in that period. New accounts and major orders from existing customers included Brewery Martens, Fromagerie Bell, McNeil, Capsugel Ashland Chemical, Kraft, Pfizer, Benthan Brewery, Pliva, and others.

This is Part Three of a six-part note.

Part One provided background information.

Parts Two began the discussion of the marketing by Invensys.

Part Four will detail what SSA Global gets.

Part Five will cover the merger impact and challenges.

Part Six will discuss competition and make vendor and user recommendations.

Resulting Market Impact

While no one expected that merely returning to the Marcam brand would automatically regenerate sales of PRISM and Protean, there was a whiff of opportunity owing to still little direct competition in this segment. Namely, although SAP, Oracle, and PeopleSoft can address certain large enterprise process ERP requirements, the small to midsize business (SMB) market still perceives their products as too complex and expensive, while not necessarily addressing their plant-centric needs. On the other hand, Microsoft Business Solutions (MBS) does not yet provide its own packaged product for mid-market process manufacturers. It still relies on independent software vendor (ISV) partners like VerticalSoft, NaviMeat, or Vicinity Manufacturing to serve the market by enhancing MBS Navision and MBS Great Plains products. Ross Systems, although it has lately proven the viability of the SMB market with focus on selected process industries and fiscal discipline, has also lately been somewhat negatively impacted by a protracted, delayed merger with a China-based suitor (see chinadotcom in the 'Process' of Acquiring Ross Systems), which was at last finalized early in September. Another process manufacturing stalwart, Infor Global Solutions (formerly Agilisys and SCT Process) has long shown the potential to enter the process ERP mid-market, but it continues to direct its efforts towards its SCM offering that is rather suited for larger enterprises, while the company's recent name changes and acquisitions within discrete market industries might dilute its historically sharp process manufacturing focus.

Yet, Marcam's total revenue remained heavily reliant on its archaic (and often heavily customized beyond control) PRISM install base for both maintenance and additional licenses. In terms of total orders for licensed products, over 60 percent of revenues continue to be derived from existing PRISM and Protean customers. Marcam was also planning to ship a number of new products in the foreseeable future, as promised to its customer base over eighteen months ago. To that end, the Protean Mobile Computing module would extend Protean to wireless devices, while manufacturing executions systems (MES) integration capability would enable the connection of Protean to the MES level, a frequent request from the install base according to Marcam. A business intelligence (BI) solution for Protean was to join an existing BI module for PRISM, since BI has been a popular module for PRISM and the company saw success for BI as part of Protean. Last but not least, at the end of 2004, it planed to release a Quality Management module for Protean that has been seen as vital part of ERP by many process manufacturing companies. Namely, Marcam's PRISM product has included comparable functionality for some time and has proven to be a popular module.

Unfortunately, it has not exactly been "back to the future" for Invensys-owned Marcam, given it had meanwhile forsaken its Tier 1 process ERP status of the 1990s, whereas it had many times meagerly tried to reemerge as a pure mid-market process ERP vendor. As can be seen from the discussion thus far, this organization has been through trying times, to put it mildly. Under Invensys, it has seen things change frequently including reorganizations, management changes, strategy changes, and the loss of many employees with deep domain knowledge. During these changes, the crucial individuals creating, servicing, and supporting their customer base might have remained the same but the name and game plan change game has become confusing to many, including customers, prospects, and employees.

Many other all too common problems have not disappeared with the mere name reversal. The market for new accounts has remained difficult for many vendors, but particularly for Marcam, which had to pin its hopes on success with the existing base in terms of continuation of maintenance fees and additional license fees. Marcam needed to satisfy the needs of the install base including effective communication with that base, something that has often been reported as a problem in the past, including during the Invensys phase. Last but not least, the vendor has traditionally been strong in product functionality and support, but in the last few years it has apparently failed the test in sales and marketing.

Invensys Lets Go of Its ERP-MES Vision

Eventually, its former parent company, Invensys, which no longer saw ERP as part of its portfolio since the divesture of Baan in June 2003, had to cave in to the Marcam sale too. Hereby, Invensys has abandoned for good its production suite vision to blend the boundaries between ERP and MES, as the Wonderware and Protean technologies have never been combined. Despite almost getting at the doorstep of espousing possibly a unique concoction of formerly owned software assets, Invensys has failed to execute in actually turning them into a new enterprise software application category. Consequently, Invensys continues to refine its focus and core competencies of plant automation, and has now exited the enterprise software market following its sale of Baan and Marcam, both to SSA Global, somewhat resembling Computer Associates with earlier interBiz sale to SSA Global and with a very recent sale of ACCPAC to Best Software (see Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions?).

Although companies that use MES fare better than those that do not, in terms of reported significant improvement in profitability and efficiency metrics over a long term, no vendor has yet succeeded in selling both ERP and MES, albeit Invensys coming closest to the goal. One of the reasons for this might also be in different buying audiences for these two software categories (i.e., white collar corporate financial and human resource (HR) management and planning personnel buying ERP for more strategic needs versus blue collar production and maintenance supervisors caring more for the MES' nitty-gritty and tactical objectives).

The major question now would be whether the acquisition is good for the Marcam customer. In short, yes, in spite of some inevitable caveats that will be discussed later on. Now, the Marcam products are owned by a company that understands ERP customers and their needs. Invensys had managed the Marcam business with a series of executives and policies that were well suited for Invensys' traditional plant-centric business, but did not always do the correct thing for ERP products. SSA Global, conversely, is a well-managed extended enterprise applications business that understands the needs of customers and the dynamics of the ERP software business.

The motivation of the buyer vendor will have come from the strengths of Marcam's install base (nearing 2,000 sites) and products. We therefore expect the new owner to continue or even increase the focus on the existing customer base, meaning existing and potential customers face low risk from this acquisition and conceivable benefit from new ownership. Continuing as a market aggregator, the financially viable SSA Global focuses on maintaining and developing business applications' extensions around a number of ERP systems, many of which resembled Marcam's state of affairs at the time of acquisition, and have since (miraculously or not) been rejuvenated. We thus expect the "care and feeding" of the products and customers to improve for Marcam customers too.

SSA has repeatedly stated that it does not "sunset" products or releases and we expect that policy to be extended to PRISM and Protean as well. Still, while support of older releases is part of SSA Global's policies, we expect that like all older release support programs, long term support cost will likely rise for those customers to decide to stay on an older release.

This concludes Part Three of a six-part note.

Part One provided background information.

Parts Two began the discussion of the marketing by Invensys.

Part Four will detail what SSA Global gets.

Part Five will cover the merger impact and challenges.

Part Six will discuss cmpetition and make vendor and user recommendations.

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