Event Summary
Seemingly
unfazed by (although certainly aware of) a tough economic environment and/or
by its heavyweight competitors' recent initiatives, ACCPAC International
(www.accpac.com), an independent subsidiary
of Computer Associates International, Inc. (NYSE: CA) that
has been offering accounting and a broader range of other enterprise business
solutions for small and mid-size businesses, continues to expand its products
footprint and operations worldwide. To that end, its latest product offering
now ranges from accounting to include customer relationship management (CRM),
human resource management system (HRMS), manufacturing, warehouse management
system (WMS) and many aspects of e-commerce. On December 18, ACCPAC also announced
that it has filed a registration statement with the U.S. Securities and Exchange
Commission (SEC) relating to a proposed initial public offering (IPO) of common
stock. All of the shares are being offered by ACCPAC International, Inc., and
the offering will be managed by RBC Capital Markets, SoundView
Technology Group and Adams, Harkness & Hill, Inc.
Although the registration statement relating to these securities has been filed
with the SEC, it has not yet become effective. These securities may therefore
not be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective.
During the past year ACCPAC has announced the following:
-
Acquisition of AGS Software, Inc. for point-of-sale software
(POS)
-
Acquisition of eWare Limited for CRM software
-
Acquisition of manufacturing software from Lahey Software
-
Release of ACCPAC Advantage Series version 5.0 for a 100%
web-based accounting solution for mid-sized companies.
-
Release of ACCPAC Advantage Series for the Linux desktop
-
Release of ACCPAC Exchange the first Electronic Data Interchange
(EDI) offering to integrate mid-market accounting applications with IBM
Business Exchange Services, aimed at delivering affordable EDI transaction
documents over the Internet.
-
Release of Simply Accounting 2003 the new version of its
integrated accounting program for small offices/home offices (SOHO).
-
Formation of the ACCPAC Sales Success Distribution Program
a global distribution program for ACCPAC third-party developers.
-
An agreement to collaborate with CGA Online Services Corporation
to develop CGA Online a new web-based online system that
will provide a single source of information and services for Certified General
Accountants (CGAs)
This
is Part Four of a four-part note.
Parts
One and Two detail recent ACCPAC announcements.
Part
Three discussed the Market Impact.
Challenges
ACCPAC is not without hurdles nonetheless. To begin with, in addition to brutal competition coming from both above and underneath, it has a lower stature and brand recognition compared to its direct foes' Microsoft, Intuit, and Best Software. ACCPAC still has a smaller channel by the mere number of resellers (despite possibly more uniform worldwide coverage) and, with optimistically estimated revenue of $100 million, it derives less revenue from the accounting market than the other three. The size of any vendor in this market segment certainly counts, as well as the consequent size of the R&D budget.
ACCPAC's
VAR channel therefore needs some bolstering, given that more than 3,500 of its
6,500 resellers are involved with Simply Accounting, a financial suite for SOHO
users, that contributes ~20% of the revenue. Furthermore, some regional Microsoft
Business Solutions' (e.g. Great Plains, Navision,
or Solomon) and or Best Software's (e.g.,
MAS 90 or SalesLogix) resellers often generate
more than $10 million in annual revenues. Conversely, not many of ~1,500 ACCPAC
Advantage Series' VARs exceed $1 million. One has to see how the above-mentioned
ACCPAC's moves to nurture the relationship and the morale of its VARs and to
make them more successful (profitable), will play against MBS' and Best's enticing
financing arrangements for their VARs and customers, particularly during these
days of cash scarcity. Given ACCPAC has offered its channel and customers a
special financing arrangement with American Express (AMEX),
look for continued outwitting moves amongst the above powerhouse vendors.
Moreover,
although ACCPAC has a notable worldwide presence, and the No. 1 position in
e.g., Canadian and South African accounting markets, it has no market leadership
in many crucial mainstream regions nor in certain vertical segments owing to
the fierce channel competition from more aggressive, better known and/or wealthier
competitors like Microsoft, Sage/Best
Software, Exact Software, Epicor,
and Scala to name some. The company still has some US states
where it has no reseller as yet, and it still derives as much revenue from Canada
as from the much bigger US.
Also, not only ACCPAC may be plagued with the "accounting-only" perception, but its VARs have long been accustomed to deploying accounting point solutions (many of them are CPAs), and it will take much doing to retrain these to become full-fledged implementers of broad enterprise solutions including supply chain management (SCM) or CRM. The fact of currently having only a couple hundred CRM VARs (mostly accounting VAR converts) may confirm the fact that, although being numerous, current ACCPAC VARs will not have many CRM experts and CRM implementation experience. The same would hold for WMS and many other add-on applications the company has recently delivered. Thus, one of the biggest challenges for the company, has been helping traditional accounting VARs get up to speed on the new offerings, teaching them how to sell, market and implement them. Time will only tell whether the beefed up support, adding a strategic sales group of reps with deeper knowledge of the products, vertical-market issues and strategies VARs need to handle these larger projects, will suffice.
Further on the down side, ACCPAC segments its market by company sizes rather than by vertical segments, which lags the current trend of delivering sharp vertical solutions. ACCPAC's native manufacturing ERP functionality across the board, besides being lopsided between lighter manufacturing functionality on one side and very solid financials and HR functionality on the other hand, has been a far cry one of the strongest in the market as the company does not exhibit much of a vertical focus either. The product is well suited for general light discrete manufacturing environments, with almost no support for complex/engineer-to-order (ETO) nor for lean/flow repetitive manufacturing, which is pale given the fact that some of its competitors offer a sharp vertical focus even to the precision of six-digit Standard Industrial Classification (SIC) codes within an industry (e.g., Navision and Epicor). The company should, therefore, try to interest its resellers in industry specialization and provision of vertical extensions, and/or should internally vertically incline its product offering and develop industry templates, wizards and implementation methodologies to further decrease the time and expense of implementation projects.
Moreover,
outside WIP shop-floor capability, ACCPAC Pro does not offer distinguishing
(if any) intrinsic manufacturing ERP functionality (although there have been
a number of readily available interfaces to third-party specialist products)
such as hazardous materials reporting, forecasting, distribution requirements
planning (DRP), strategic-level planning, sales & purchase contracts, field
repair, plant maintenance). A slew of manufacturing-centric competitors like
Syspro, Epicor, and Scala, may boast many of these capabilities,
in addition to a solid financial modules and multinational coverage. Not to
mention the capabilities of Tier 1 ERP intruders. Opting for a more focused
third-party manufacturing product for ACCPAC Advantage would then fly in the
face of being an end-to-end provider, which the company has been touting lately.
Still, by typically offering the lower price point compared to the above solutions,
ACCPAC may bet on the maneuvering space with its source code provision to customize
a nearly-perfect fit and still offer a better deal for the customer.
Moreover, despite notable functional and technological initiatives, one of the biggest challenges for ACCPAC and its channel remains the management of still dual flagship foundation product lines. Also, while the products may have their separate niches (i.e., native manufacturing of Pro Series vs. multi-national and Web-based capabilities of Advantage Series), they may in many instances be similar enough to confuse customers and VARs in selling the portfolio.
The management team will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. It will also have to vigorously deliver an assuring message to the current customers about the support, enhancement, and migration plans for their respective products. The task of keeping track of a growing matrix of upgrade compatibility relationships between multiple product lines and their own nuances (e.g., from Discovery to Enterprise) remains immense, in addition to some still outstanding integration and web-enablement effort for the Pro Series product. With the large amalgam of products and a huge number of users using a plethora of different module gradations and/or releases, the likelihood of experiencing upgrade glitches may be high, however the products may be genetically similar.
Still, ACCPAC has raised the bar by offering its customers multi-dimensional choice: 1) to start with accounting and add other tightly integrated business applications as needs arise; 2) start with a simple set of enterprise applications and grow to more advanced level applications; 3) run applications in house or on a subscription base; 4) run on wide range of platforms — Windows or Linux OS, and/or on Oracle, IMB DB2, SQL Server, or Pervasive database; and 5) run on a LAN or provide access via the web. Not many peers if any are able to offer a product that is designed to accommodate new technologies easily, and that caters for a long term growth with an abundance of flexibility like in the case of ACCPAC customers.
User Recommendations
ACCPAC remains a stalwart vendor within the mid-market accounting and financial software markets, with its recent forays in becoming a global provider of end-to-end business applications to SMEs. The current market trend is towards vendors that can provide comprehensive solutions for small and medium-sized companies with a justifiable return on investment (ROI), and ACCPAC seems to have a fair shot. Moreover, with its global coverage, multi-national product's capabilities, compact cross-module integration and technological consistency, as well as with its cross-platform support, the vendor seems poised to give run for the money to almost any contender.
ACCPAC's target market, single- and multi-site and multi-national accounting, light manufacturing and distribution companies and their satellite subsidiaries with up to $250 million-a-year revenue range, should consider the company's value proposition, but avoid selecting it without looking at what the other vendors have to offer. These companies generally are rapidly growing and agile but have a limited IT budget/staff, a conformist IT strategy (a staunch Microsoft, CA and/or IBM shop), and solid accounting, distribution, CRM and B2B e-commerce collaboration requirements.
Moreover, global enterprises that have integration needs outside of the Microsoft environment, with multiple-platform and strong scalability requirements, and with multiple dispersed locations, should earnestly evaluate ACCPAC, and possibly its flexible either on premise and/or hosted deployment options. Looking at industry sectors, the company covers financial, distribution, manufacturing and service sectors. Where it does target vertical sectors they would include manufacturing, distribution, retail, nonprofit, healthcare and education via third-party add-ons and resellers' functional additions.
Certainly, for SMEs that have long been using one of ACCPAC's products for financials and/or accounting, Advantage Series should to be seen as a logical, but not necessarily the only ultimate solution. Existing customers should evaluate the specialty products add-on's and/or upward migration as a way to add value to their existing applications whether with an impending integration effort now or by waiting for the company to supply a generally available integrated solution.
As a general rule of thumb, consider ACCPAC Pro Series product if you are rapidly changing small or medium light manufacturing enterprise with less than $100 million in revenues, but with growth aspirations and a need to customize the product as to accommodate vertical solution. ACCPAC Advantage Series suite has only basic manufacturing capabilities, but with strengths in financials, payroll and inventory management, international features, as well as support for a broader range of implementation technologies (i.e., Web access, and more databases supported). Also, while it is easy to customize the user experience and while it provides many entry points for integration with specialty applications, Advantage it is a more packaged application, while Pro Series is more suited to prospect with a need to modify the product for very specific needs at the source code level. Thus, Advantage Series should be evaluated in moderately agile and changing medium and large enterprises (up to $250 million in revenues) where international business management is needed and the traditional product feature-functions and scalability still play very important part of the selection.
Enterprises looking for a much broader functionality beyond traditional ERP boundaries (e.g., more intricate CRM and supplier relationship management (SRM) functions such as content management, personalization and relationship optimization, product lifecycle management (PLM), direct materials procurement, plant maintenance, or complex project management/engineer-to-order (ETO) functionality) from a single vendor may benefit from evaluating other products at this stage.
Potential clients should conduct preliminary research on the industry expertise and reference accounts of ACCPAC's regional offices or affiliate service providers. Existing customers with products based on a proprietary technology, custom systems or products from other vendors should review the affiliate's development capabilities in order to gain data integration between their various systems. They should be asking ACCPAC whether, how and when the above CRM, WMS, EDI and B2B capabilities could be added to their investment. They should also inquire about any possible impact (or benefits) of migrating towards more advanced offering.