Adonix' Mid-Market FORMULA – Adopting Best of Both 'Organic Growers' and 'Aggressive Consolidators' Worlds

Adonix Espouses Growth

Adonix (http://www.adonix.com), the largest, privately-held native French enterprise applications provider for mid-sized manufacturing and distribution companies, has espoused its strategic objective to grow both internally and through carefully targeted acquisitions of companies that can add value to its sole modern mid-market enterprise resource planning (ERP) system—Adonix X3 (see Adonix Expands X3 and Its "French Connection). Adonix X3's modern toolset, which has facilitated building functional enhancements—even those originating from acquisitions—into its integrated framework. The vendor cites its proven, ten-year (or so) track record, including the acquisitions of the fixed asset management provider ABEL in 2002, and the process manufacturing ERP provider CIMPRO in 2003 (see Adonix + CIMPRO = A Feature-Rich Process ERP Product, but with Challenges) as illustrating the success of this strategy.

In March, Adonix Group posted outstanding growth for the third consecutive year in both revenues and profits for the calendar/fiscal 2004. Reaching $120 million (USD), consolidated 2004 Adonix Group revenues reportedly grew by a lofty 41 percent, whereas the license revenue grew by over 70 percent over 2003. The France-based company believes these stellar results were due in large part to the successful integration of its acquisitions, progress in penetrating its target markets for ERP software, and continued increases in profitability, which reached $21 million (USD).

While growth was spearheaded by the success of Adonix X3 in the mid-market ERP sector, Adonix Group also gained momentum in the large account segment of the market, notably through the integration of the software vendor specialists it acquired in the logistics, finance, and HR domains. Because of its continued focus on addressing the needs of key target verticals in the process, discrete, and distribution industries, the vendor has been able to sign a number of mid-sized North American companies who are leaders in their particular market segments, including Aceto in specialty chemicals, Fleming in specialty pharmaceuticals, and Satellite Industries in sanitary products. Adonix Group anticipates continued growth in 2005, with organic revenues expected to exceed $140 million (USD).

For a detailed discussion of the methods of consolidation taking place in the ERP world, see Rapidly Consolidating ERP Vendors: The Worlds of " Organic Growers" and "Aggressive Consolidators".

This is Part One of a four-part note.

Part Two will detail Adonix' strategy.

Part Three will discuss Adonix' warehouse management system response.

Part Four will cover technology, challenges, and make user recommendations.

Acquisition of Gruppo FORMULA

In May, Adonix announced that it has acquired 100 percent of the shares of Progetto Integra S.p.A., the holding company that controls most of the shares of Gruppo FORMULA S.p.A. (http://www.gformula.com/). Gruppo FORMULA is the leading provider of mid-market enterprise software and services in Italy. Since Gruppo FORMULA is a publicly traded company on the EuroNext stock exchange in Brussels, the agreement is subject to approval by the Italian regulatory authorities.

Prior to this latest acquisition, Adonix had about 1,000 employees, 8,000 customers, 150 partners, and was present in 27 countries. Its North American office locations are in Pittsburgh, Pennsylvania and Tarrytown, New York. It has a direct presence in France, Spain, Italy, United Kingdom, Portugal, with resellers', system integrators', and consultants' presence in Canada, Mexico, China, Holland, Morocco, South Africa, and Tunisia. With a network of 2,500 trained professionals, Adonix believes to be well positioned for delivery of crafted ERP solutions and services to the underserved "Fortune 50,000" of mid-market companies, and to be experienced in managing multi-national projects due to local assistance, support, and expertise for customers in these markets.

The FORMULA acquisition should add $70 million (USD) in annual revenues to the Adonix Group, as well as 600 employees and 800 customers. As a result, the Adonix Group should now become a $200 million organization, with more than 1,500 people and nearly 9,000 customers worldwide. Nevertheless, Adonix intends to expand even more internationally, since its experience from European user organizations with international presence, and its recent product development strategy present a good expansion opportunity to become a significant player for midsize enterprises well outside Europe. Almost 80 percent of the license revenue comes from Adonix' indirect channel, but of which approximately 60 percent is still from France.

FORMULA's Diap@son application is the market share leader for enterprise systems in Italy's mid-sized business sector, and should help bolster the Adonix product line with technology, expertise, and a customer base that complements Adonix' evolving growth strategy. Diap@son is a broad extended-ERP solution, with a range of specific components for each selected vertical market, customized to the swift modes of operation and technologies required by the globally competitive Internet era and developed to support the core process of various functional business areas such as logistics, business management, customer relationship management (CRM), SCM, and business intelligence (BI).

In the last few years the product has been remarkably extended in the administrative area, with the release of a specific module of centralized treasury, and in the logistics and production area, with the new maintenance modules, and multi-site functions. Seen from a technological point of view, Diap@son 6.0 has introduced the new Web-based Java interface, which is more usable and flexible, and according to the "user work area" theory, it adapts to both business process-based planning, as well to the traditional working functions-based planning. Moreover, even the product's core business logic includes some components completely re-written in Java, which has been the result of FORMULA's technical strategy, better known as the "revolution under the hood". Namely, the user is able to perceive the existence of the new Java components only from the improved performances, whereas these components are otherwise seamlessly combined with the components based on more traditional technologies.

Diap@son 6.0 did not alter the product's portability and internationality. Its support for UNIX, IBM iSeries, Microsoft Windows, and now Linux platforms and its multilingual and multi-localization capabilities, which are the two features that have always differentiated FORMULA's product and its success in Italy, are still intact. Like its new parent's counterpart product, X3, Diap@son's architectural structure is characterized by integration and openness, since, from the start, it has been integrated with the standard "extended" components of the classic ERP, including CRM, SCM, advanced planning and scheduling (APS), service and maintenance, etc.

These product extensions have been produced by FORMULA in cooperation with its partners, in order to obtain a solid and flexible integration that completes the suite. Moreover, the 6.0 version introduced other two new components. Diap@son Corporate Portal and Diap@son Integration Server were developed together with Broadvision and Novell. With Diap@son Corporate Portal, the client is able to leverage enterprise portals including any type of internal or external services, keeping the ERP as the native component of the portal. On the other hand, Diap@son Integration server leverages the opposite process by exposing ERP functions such as Web services, and making them accessible and usable from any other kind of internal or external application, as long as it is authorized.

Meta4 Acquisition

In addition to these acquisitions, Adonix also acquired Meta4 in 2003. Founded in 1991, Meta4 has more than 900 clients in 18 countries and its solutions manage 4.5 million people across three continents. The company offices, with over 400 employees, are located in Barcelona, Buenos Aires, Lisbon, Madrid, Mexico City, Santiago de Chile, and Paris. It is one of the worldwide leaders in payroll and human and intellectual capital management (HICM) solutions, which aim at maximizing the user organization's knowledge potential for support business and increasing productivity, streamlining organizations efficiently, and providing them with greater competitive edge. The transaction took place through the purchase of the operating companies, Meta4 Spain S.A., all its subsidiaries, and Meta4 France S.A.

With the acquisition of Meta4, (with reportedly more than 45 percent market share in Spain), Adonix has consolidated its position as a leader in Southern Europe, expanding the group's offering to include best-of-breed payroll and HR/HICM solution, and it has entered the Latin American market. Totally self-financed, the agreement for the acquisition was entirely in line with Adonix' growth strategy to maximize functional and technological synergies in the development of business management software. With ABEL, a specialist of fixed assets management that was acquired in 2002, and Meta4, Adonix has broadened its historical expertise and geographical coverage, to become a credible partner for larger organizations. In return, the acquisition has allowed Meta4 to continue to develop more sophisticated solutions, and its customer has experienced little change in service.

This concludes Part One of a four-part note.

Part Two will detail Adonix' strategy.

Part Three will discuss Adonix' warehouse management systems response.

Part Four will cover technology, challenges, and make user recommendations.