American Software - A Tacit Avant-Garde?

Event Summary

According to its press release on June 19, American Software announced that e-intelliprise, its fully web-based ERP solution with complete front-to-back office integration, now includes a customizable Business Intelligence Portal that provides secured role-based views of key performance indicators (KPIs). The Portal is a knowledge management system throughout the supply chain, measuring KPIs versus yearly, monthly, or daily goals and identifying trends that could affect overall company strategy.

The Business Intelligence Portal is the second element of American Software's Enterprise Portal Strategy, following the recently released Trading Portal. The Business Intelligence Portal is accessed via the Internet, and provides a proactive management tool to identify and analyze performance variants spanning the entire supply chain. The Business Intelligence Portal delivers real-time information to decide the direction of daily company strategy.

"e-intelliprise leverages the power of the Internet with the ability to proactively deliver usable information to drive business decisions", said James C. Edenfield, president and CEO of American Software. "e-intelliprise has been designed to provide businesses with the information and system flexibility to respond to the rapidly changing business demands of the e-business marketplace."

Earlier, on June 12, American Software announced that e-intelliprise has been implemented with wireless markup language (WML) capability to allow users the ability to conduct business transactions via any device that supports wireless technology. Users of e-intelliprise should be able to increase response time and competitive advantage by instantaneously managing their business transactions as events happen. With this capability, e-intelliprise notifies users of key performance indicators (KPIs) via cell phone, two-way pager, or PDA, from which a decision maker can take action.

This wireless order-approval capability extends the power of the ERP throughout the mobile organization, allowing decision makers instant real-time communication capabilities. When using the e-intelliprise Trading Portal, the alert system automatically notifies the user when an RFQ has been opened for a product. Using wireless capability, the user can accept a vendor bid instantaneously, wherever they are, immediately after a bid is transmitted. After the bid is accepted, a purchase order is created and tracked through the back office system using the front-to-back office integration of e-intelliprise.

"By giving e-intelliprise wireless capability, American Software is delivering the real-time notification to mobile decision-makers that virtual companies need to become even more responsive to rapidly changing business conditions," said James C. Edenfield, president and CEO of American Software. "This will enable companies to optimize their operations and increase profitability by responding more effectively to business opportunities as they occur."

On June 7, American Software, Inc. reported results for the fourth quarter and the twelve months ended April 30, 2000. For the twelve months ended April 30, 2000, total revenues were $105.5 million, a 3% decrease from last year. Software license fees were $20.6 million, a 5% increase from the same period last year. Services revenues were $59.7 million, a 6% decrease from the comparable period in fiscal 1999. Maintenance revenues were $25.2 million, a 3% decrease from the same period in fiscal 1999. Net loss was $1.2 million or $.06 per share, compared to last year's net loss of $8.5 million or $.38 per share excluding charges and tax benefit credit of $24.3 million or $1.10 per share for the comparable period last year.

For the fourth quarter, the total revenues for the quarter were $23.3 million, a 19% decrease from the same quarter last year. Software license fees were $2.4 million, a 60% decrease from the same period last year. Services revenues were $14.6 million, a 12% decrease from the same quarter last year. Maintenance revenues were $6.3 million, a 2% increase from the same period in fiscal 1999. Net loss was approximately $2.7 million or $.12 per share compared to a net income of $1.2 million or $.05 per diluted share for the comparable period last year excluding a tax benefit credit and other adjustments of $3.7 million or $0.17 per diluted share. The overall financial condition of the Company remains very strong with cash and investments of approximately $44.2 million and no debt.

"This was a transitional year for American Software. While the impact of Y2K presented challenges, the launch of our new e-business solution suite gained industry recognition and AmQUEST, our Application Infrastructure Provider (AIP) business unit, experienced strong sales success", stated James C. Edenfield, president and CEO of American Software. "In the coming year, we will continue to leverage these leading solutions to gain market momentum."

Market Impact

American Software, the Atlanta-based enterprise software applications vendor, has been quite busy over the last few years in its quest to assemble a broad e-business offering for mid-market users. It continues to announce additional functions that broaden the scope of its e-intelliprise application suite, which it released in 1999 as a Web-enabled reincarnation of Intelliprise. American Software introduced Intelliprise in 1998 as a brand new enterprise resources planning (ERP) suite that can support multiple modes of manufacturing, in addition to having full supply chain functionality and Internet connectivity.

The system provides users with three important factors for success in business today: the information they need in order to take immediate action, the perspective to plan future actions, and the flexibility to grow as business conditions change. Apart from its component-based architecture, the system is equipped with a set of business process templates that are designed to run a multinational manufacturing and distribution enterprise.

Very impressive is the Flow Manufacturing suite that can either be integrated into Intelliprise or used as a stand-alone package and which is currently leading the market with its functionality. Other features that can be bolted on to the Intelliprise suite include a set of supply chain planning and execution applications, from advanced planning & scheduling (APS) to warehouse and transportation management, which are provided by Logility, a wholly owned subsidiary of American Software.

Intelliprise also features a set of predefined data marts based on SCOR and GAAP performance metrics that help companies organize methods of collecting and analyzing data on the performance of individual departments. In addition, it contains a set of key performance indicators that companies can use to establish benchmarks for measuring their performance.

American Software has also introduced a series of applications under the banner ECON-Electronic Commerce on the Net-which allows customers to access and use the applications within Intelliprise over the Internet (a series of Web extensions for order placement, purchasing, catalog, bidding and expense reporting). Recently announced functions also include the expansion of the relationship with Categoric Software to embed its alert messaging into the entire e-intelliprise suite.

We believe American Software will continue to enhance its portal strategy and Intelliprise's ability to facilitate collaboration between trading partners in areas such as forecasting and inventory management. We also believe that the company should more aggressively pursue alliances with other vendors that can provide sales force automation and customer relationship management applications to the suite. However, the company still faces the challenges presented by a dismal mind share and market visibility as well as a recent sharp revenue decline and poor financial performance (See Figure 1 & 2).

Figure 1

Figure 2

User Recommendations

American Software's traditional target market - multi-national manufacturing and distribution companies with annual revenues between $100 million and $800 million may benefit from evaluating the company's value proposition. The e-intelliprise suite has a broad scope of functionality that may satisfy the needs of most discrete mid-market manufacturers. Given the fact that e-intelliprise is a new product, written entirely from scratch and with only a few dozen clients so far, a rigorous reference checking is recommended.

Any organization evaluating American Software should consider existing functionality only, and, in the case of final selection, should inquire and negotiate incorporation of new applications' components now at negotiated license fees, given its recent increase in new product introductions. Future clients are also advised to request the company's written commitment to promised functionality, general availability date, price, length of implementation, and seamless future upgrades, particularly for recently announced partnered offerings. Moderate caution should be exercised now and a watchful eye should be kept on the company's future financial performance.