Vendor Summary
Founded in 1981, Aspen has evolved over the years into a vendor of a broad array of applications for supply chain management, process design and control, and e-business. Aspen Technology takes its name from ASPEN (Advanced System for Process Engineering), a synthetic fuels research project begun by the Department of Energy in the mid 1970s. CEO Lawrence Evans, then a chemical engineering professor at MIT, was made the principal investigator for the project and later enlisted chemical engineers Joseph Boston and Herbert Britt. In 1981, the trio formed Aspen Technology to develop and market computer-aided chemical engineering software to process manufacturers.
Aspen's first applications supported simulation and design for the process manufacturing industry. In contrast to discrete manufacturing, process manufacturing involves a combination of complex chemical reactions and material transport operations that requires precisely designed production equipment.
The company used proceeds from its IPO in 1994 to embark on a series of acquisitions to expand its suite to cover other areas of process manufacturing. Acquisitions of Industrial Systems (1995) and Setpoint (1996) extended Aspen's suite with software for controlling and monitoring the daily operations of chemical processing plants. In 1998, Aspen acquired Chesapeake Decision Sciences, a maker of supply chain planning software and soon after reorganized its product offerings around the fast-growing area of supply chain management (SCM). In all, Aspen has made twenty material acquisitions of software and integration firms during the last decade.
In 1999, with revenues suffering under a downturn in its target markets and Y2K spending delays, Aspen implemented a restructuring program intended to reduce its operating costs and improve productivity. In connection with this restructuring, Aspen reduced its staff by approximately 200 employees, about 12 percent of the global workforce, closed offices, and streamlined operations. Following a brief respite, the company launched a focused hiring program to build staff in its supply chain management product areas, indicating a new emphasis on supply chain and digital marketplace applications.
The breadth and diversity of its applications has given Aspen a dominant presence in the chemical, petroleum and pharmaceutical industries with some penetration into semiconductors. The company reported total revenues of $268.1 million in fiscal 2000, compared with $226.5 million in the previous year. Revenue mix of products and services was almost 50:50 for fiscal 2000, and represents a shift toward licenses since last year (42:58) that indicates a revival of new license growth. For the quarter ended September 30, 2000, software license revenues were $32.6 million, while services revenues totaled $36.9 million. Net profit for the second fiscal quarter fell negative at $3.7 million compared with a net loss of $3.1 million for the same period in fiscal 1999.
Figure 1.
Figure 2.
Vendor Strategy and Trajectory
Demand for Aspen's SCM offerings has increased steadily since its acquisition of Chesapeake Decision Sciences' MIMI product suite, although the company continues to receive substantial revenues from sales of its process design and control software. Aspen estimated that revenues from supply chain applications made up 30% of total revenues for FY 2000 and projected the percentage would increase in subsequent quarters.
Aspen's long-term strategy is to continue integrating its higher-level supply chain management and Internet collaboration solutions to lower-level process plant control and operations monitoring applications. This commitment to process control will strengthen its already firm hold on the process industries (PI) but will make it difficult to extend its reach into other industry verticals. Because of the generally lower penetration of SCM technology into CPI, this strategy should represent no barrier to growth over the next 3-5 years.
Digital marketplaces are Aspen's latest product addition and the company is quickly establishing itself as an enabler of web-based buying and selling in its core process industry verticals. PetroVantage, a digital marketplace for the petroleum industry formed with technology partner IBM, will enable faster and more profitable trading and logistics decisions for crude oil and refined products. e-Catalysts.com, an on-line, collaborative marketplace for the $10 billion catalysts industry, will leverage Aspen's supply chain, collaboration and netmarket solutions to help companies make faster, more efficient decisions in the purchase and sale of catalysts and related products and services. ChemCross, the largest Asian chemicals exchange initiative, recently selected components of Aspen's Marketplace Solution. While digital marketplace related offerings comprised just 5% of Aspen's total revenues for FY 2000, the company expects this to double in FY 2001.
ANALYSIS
Vendor Strengths
Vendor Challenges
Vendor Predictions
Vendor Recommendations
User Recommendations
Aspen Technology should occupy a prominent role in enterprise software selections for process manufacturers, especially those who produce chemicals, pharmaceuticals, and refined oil products.
For supply chain management, Aspen is the only vendor that can offer deep functionality for the process industries with the added capability to deliver process simulation and control functionality and integrate them. The main caveat is that most of Aspen's SCM applications are essentially toolkits in which desired features can be developed, not packaged solutions that can merely be configured. Exceptions are applications from Petrolsoft, Broner, PIMS and Aspen's polymer supply chain suite, all of which are pre-configured.
Given the customization effort required for many of the applications, experienced resources are a must for implementations. That being said, Aspen is attempting to reformulate some of its more popular functionality as packaged modules and templates to speed implementations. Users should also bear in mind that Aspen's digital marketplaces, such as PetroVantage and e-Catalysts.com, have strong potential but are largely experimental at this stage.
Aspen offers a unique value proposition for process manufacturers that have already implemented SCADA (Supervisory Control And Data Acquisition) systems or DCS (Distributed Control Systems). Unlike more generic enterprise application providers like SAP, Oracle and others, Aspen focuses on integrating its supply chain functionality to lower-level plant control and monitoring systems like SCADA and DCS, rather than attempting to create a link to higher level financial and accounting applications.
Companies in complex manufacturing industries (high tech, automotive), or those seeking a transportation planning solution, should pass over eSupply Chain unless complex business processes require custom modeling.