Cincom Sticks to CONTROL of ETO and MRO Part 1: Recent Developments

Background

Cincom Systems, Inc. (www.cincom.com), a privately held, Cincinnati, OH based provider of software solutions and services primarily to complex manufacturers has possibly been a textbook case of longevity in the software business. Since 1968, the company has developed tools for manufacturing, financial, and sales automation applications. Its software manages application development, customer support, database, call center, and manufacturing functions. In addition to core ERP software, Cincom develops, markets, and supports software for document management, knowledge systems for sales, and customer relationship management (CRM). More than 5,000 customers in 93 countries use its software solutions worldwide, including such customers as Boeing, Trane, TRW and Alliant TechSystems. Thomas Nies has been president, CEO, and owner of Cincom since he founded the company; his tenure as CEO is the longest in the computer industry.

During the last 34 years, Cincom has strived to provide its customers an evolutionary path through major technological changes, enabling them to keep pace without major disruption of their business. Cincom's knowledge of complex manufacturing has ensured delivery of functional products bundled with rapid implementation resulting in one of the fastest Return-on-InvesTMent (ROI) and one of the best customer service and support organizations in the industry.

Cincom Manufacturing Business Solutions developed sharp vertical engineer-to-order (ETO) complex manufacturing functionality long before most of its larger competitors had grasped the concept of vertical focus. By delivering cutting-edge functionality pertinent to complex discrete manufacturing and maintenance, repair and overhaul (MRO) enterprises, Cincom has made its name especially within the aerospace and defense (A&D) segment. Additionally, with its iC Solutions products for sales force automation (SFA) and bid management functionality that is well-attuned to the CRM needs of complex manufacturers, Cincom struck a differentiating value proposition a long time ago.

This, Part 1 of a 3-part note examining Cincom, details the company's history and recent product announcements.

Part 2 will discuss the Market Impact of the announcements. Part Three will discuss the Challenges faced by Cincom and makes User Recommendations.

CRM for Complex Manufacturers

Cincom's Knowledge Builder represents an integral part of Cincom's CRM for Complex Manufacturers suite, which was devised to simplify the most complex selling, while accelerating the sales cycle, broadening sales channels, and lowering the cost to sell. In April, Greenheck Fan, a leading manufacturer in the air movement and control industry, has implemented Cincom Systems' Knowledge Builder for automatic order entry into its ERP system. Donovan Brekke, Greenheck's VP of IT, said, "We're actively working to put a common face out to the customer. Knowledge Builder will be the back end. The web will be the front end." Greenheck has used Knowledge Builder for six models of damper products, which control airflow in ductwork. An application development tool like Knowledge Builder captures product and engineering expertise, so that salespeople and even customers can quickly configure the products and options that meet specific needs. To that end, a manual process that took anywhere from a day to several days is now reportedly accomplished in about one minute with the use of Knowledge Builder. Customers already order in-stock ventilation equipment round the clock on Greenheck's web site. Products not in stock can be built to customer specifications in three-, five-, and 10-day cycles.

The Knowledge Builder product supports the sales force in needs analysis, product configuration, and proposal generation thus helping to deliver individual customer solutions directly at the point of sale (POS). The module also captures knowledge and transforms it into a powerful sales tool. A salesperson, partner, or customer can apply expert knowledge at the point of sale to quickly and accurately translate requirements into a product offering which matches their particular needs. The Knowledge Builder development environment enables the "domain experts" within the company to quickly and easily capture knowledge about the enterprise's products and services, their attributes and features, and alternative configurations. It accommodates diverse product offerings from simple Configure-to-Order (CTO) to complex Engineer-to-Order (ETO) applications. It converts unique customer requirements into customer solutions by generating a variety of outputs including among others, quotations, sales orders, manufacturing orders/bills of material (BOM), proposals, contracts, and drawings.

On the other hand, Cincom's CRM for Complex Manufacturers product suite enables sales people and partners to establish smart sales processes worldwide. The e-Channel product enables companies with complex products and services to capture and distribute critical sale and product configuration knowledge across all sales channels. e-Channel supports direct and indirect sales channels, and it is a comprehensive interactive selling system for both networked and mobile users. The e-Channel Desktop permits each sales agent to organize customer, product, pricing, and external information so that it is immediately accessible by anyone involved in the sales opportunity.

Enterprise Management

Preceding the above developments, Cincom Manufacturing Business Solutions announced at the end of 2001 the release and availability of CONTROL:2002^TM, the latest version of Cincom Systems' flagship ERP software. CONTROL:2002 encompasses activities included in business planning, business acquisition, order management, engineering, procurement, manufacturing and re-manufacturing operations, cost management, finance, and aftermarket support. It also includes a new program management suite of components for complex manufacturers who need program management and cost control, such as those with ETO and manufacture-to-order (MTO) environments. CONTROL:2002 allows project managers to define different work breakdown structures (WBS) and track cost roll-ups, direct and indirect labor, and actual and standard costs.

Figure 1:

The suite continues to be fully Internet-enabled, automatically determining online what products are available to sell, what revisions should be built, whether older revisions can be used up first, and when other parts can be substituted. CONTROL:2002 also features the traits of its predecessor, CONTROL:2001^TM, of handling non-project-controlled environments that do not require intricate project planning.

Market Impact

Kudos to Cincom for its tenacity and prudent decision-making in a difficult environment. Although the malaise of the market during the last few years has also taken its toll in the company's flat or even declining revenues, still, with estimated revenue of ~$150 million in 2001, Cincom remains one of the largest privately held software companies particularly after Lawson's recent IPO. Cincom has also been one of the most functional and, at the same time, one of the easiest to install and maintain complex manufacturing-oriented products in the market, with a low total cost of ownership (TCO) and a software vs. service cost ratio averaging 1:1.

Another factor that may bode well for its future is its international coverage, and a broad geographic revenue mix (a few thousand customers in over 90 countries), which not many vendors of its stature can tout. Cincom has 800 employees based in offices in 23 countries and more than half of its revenues are generated from outside North America. As for the overall picture, the estimate is that more than two thirds of revenue comes from existing customers, with new business accounting for the rest.

Service and support are another strength, as Cincom's Professional Services organization is known for its experience and domain expertise. The company points out that it trains its consultants on its budget rather than on the customer's. The typical industry practice is learning on the fly during trial-and-error implementations.

Still, the entrepreneurial spirit and enthusiasm of its management and an early mover advantage could not entirely make up for its finite resources. As a result, during the mid and late 90s, many high-flying publicly traded ERP competitors outpaced Cincom both in the scope of the extended-ERP functionality and mind and market share-wise. Consequently, the lack of strong natively integrated global corporate financial (delivered via an alliance with CODA) and time attendance/payroll modules (delivered via an alliance with Kaba Benzing), its erstwhile industry-lagging proprietary technology, and lethargic marketing prevented Cincom from closing many mega-enterprise deals then.

Additional Cincom Solutions in Other Markets

Still, facing fierce competition in the complex manufacturing market with finite opportunities, Cincom has made strides to crack other markets. As an example, on April 10, Quality Care Solutions, Inc. (QCSI), a provider of IT software and services for healthcare payers, completed an agreement with Cincom Systems to develop and deliver an integrated communications and correspondence management solution. This agreement offers an exclusive integration for QCSI clients who have high-volume customer correspondence needs.

Cincom's iD (intelligent Document) Solutions enables companies to quickly and cost-effectively deliver highly personalized customer communications. By leveraging existing IT systems, hardware, and databases, iD Solutions should give health plans the power to process over one million customized claim letters, membership letters, explanation of benefits, and other HIPAA-required communications per day. The QMACS integration with Cincom's iD Solutions^(TM) should help health plans lower costs by increasing administrative efficiencies, since a single user has the ability to produce more correspondence by streamlining and automating processes. Healthcare payers will also reportedly be able to produce correspondence and customized forms, and reduce errors in processing.

Further, in March at CeBIT 2002, Cincom presented how its customers might improve their efficiency in areas such as web-software development, sales, and personalized customer communication, using the following Cincom software solutions: Cincom Smalltalk^TM, iC Solutions and iD (intelligent Document) Solutions. Cincom Smalltalk is an object-oriented development environment for binary, portable multi-platform applications aimed at helping software developers create programs quickly and efficiently. Cincom touts that Smalltalk ideally supports the development of scalable, web-based Internet solutions, intranet systems, and client/server applications. It claims that compared to Java, C++, or Visual Basic, Cincom Smalltalk offers an increase in productivity for software development, which should help developers to shorten the time-to-market for their programs. Cincom Smalltalk consists of the two development environments VisualWorks^® and ObjectStudio.

In that regard, on April 24, GemStone Systems, a provider of zero-latency performance software, and Cincom formed a strategic partnership to provide customers worldwide with a platform to develop and deploy scalable Smalltalk solutions. As part of the new partnership, engineers from both companies will work together to provide tighter integration between Cincom Smalltalk and GemStone/S Smalltalk Server, which will provide customers with the platform to develop and manage Smalltalk applications. In addition, the companies will expand their distribution centers worldwide, and the sales and consulting professionals will work together on joint product training and sales engagements. As the two leading Smalltalk providers, GemStone and Cincom have reportedly worked together for more than a decade to offer Smalltalk solutions to industry-leading customers such as JPMorgan Chase, UBS Warburg, Orient Overseas Container Line and Texas Instruments. The new agreement strengthens the partnership to provide more products and services to customers.

This concludes Part 1 of a 3-part note on Cincom.

Part 2 will continue discussion of the Market Impact. Part Three will discuss the Challenges Cincom faces and make User Recommendations.