Event Summary
Deltek
Systems, Inc. (www.deltek.com
), the leading provider of enterprise software and solutions for project-based
businesses and professional services firms, remains committed to a potentially
unique, high level of investment in product development as compared to other
software companies. According to Kenneth E. deLaski, Deltek President and CEO,
the average public software company only invests approximately 14.5 percent
of its revenue in product development and, at 24 percent, Deltek customers should
take this as a strong sign that the vendor is deeply committed to continued
investment and improvement of each of its product suites for project businesses
and professional services firms. Deltek also announced that, once again, it
achieved strong profitability and cash flow for fiscal 2002, which reportedly
marked the 18th consecutive year of profitability for the company. In addition,
the company added more than 300 new customers during the year in a variety of
industries including aerospace, construction, engineering, IT services, consulting,
architecture, and project-based manufacturing.
This
is Part Three of a six-part note.
Parts
One and Two covered product announcements for 2003 and 2002. Part Four will
detail Deltek's differentiators.
Part
Five will discuss major Deltek's product lines.
Part
Six will present challenges and make user recommendations.
Company Background
While
the 2000s have indisputably been the most exciting, product rejuvenating years
for Deltek, the vendor's entire lifetime is a far cry from being bland. Incorporated
in 1983 in McLean, Virginia (its headquarters were recently moved to Herndon,
Virginia), and founded by the father-son team of Donald and Kenneth deLaski,
Deltek started as a small accounting firm that developed accounting solutions
for firms contracted by the American Federal government. In order to meet stringent
government contract requirements, in 1985, Deltek introduced what became its
initial flagship. System1 was a Microsoft DOS-based
product that became one of the first government contracting solutions (GCS).
Since then, Deltek's founders have continued to manage the company with great
success by expanding its client-focus into the commercial sector during the
late 1980s. In 1991, Deltek reached its 1000th customer on System1, and with
its revenue being approximately $15 million (USD), it began to configure its
software for larger customers.
Subsequently,
in 1995, Deltek released Costpoint, a more comprehensive ERP application for
large or complex firms. Costpoint took advantage of the previous ten years of
project accounting experience, and has recently become part of Deltek Enterprise
software suite. In that same year, Deltek released ET Enterprise
(now named Deltek Time Collection), a fully automated timekeeping and collection
system. By the time Kenneth deLaski took over in 1996, Deltek's revenue had
grown to more than $30 million (USD) and the company had more than 300 employees.
In 1997, Deltek joined the fray of software companies in the going-public frenzy
which began in the late 1990s, helping it to gain some visibility and allowing
it to make a number of astute acquisitions.
The
first acquisition took place in May 1998, when Deltek acquired Harper
and Shuman, Inc., a leading provider of accounting software for architectural,
engineering, and construction (A/E/C) firms. The acquisition of Harper and Shuman,
which included the Advantage and CFMS product
lines, added 2,800 firms to Deltek's install base, and was a major step in supporting
Deltek's strategy of providing comprehensive business solutions to firms in
the A/E/C industries.
Deltek
next released its successor to System1,GCS Premier in February 2000, which was
a Windows-based accounting solution designed for small to mid-sized government
contractors. In April 2000, Deltek formally unveiled its vision and launched
its initiative to become the vendor of choice in the emerging market of professional
service automation (PSA) software. Consequently, Deltek acquired essentially
all of the assets of A/E Management Services, Inc., including
its RFP GenTrak product line, a marketing, proposal and opportunity
tracking automation system for architectural, engineering and construction companies.
Shortly thereafter, Deltek reached an original equipment manufacturer (OEM)
agreement with Necho Systems, Inc. to add that vendor's travel
expense automation system to the Deltek front office product suite. Both of
these areas are fundamental pieces in Deltek's overall product strategy. Deltek
is currently developing its own expense management system with the beta release
slated for mid-2004. Accordingly, it will be terminating its OEM agreement with
Necho but will still continue to support the current Necho offering.
In
May 2000, Deltek unveiled the Enterprise Planner product suite,
the first results of Deltek's partnership with Adaytum Software
(now part of Cognos), originally announced in October 1999. Deltek next announced
the expansion of its consulting services in June 2000, encompassing six additional
practice management areas in accounting and finance; business intelligence (BI);
human resources (HR) and payroll; government contracting; information technologies;
and, project management. The company formed these practice areas to build on
the success of its implementation consulting services and to better utilize
the expertise of the company's systems consultants. Since then, the company
has been aggressively pursuing a product development and partnering program
designed to extend its leadership beyond its traditional back-office expertise
to the PSA market for front-office and collaborative e-business software. In
August 2000, Deltek acquired Semaphore, Inc., a major developer
and distributor of advanced financial and project management software and services
for over 2,000 A/E/C and other professional services firms. The acquisition
doubled Deltek's market share of the A/E/C industry, and gave it 72 percent
of the firms listed in Engineering News Record's Top 500 Design Firms.
Deltek Strategy
In
hindsight, the most recent achievements depicted in the Parts One
and Two
could be regarded as the materialization of Deltek's blueprint created at the
beginning of 2001, which charted and summarized the company's future target
markets, growth strategies and key product development initiatives. Deltek then
decided to continue to market its products to serve the needs of project-oriented
businesses and professional services firms. Specific application solutions and
markets that Deltek has targeted since 2001 have been
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Advanced, highly scaleable, back- and front-office solutions for medium to
large project businesses in specialized industries such as IT services; construction;
research and development;, biotechnology; systems integration (SI); and, project
manufacturing.
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Integrated, end-to-end solutions for professional services firms including
architecture and design; engineering and environmental; IT and management
consulting; accounting and legal; and, marketing and communications.
-
Front- and back-office software applications and solutions for all types and
sizes of government contractors.
-
CRM and proposal automation solutions exclusively designed for project-oriented
businesses and professional services firms.
-
Advanced, highly scaleable solutions for employee T&E collection in professional
services organizations.
Since
2001, a key growth strategy for Deltek has been providing additional front-office
software applications to its existing clients which numbered approximately 7,500
in 2001 and has currently grown to over 8,000. Logically, the targeted front-office
solutions have been CRM; employee T&E; employee self-service; project and resource
planning; budgeting, and e-business. At the time, the centerpiece of Deltek's
front-office strategy was the Deltek CRM & Deltek Proposals
product. Introduced in late 2000, this new application delivers feature-rich
applications for sales force automation (SFA) and CRM; proposal generation;
and, tracking automation. To facilitate these growth strategies, the company
has expanded its sales force by nearly 30 percent in 2001. Additionally, Deltek
has been judiciously expanding its indirect distribution channel and increasing
its sales and marketing efforts internationally.
International Business Strategy
With
a roster of international clients including pharmaceutical company Kendle
International (Germany) and General Dynamics (Saudi
Arabia), Deltek has achieved a certain presence in international markets. However,
as seen in the recent hiring of partnering expert Yousef Bayou as Director of
International Business, Deltek's international business strategy is being refocused
from targeting users to marketing and selling its solutions through value-added
reseller (VARs) channels. The company will also continue to support its relationship
with its existing overseas clients in markets that include Europe, the Middle
East, India, Australia, New Zealand, the Philippines, and South Africa. As a
result, Deltek has locally-based partners that can offer responsive customer
support and are knowledgeable about the relevant laws and tax regulations. Ultimately
channel efforts will initially be focused on Europe, with additional markets
being targeted at a later date. Deltek is already in discussions with a number
of potential reseller partners.
This
concludes Part Three of a six-part note.
Parts
One and Two covered product announcements for 2003 and 2002.
Part
Four will detail Deltek's differentiators.
Part
Five will discuss major Deltek's product lines.
Part
Six will present challenges and make user recommendations.