Event Summary
A true mid-market incumbent vendor that has not had much good news for last several years following up on its progenitors' merger and subsequent name change in 1999, seems to finally have been disseminating upbeat news both in terms of its financial performance and of its strategy clarity.
Namely,
on April 23, Epicor Software Corporation (NASDAQ: EPIC), one
of leading providers of integrated enterprise software solutions solely for
the mid-market, announced its financial results for the first quarter ended
March 31, 2003. Total revenues for Q1 2003 were $34.3 million, a 4.7% drop compared
to $36 million for Q1 2002, while software license revenue totaled $7.8 million,
a 7% drop compared to $8.4 million a year ago (see Figure 1). However, net income
for the quarter, which includes $1.7 million in amortized capitalized software
development costs and acquired intangible assets, was $2.4 million, which compares
with a sizable net loss of $2.7 million in the comparable quarter last year.
More important, the company's balance sheet at March 31, 2003 showed healthy cash and cash equivalents of $40.4 million, given the company has reported positive operating cash flow for six consecutive quarters. The vendor has also maintained its guidance for Q2 2003 with license and total revenues expected to be flat to slightly up from the first quarter's revenue levels. The company also anticipates continued profitable operations during the second quarter due to continued controlled expenses.
Figure
1
The
positive financial results coincide with the notion of Epicor also figuring
out its manageable few core competencies. Recently in April, Epicor was also
honored by the Progress Company, an operating unit of Progress
Software Corporation (NASDAQ: PRGS) and a supplier of technology for
building business applications, as its 2002 "Partner of the Year." Progress
selects its partner award recipients based on their innovative use of Progress
OpenEdge technology, their focus on high-value initiatives, and various
collaborative efforts that have allowed them to deliver maximum business value
in a challenging economy. Epicor reportedly received the top honor of "Partner
of the Year" for its demonstrated success in the delivery of a broad range of
end-user manufacturing solutions, using a single set of advanced business logic
processes based on the Progress OpenEdge platform.
Preceding
the event, Epicor's Manufacturing Solutions Group, with over
6,000 small to mid-market manufacturing solutions customers worldwide, and Progress
announced last November a combined .NET Web services strategy, whereby both
companies will support the Microsoft .NET framework. By adding
the power of the Progress OpenEdge platform to a native Microsoft .NET User
Interface (UI), Epicor strives to offer manufacturing customers new levels of
scalability, reliability and flexibility in implementing enterprise solutions.
Thus, over the next year or so, Epicor's small to mid-market manufacturing solutions
customers worldwide should have the opportunity to move to the Progress OpenEdge
platform supported through a Microsoft .NET UI. Epicor touts customers will
be able to leverage the familiarity of the Microsoft UI, while benefiting from
the flexibility and power of OpenEdge's operating system independence, low total
cost of ownership (TCO) and support for multiple databases.
Epicor believes the combination of OpenEdge and .NET is a win-win for end users, as well as for Progress and Microsoft developers. In addition to giving .NET users access to best-of-breed-like Progress-based Web services, Progress OpenEdge support for .NET should provide the Progress developer community with an expanding market for their domain expertise. Namely, the OpenEdge platform offers application developers the option of supporting a wide variety of UI techniques and technologies via a single collection of business logic components within the platform. Working with Epicor, Progress has extended that independent approach to the .NET environment, while the platform is also J2EE compliant.
Support
for .NET should help application developers leverage proven Progress-based business
logic, while integrating with the Progress RDBMS (Relational Database
Management System), one of the leading embedded databases for business
applications around the world. As a result, Epicor's manufacturing solutions
should be able to accommodate virtually any technology environment, while giving
Epicor customers the benefit of a strong, scalable product.
This
is Part One of a three-part note.
Part Two will discuss the Market Impact.
Part
Three will cover Challenges and make User Recommendations.
Epicor Manufacturing Strategy
The above announcement was part of the wider strategy and the product roadmap for the mid-market manufacturing industry, which was announced in March 2003, whereby development efforts for Epicor's manufacturing software solutions will focus on supporting discrete, mixed-mode manufacturers, a sector that encompasses the majority of Epicor's manufacturing customers today. The vendor believes that, with integrated end-to-end enterprise suites designed to help manufacturers increase collaboration with suppliers and customers, and improve operations throughout the value chain, its manufacturing software solutions are uniquely suited to support the needs of today's global manufacturers.
Epicor's manufacturing solutions have historically consisted of separate products architected for the lower, mid, and upper tiers of the mid-market. Contrary to this practice, the vendor recently announced it plans to develop a single business framework that would support multiple UIs that could be tailored to companies of different sizes and within different industries. This next generation of solutions will supposedly be operating system (OS) and database independent to accommodate virtually any technology environment and any size manufacturing operation. This should offer customers new capabilities and new levels of application reliability, scalability, system interoperability and flexibility, combined with a rich user experience and low TCO. Additionally, Epicor's product roadmap will provide manufacturers with an easy migration path to leverage Microsoft .NET and Web services. While the manufacturing industry has been slower than some to adopt Web services, the technology is reportedly gaining popularity. Epicor's product roadmap thus aims at enabling manufacturers to adopt Web services on their own timeframe and while protecting their technology investment.
Going
forward, Epicor's next generation manufacturing solution will also deliver a
single technology and business logic infrastructure to its entire range of customers,
optimized for the .NET Framework. The solution will provide for different interface
and workflow layers designed to fit the size and scope of manufacturers from
the lower to upper mid-market. A critical component of the strategy is to provide
choices to customers, who may choose from a number of database platforms, including
Progress RDBMS, Microsoft SQL Server and Oracle 9i.
And, the new product architecture will also allow a manufacturer to deploy the
product on a number of operating systems including Windows NT,
Windows 2000, Windows XP, Unix and Linux.
This approach should offer several benefits to customers since, rather than
purchase and deploy multiple solutions, large manufacturers could instead deploy
a single solution that meets the needs of their small, medium and large divisions.
Also, customers will supposedly be able to move seamlessly between solutions
as they grow or their needs change.
Executing
on a critical milestone of its product roadmap, Epicor has incorporated a single
application framework across two of its existing manufacturing solutions, Vista
6.0 and Vantage 6.0, which was supported through the
company's above alliance with Progress Software Corporation. While Vista and
Vantage now share a common framework, their UIs and workflow are still unique
to the markets that they serve.
Vista 6.0
Vista 6.0 was introduced in February 2003, as a major upgrade to Epicor's Vista manufacturing software solution designed to automate operations and improve workflow for small job shops and make-to-order (MTO) departments of large enterprises. Designed to fit the way a manufacturer does business, Vista 6.0 aims at providing an affordable and proven solution that easily manages scheduling, job tracking and integrates accounting functions to increase efficiency and productivity. Tailored to the needs of the small to midsize manufacturer, the new version of Vista affords technology choices offering support for both Microsoft SQL Server and Progress RDBMS.
The product has also been functionally enhanced, since the new Quality Assurance module aims at streamlining the quality process across the entire manufacturing operation. The Inspectors' Queue should give inspection teams a birds-eye-view into a shop's various quality processes — from Receiving Inspections to First Article Inspection, Non-Conformances and Corrective Actions — Vista's Quality Assurance module is integrated with other Vista modules and provides a full audit trail of shop processes.
Vista's new Advanced Inventory Management module brings a number of features to small and midsize manufactures, designed to handle the expanded tracking needs that customers require. With advanced features like Serial Tracking, Dimensional Inventory, and the ability to review substitute parts when making key buying decisions, the Advanced Inventory Management module should give a manufacturer's purchasing and inventory management employees a real-time visibility of inventory, enabling them to make better buying decisions.
Further, the Vista Dashboard puts all this critical business information at a manufacturer's and its employees' fingertips. A one-stop interface to Vista 6.0, integration with the Internet makes the Vista Dashboard easy to use and customize. The module provides real-time exception-driven indicator flags to users, like late jobs or expiring quotes, alerting them to business issues as they arise so adjustments can be made on the fly, resulting in a more proactively run business.
Vista's Advanced Bill of Materials (BOM) module offers complex multi-level assemblies that can be created, maintained and used for quotes or jobs within engineering and production departments. The Advanced BOM also enables multiple revisions tracking with effectivity dates and approvals for enhanced process documentation and tighter engineering control.
Because customer satisfaction and service is key to the success of the small to midsize manufacturer, Vista provides the basics of customer relationship management (CRM) with its new Contact Management module. Designed specifically for small to midsize manufacturers, it should enhance customer service by documenting and sharing customer communication with the entire organization. Offering integration across Vista modules for Sales, Customer Service and Production Support, should ensure a manufacturers' customers receive the personalized attention they require. Contact Management also combines strong user task control to improve a manufacturer's overall responsiveness to customer inquiries.
Vantage 6.0
In March 2003, Epicor also announced availability of Vantage 6.0, its comprehensive integrated manufacturing solution that addresses the needs of larger mid-market MTO and mixed-mode manufacturers with fully integrated relationship management applications that should enable users to better manage interactions with customers and suppliers. As one of multiple new features, by delivering comprehensive Business Activity Monitoring (BAM) capabilities, Vantage 6.0's Business Activity Dashboard aims at providing a holistic view of manufacturing operations, and providing real-time visibility of how the business is performing. This business visibility should enable users to quickly identify bottlenecks in their operations so they can make changes aimed at continuous process improvement. This capability should also allow the system, through user definable business rules, to proactively manage an enterprise's processes by electronically alerting and planning all those actions needed in order to fulfill the business goals.
In keeping with Epicor's focus on delivering flexible manufacturing solutions, Vantage 6.0 provides customers with multiple options for deployment, and offers support for Microsoft, Linux and UNIX operating system environments. Additionally, users should be able to customize and personalize the application through intuitive workbenches, to make the solution best-fit specific requirements, without impacting future upgrades.
Also, keeping in step with emerging requirements as the manufacturing industry continues to become more global in scope, Epicor has incorporated a multi-company collaboration feature within Vantage 6.0 which should enable companies to synchronize their manufacturing operations globally. The Multi-company Collaboration module to that end should allow companies to deploy and consolidate enterprise information across multiple companies, multiple servers or multiple countries. The module also enables real-time electronic commerce and collaboration among companies or business units within an enterprise, and to define how the inter-company relationship should be. The Multi-company Collaboration module also enables Vantage to be deployed across multiple databases on a single server or across separate servers. Regardless of configuration, Vantage 6.0 supposedly provides users with a consistent "look and feel" across the enterprise and can be centrally managed as one application.
Finally, Vantage 6.0's Multi-National Financials module includes many of the financial localizations required to deploy Vantage in most countries around the world, which encompasses the traditional Anglo-Saxon accounting methods as well as Napoleonic and the hybrid styles employed around the world. This multi-national framework also enables streamlined integration of Vantage into other accounting systems so companies can deploy Vantage while still keeping existing financial systems that may be dictated by a corporate head office.
Vantage
6.0 follows on major developments espoused during 2002 in the Vantage
5.2 release, which features a fully integrated customer relationship
management (CRM) module, Vantage CRM, aiming at providing discrete manufacturers
with the ability to automate their sales, marketing and customer service operations.
Vantage CRM provides fully embedded integration with the core Vantage application, rather than offering stand-alone modules that have to be custom integrated. Because Vantage CRM is Web-enabled, it provides one-touch access to all the information within the Vantage database in real-time, from virtually anywhere in the world. Sales representatives can thus quickly access the information they need to prepare a quote or respond to a prospect. Additionally, Vantage CRM enables a manufacturer to provide its customers with controlled access to information on open orders, shipments and payments through a fully secured Web portal. Vantage CRM thus aims at managing the entire customer lifecycle for manufacturers, from generating leads to closing sales to providing support that drives additional business.
Complementing Vantage CRM was an integrated supplier relationship management (SRM) module, Vantage SRM, which links suppliers to relevant information residing within a manufacturer's enterprise system, as to glean the information they need in order to provide a higher level of service to a manufacturer. By connecting a manufacturer and its suppliers in an electronic value chain that includes manufacturing, distribution, service and financial operations, Vantage SRM aims at enabling these relationships to run more efficiently and effectively, leading to cost savings and improved productivity on both sides. Manufacturers should in turn have a comprehensive view of their suppliers and be able to better analyze and evaluate performance, which should help them make more strategic sourcing decisions.
During 2002, Vantage became more widely available in the Asia-Pacific region, offering translations in simplified and traditional Chinese, as well as English. By offering manufacturers Chinese-language versions of a solution, Epicor is providing them with solutions that will help them grow in a global market. Manufacturers with multiple sites throughout the region, especially those that may have facilities run by Chinese-speaking staff, will have benefited the most from the new language releases.
Executing the Product Roadmap
With
the latest releases of both Vantage and Vista, Epicor executed on a critical
milestone of its manufacturing product roadmap -- incorporating a single application
framework across the two solutions through the alliance with Progress Software
Corporation. Further, however, in early 2004, Epicor plans to introduce its
.NET manufacturing solution code named Project Sonoma, which
will feature an n-tier architecture that has been architected from the ground
up to support Microsoft .NET and Web services. The platform will supposedly
deliver unrivalled flexibility and performance for both developers and customers,
and allow for the development of applications based on Web services that have
either a smart client or browser-based UI. The solution should enable all (both
existing and future) Epicor's manufacturing customers to leverage Web services
technology for maximum ease of use, integration, and lower TCO, without complex
or costly migration headaches. This will again be delivered through a combination
of the Progress OpenEdge platform and a .NET-based presentation architecture,
which should offer Epicor customers the combination of one of the most powerful
and reliable business processing engines on the market today, with the extensive
collaborative capabilities offered by .NET and Web services.
In
March 2003, Epicor also announced the expansion of its Partners for
Growth channel partners program to assist value-added resellers (VAR)
and authorized consultants in delivering Epicor's enterprise solutions. With
an expanded focus on delivering its manufacturing solutions through the channel,
Epicor is actively recruiting partners with manufacturing domain knowledge and
a presence in key markets throughout North America. The expanded channel program
has already attracted a number of partners including Meritage,
M&M Business Solutions, 2W Technologies, and
Marshall and Poe.
Epicor's Partners for Growth program aims at providing virtually all the key elements and tools a partner needs to achieve success in the mid-market. From the above award-winning integrated enterprise solutions, partner certification and training programs offered both in the classroom and online, to a wealth of marketing tools, as well as generous margins on software sales, the Partners for Growth program is designed to get partners up and running quickly to ensure success. Epicor also provides guided implementation assistance to new Partners, by providing on-site consulting assistance for their first two implementations to assist and help ensure quality implementations.
This
concludes Part One of a three-part note.
Part
Two will discuss the Market Impact.
Part
Three will cover Challenges and make User Recommendations.