A supply chain execution vendor specializing in warehouse management and
Internet fulfillment, EXE Technologies emerged from the merger of Neptune
Systems, Inc. and Dallas Systems, Inc. in mid 1997. Dallas Systems had
built its WMS around the needs of retail and wholesale distribution companies
while Neptune brought expertise in third party logistics (3PL) to the
combination. Dallas Systems' EXceed was offered on IBM mainframe and Unix,
while Neptune Systems' solutions were supported on client/server Unix
and Windows platforms as well as OS/390. At the completion of the merger,
EXE instantly became one of the largest WMS vendors in the supply chain
execution market. Its broad range of supported platforms gave EXE the
ability to provide WMS solutions for companies of virtually any size.
the merger, EXE has concentrated its development resources on Neptune's
NT-based WMS product, which utilizes an open N-tier architecture. The
enhanced product, EXceed eFS (eFulfillment System), is a multi-platform,
multi-language software solution for e-commerce fulfillment and warehouse
management environments including: retail, grocery and wholesale firms;
manufacturing firms; third-party logistics and outsourced e-commerce providers.
The suite contains two extensions: eFS Fulfill and eFS Collaborate. eFS
Fulfill combines Exceed WMS with transportation management functions such
as shipping and receiving for multiple transport modes including air,
ship and rail. eFS Collaborate provides suppliers and customers the ability
to share information to support collaborative planning forecasting and
replenishment (CPFR) activities.
is a premier solution provider for Microsoft in the supply chain execution
industry. EXE has implemented over 250 warehouse installations using Microsoft
technology, including Windows NT and SQL Server. EXE has collaborated
with Microsoft on the deployment of its EXceed warehouse management application
on SQL 7.0, Windows 2000, and site server products. EXE also has a worldwide
database reseller agreement with Oracle Corporation, in which it offers
a certified interface to Oracle's applications.
Strategy and Trajectory
In spite of its promising genesis, EXE failed to grow its business significantly
in the two years following the merger. Total revenue more than tripled
from 1997 to 1998 but sagged significantly from 1998 to 1999, in which
the company grew by just 6% to $96.8 million. As a cost-cutting measure
during the Y2K-induced lull in its customers' buying activity, EXE restructured
its operations in August 1999 and reduced its total headcount by 130 people
it continues to support mainframe and Unix installations among its 300+
customer license base, EXE has begun to focus heavily on its Windows NT/2000
platforms and reputedly was the first supply chain execution vendor to
be fully certified on Windows 2000. At of the end of fiscal 1999, EXE
derived 26% of its total revenue from the sale of new software licenses
and upgrades, 66% from services and maintenance, and the remainder, 8%,
from the resale of software and hardware components it uses to complement
its solutions. In the first two quarters of 2000, software licenses have
grown considerably as a percentage and the company relies more and more
on consulting partners for providing implementation support and maintenance
to its clients.
is focusing research and development dollars on initiatives to offer a
more packaged solution environment and will target a 1:1 ratio of licenses
to services, a goal it may achieve in 2000 (70% probability). EXE markets
its EXceed fulfillment and collaboration solutions primarily to true dot-com
retailers, although this has created skepticism among some members of
the investment community since the decline of dot-coms in favor of brick-and-click
poor market conditions, EXE cancelled an IPO in 1998. With an entirely
new team of underwriters on board, EXE recently downsized its IPO expectations
from generating $111 million to $53 million. With the close of the second
quarter of calendar 2000, EXE's position in the SCE market is in doubt
as other players, such as Manhattan Associates, continue to gain market
share. Based solely on license revenues, however, EXE is the clear leader
with $25.4 million in license revenue for FY1999 and over $30 million
for the first half of 2000. Undaunted by its negative bottom line, EXE
resurrected its plans for an IPO this year, proceeds of which will be
used to fund operations and make strategic acquisitions in an effort to
capitalize on its newfound growth.
comprehensive WMS functionality over almost every platform: EXE's current
product line is the culmination of decades of development effort, employing
feedback from customers and members of its Industry Advisory Board (IAB).
Its multiple platform expertise gives it an edge over other vendors
in providing integration services on client implementations.
presence: EXE derives 64% of its revenues from North America, 20% from
EMEA, and 16% from the Pacific Rim. No other WMS vendor enjoys a customer
base so evenly distributed over the globe. Its area of fastest revenue
growth is Asia with a compound annual growth rate of 86% since 1997.
Geographic diversification better insulates EXE against local economic
of profitability and flat revenues: In spite of EXE's lead in the SCE
market, a position determined by total revenue, the company has posted
large losses in the last three years (see Fig. 1). Short term, this
will make investors hesitant to add the company's stock to their portfolios,
which will in turn hamper EXE's efforts to raise capital through public
funding. Some investment banks and institutional investors view the
company's emphasis on the dot-com B2C market with trepidation given
the recent bust in the B2B and B2C software markets.
internal research and development staff: As of March 1, 2000, EXE maintained
a development staff of 37, representing just 7% of its total workforce.
This is roughly half the average for the SCE software industry (~15
%) and a third of the larger supply chain management software market.
Much of the reduction stems from the company's restructuring steps in
1999 and, while reducing the number of R&D resources may have yielded
short-term cost savings, it can ultimately bring about a loss in technological
leadership. EXE has enlisted the aid of outsourced development and implementation
services through Hindustan Computers Limited and Span Systems Corporation
but these are an insufficient substitute for in-house resources.
capital to make acquisitions: EXE believes the best way to grow market
share is through acquisitions. It feels that it is easier to acquire
a complementary software vendor and assimilate than to develop functionality
in-house. Making large strategic acquisitions will be difficult unless
the required capital can be raised in the stock market.
potential for growth: In spite of its lack of profitability, EXE's experience
and leadership in the WMS and fulfillment markets increase its chances
for becoming profitable sometime over the next 1-3 years (70% probability).
Success is contingent upon maintaining a favorable market perception
among end users, competing effectively against other players like Manhattan
Associates, Provia, and Industri-Matematik.
by a larger vendor: EXE's WMS and fulfillment product would be complementary
additions to i2 Technologies' core supply chain planning applications.
Acquisition by i2 within the next 12-24 months (40% probability) would
allow it to offer one-stop shopping for supply chain planning and execution
- In spite
of EXE's strong position in the WMS and fulfillment markets, further
growth will be difficult without an infusion of capital. The company
has chosen to address this need through its recent IPO. Though the stock
market has been dangerous for software companies in recent months, we
expect that EXE will benefit from its public offering in the longer
term (70% probability).
marketing message to target brick-and-mortar retailers: EXE needs to
communicate clearly its willingness to provide solutions for both dot-com
and brick-and-click retailers, a message that has become obscured in
its zeal to capture its share of the pure-play Internet retail segment.
product lines: Although its multiple platforms enable EXE to offer solutions
for a broad range of enterprises, it should begin to rationalize components
of each platform in order to avoid confusion during the sales process.
channel partner network: i2 Technologies and Osprey, a small services
firm specializing in migrating companies to e-commerce, represent EXE's
only official channel partners. EXE should consider expanding this network
as well as establishing additional strategic alliances with systems
integrators, consulting firms and complementary software vendors to
help perpetuate revenue growth.
Users in the retail, wholesale distribution, manufacturing, and third
party logistics (3PL) businesses should give EXE a prominent position
on short lists, especially those using an N-tier architecture supported
by Windows NT/2000. Mainframe users should look elsewhere for WMS and
fulfillment capabilities unless they are prepared to migrate to NT or
Unix. Users may want to include the Unix version of EXceed in selections
over the short term (12 months), but should not be surprised to see EXE
scale down its enhancements of this product in favor of NT.