Vendor
Genesis
Geac
Computer Corporation Limited manufactures, services, and rents systems, hardware,
and enterprise applications to large and small organizations worldwide. Geac
is the largest Canadian and one of the largest and most successful international
software companies. Its solutions are specifically designed for the critical
needs of users in the banking industry, hospitality markets (restaurants and
hotels), newspaper publishing, public safety, property management & real estate,
and libraries.
Geac is also a best-of-breed provider of mainframe and client/server cross industry
solutions for financial administration and human resources (HR) functions, and
enterprise resource planning (ERP) applications for manufacturing, distribution,
and supply chain management. Founded in 1971, with headquarters in Markham,
Canada, Geac has been experiencing a steady growth over the last decade. It
has been a publicly traded company on the Toronto Stock Exchange since 1983,
with revenues of Can$793.2 million in fiscal 1999.
Geac
has grown from a small company focused on libraries and banking/financing in
the early 1990s, to an applications software giant with more than 5,200 employees
with 90 offices in 18 countries. Through its growth-by-acquisition strategy,
the company has increasingly expanded its range of solutions targeting vertical
industries. Over the last five years, Geac has acquired in excess of 40 companies
around the world.
As
a result of its acquisition of Dun & Bradstreet Software in 1996, Geac formed
its SmartEnterprise Solutions division, which provides mid- to large-sized enterprises
with advanced best-of-breed financial, procurement, human resources and business
intelligence solutions. Its multiple platform client/server 'SmartStream',
mainframe 'E' Series and 'M' Series, and SQL product suites enable organizations
to streamline business processes and enhance information access throughout their
enterprises.
Geac's
purchase of UK-based ERP software maker JBA International in 1999 has nearly
doubled the company's size. With the addition of JBA, Geac is expected to surpass
US$1 billion in revenue and occupy the 4th largest ERP vendor position.
Geac serves its worldwide base of more than 30,000 customers in more than 40
countries through direct sales, support, and affiliate locations worldwide.
The company operates throughout the world, and as such segments its revenues
geographically. In 1999, 68% of total revenues came from the USA and Latin America,
18% from Europe, 7% from Canada, and 7% from Australasia. The large majority
of Geac's revenues are derived from maintenance and professional services (76%),
with the rest coming from the actual sale and licensing of software and hardware
products.
We
expect acquisitions to continue to form an integral part of Geac's overall growth
strategy, and the company to continue to be a leading global consolidator of
mission critical applications in distinct niches within industrial, commercial
and government sectors.
Vendor
Strengths
Geac
has proven itself an adroit and disciplined acquirer of application software
businesses. Selective acquisitions have added breath through both attractive
untapped market segments and a worldwide market presence. Its large customer
base and strong widespread global presence will provide Geac a sustained service
and support revenue stream in the future.
Geac
has demonstrated a very proficient focus in niche industries that are currently
untapped by other leading ERP vendors (Geac is regarded as one of the Top 3
solutions for Libraries, Property & Real Estate, Cash & Securities Reconciliation,
and Newspaper Publishing Industries). The mission-critical nature of its solutions
makes the company a "first call provider" in these esoteric markets whose customers
turn to it first for further system enhancements.
The
company is generally competitive in speed of implementation, total cost of ownership
(TCO), and price/performance ratio. Geac was one of the first ERP vendors to
embrace concepts of component technology, workflow- and Web-enablement, and
interconnectivity with other vendors' systems. Furthermore, its products run
on a broad set of the most popular platforms and databases. Its broad range
of multiple platform products, worldwide coverage, and significant maintenance
revenue stream tend to cushion the blow from any technological change and/or
vendor intrusion.
Geac
is financially viable and stable (See Fig. 1 & 2 - Geac Computer Corporation
Ltd. - Annual & Quarterly Results). It has a lean general & administrative headcount
and keeps its business units manageable in size. As a result, the company generates
significant free cash flow and maintains one of the highest 'revenue per employee'
ratios within the industry.
Vendor
Challenges
Due
to its late expansion into the ERP world and since its product portfolio is
regarded as a bunch of niche point solutions (as opposed to a complete ERP product
suite), the company may struggle for recognition as a potential strategic partner
when involved in software selections against other, even smaller ERP suppliers.
Its best-of-breed solutions provider strategy may fall flat with customers who
prefer a vendor that can leverage a "one-stop shop" capability.
In
order to maintain its strong growth, Geac intends to continue with both software
solutions and service provider acquisitions. This will pose a challenge of avoiding
both financial indigestion and creation of an unmanageable product portfolio
of very diverse solutions. Some of its products are already in a maturity phase
and will have to be either discontinued or retrofitted. In addition, the continual
need of integrating/interfacing new products with its current or other vendors'
products will require a very careful balancing of R&D expenses with a desired
operational profitability.
We
believe that Geac has a narrow choice of complete vertical industry solutions
compared to other large ERP vendors. It only recently introduced Web-based self-service
applications, which is significantly later than some much smaller competitors
(e.g. Great Plains and Lawson Software). Furthermore, the lack of Client Relationship
Management (CRM) and Advanced Planning & Scheduling (APS) modules in its product
suite will remain, even after the incorporation of JBA and Clarus. This adds
additional future integration issues to a company that already faces massive
integration of its disparate ERP systems.
Vendor
Predictions
Despite
a highly competitive environment, we predict that Geac has a potential of reaching
US$2 billion in revenues within the next 4 years (60% probability), based on
its expertise and stronghold in relatively untapped industries (See Vendor Strengths).
We
believe that, within the next 18 months, the company will have to either acquire
(55% probability) or partner with (45% probability) a vendor whose products
would significantly enhance its customer relationship management (CRM) capabilities.
The potential acquisition candidate is Onyx Software, while Clarify/Nortel or
Pivotal are strong partnership candidates. Failing to do so will enable J.D.
Edwards to regain and fortify its #4 ERP vendor position within the same time
period (70% probability).
Within
the next 3 years, more than 65% of Geac's license revenues will come from JBA
System 21 and Geac SmartStream product lines (60% probability). During the same
time, more than 75% of its total revenue will come from license revenue (60%
probability) based on the company's need to integrate its products with other
3rd party products.
Vendor
Recommendations
Geac
must promptly resolve any outstanding product interconnectivity issues both
within its confederacy of products and with other vendors' products. It must
also send a strong reassuring message to a possibly wary market regarding its
strategic partner viability.
Geac
should further penetrate the Small-to-Medium Enterprises (SME) market segment
in the following ways:
- Expand business in its existing customer base, by upgrading older versions
of software and by offering new extended ERP modules and enterprise applications.
- Conduct a detailed scrutiny of current geographic coverage by product
lines as to identify any room for further global expansion.
- Deliver more new, focused and pre-configured vertical solutions (e.g.,
healthcare, insurance, education, courts, etc.), and offer application outsourcing
to make Geac attractive to smaller, resource constrained smaller enterprises.
Geac
also must remain committed to new product features and the introduction of additional
enhancements (See Vendor Challenges), and to enhancing CRM and e-Commerce offerings,
possibly through strategic product alliances with competitors. We also encourage
the company to consider continuing its stream of wise acquisitions within fragmented
industries that might be ripe for a consolidation (see above-mentioned industries).
User
Recommendations
We
generally recommend including Geac in a long list of an enterprise application
selection to mid-market and low end tier 1 companies (with $100M-$2B in revenue),
based on a very deep understanding of customers' needs within the following
industries: Library Systems; Construction Systems; Property Management Systems;
Hospitality Systems; Public Safety Systems; Publishing Systems; Manufacturing
& Distribution Systems; Real Estate Systems; Cash & Securities Reconciliation
Solutions.
When
Geac is selected as a main contractor, future clients are advised to request
the company's written commitment to promised functionality, length of implementation,
and seamless future upgrades. Moreover, since we expect growing pains in merging
disparate product lines within the current channel, potential clients should
conduct preliminary research on industry expertise and reference sites of a
regional Geac/JBA office when the Geac/JBA product is selected.