Intentia Possibly Seeing Daylight

Event Summary

On October 24, Intentia International AB, a Swedish provider of enterprise business applications, reported financial results for the third quarter of fiscal 2000. License revenue increased 46% over the third quarter of 1999, and 23% for the first nine months of the year. The figure represents the most rapid growth in license revenue for a single quarter since the third quarter of 1998. However, consultancy revenue continued to hold back total revenue by declining 9% from the same quarter in 1999. Net income for the quarter was significant, $19.7 million (See Figure 1).

Figure 1.

Over the past year, Intentia has focused on developing a complete range of integrated e-business components. It has repositioned itself from being a traditional ERP vendor to an e-collaboration provider. To that end, on November 7, Intentia and MRO.COM, Subsidiary of PSDI, a supplier of MRO supply chain solutions, formed a strategic alliance. The companies plan primarily to target businesses that use Intentia's Movex e-collaboration software, and enable those businesses to implement an Internet-based e-commerce system in just four to six weeks. The companies claim the solution will integrate seamlessly with the trading community of the MRO.COM marketplace.

Today, as part of achieving greater efficiency and a profitable growth, Intentia's strategy is to expand within the framework of its existing cost structure until it achieves satisfactory profitability. Thus, it plans to make every effort to curb product development costs until license revenue has grown by 50%. Further, its consulting organization will not expand further until the consultancy margin has reached 15% (it was only 9% in the last quarter). Therefore, from the beginning of the year until the end of the period, the total number of employees declined from 3,366 to 3,243.

Market Impact

Intentia seems to be changing for the better. One encouraging sign is a notable increase in license revenue, but heavy losses have not yet been curbed. The company has posted its seventh consecutive loss, which gives serious concern to its shareholders. The company's cash and stockholders' equity values have more than halved during the last 12 months. Intentia, like many of its competitors, has had the misfortune of concurrently tackling international expansion and ambitious product development in a sluggish and morphing market.

On a positive side, there seems to be a light at the end of a tunnel. Intentia claims to have rounded out its platform-independent extended ERP product portfolio, which also features strong industry-specific functionality and expertise. Movex NextGen release, its enterprise resources planning (ERP) system launched in 1999, is now a Java-based software suite deployable across multiple platforms. Intentia continues to perform well in Europe and has articulated an attractive strategy to support e-marketplaces. For example, it has launched e-Collaborator, which should uniformly and efficiently handle the transmission of all types of business information among companies over the Internet.

The company relies on a transformation of all business information to XML format to provide a uniform procedure for exchanging information. Its Enterprise Business Portal is intended for large international companies that wish to create either an external marketplace or an internal portal for coordination among the group's various units. A parent company can use Enterprise Business Portal internally to create a joint portal that coordinates divisional functions such as purchasing, production, distribution and marketing. Customers, suppliers and even competitors can also be included in an external portal aimed at creating a common marketplace. The company says that Enterprise Business Portal can handle the full range of business transactions, including requests for proposal (RFP), placing orders, invoicing and payment using only the Internet.

Intentia now offers extended ERP applications that expand far beyond traditional ERP functionality to include Supply Chain Management (SCM), Customer Relationship Management (CRM), Partner Relationship Management, Business Performance Measurement and integrated e-business components. The e-business components consist of applications for B2B (business-to-business) and B2C (business-to-consumer) Web shops, MRO Procurement, Strategic Procurement, e-Collaborator, Employee Self-service, Corporate Portal and Enterprise Business Portal.

Gaining platform independence and providing a comprehensive product offering for the new economy tremendously expands Intentia's opportunities. However, the company's challenges remain its low traction in North America, which has traditionally hindered the significant improvement of its competitive position. Recent alliances with Sun Microsystems (for more information, see Intentia's Growing Pains) and IBM (a joint project to develop e-business applications based on IBM's WebSphere technology) might well expand Intentia's visibility. Intentia will also benefit from providing an implementation of the Movex solution for the MRO.COM marketplace.

However, the task of curbing costs of product development and sales & marketing, with a fledgling license growth and the low utilization of a bloated consulting practice remains daunting despite the company's determination to address it.

User Recommendations

Intentia's customers should certainly consider the new product offering, but avoid selecting it without looking at what the other vendors have to offer. We encourage users to familiarize themselves with the company's ambitious new products offerings and their availability, at least to better leverage their negotiating position with other vendors involved in a particular selection exercise.

As for potential customers, Intentia should be included on a long list of an enterprise application selection to mid-market and low end Tier 1 companies (with $50M-$2B in revenue) within the following industries: Automotive; Aviation; Furniture; Fashion; Food and Beverage; Paper; Pharmaceuticals; Steel; Wholesale and Retail. Potential clients in North America, however, should conduct thorough research on industry expertise and speak with reference sites of their regional Intentia office or affiliate service provider when Intentia is included in the selection process.

Current and potential users may want to inquire about the company's plans regarding Internet marketplaces in their respective industries. Ask which specific market places does (or will) Intentia connect with, and what methodology does (or will) the company subscribe to. Due consideration should be given to product availability dates and to the company's endorsement of "web standards." Should the industry as a whole adopt a different XML standard after your installation, identify who will be responsible for accommodating the change and what measures have been engineered into the application to support evolving standards.

Future clients are also advised to request the Company's written commitment to promised functionality, general availability date, price, length of implementation, and seamless future upgrades. Given that the product has been only recently released, each component should be put through its paces using a well-documented set of requirements, scripted scenario demonstrations and rigorous reference checking.

As with all new releases, users should employ a critical approach in their evaluation of Movex and require the vendor to demonstrate specific business processes. Though demonstrations do not guarantee a trouble-free implementation, they can go a long way toward helping users understand how the software might behave in their environments.