Intentia’s Intents To Be More Fashionable

Event Summary

On August 15, Intentia International AB (XSSE: INT B), a Swedish provider of enterprise business applications for mid-size and large enterprises, reported results for the second quarter of 2001. The profitability restoration plan, which was launched in 2000 with the intention to ensure the company will continue to generate higher license revenue within the constraints of its current product development and sales organization, has apparently resulted in improved earnings and cash flow. Cash flow from in Q2 2001 operating activities improved by SEK 222 million ($21.1 million) and was SEK 65 million ($6.2 million). License revenue for the quarter grew up 26% to SEK 274 million (~26.1 million), while consulting revenue rose 36% to SEK 689 million (~$65.6 million). Total revenue of SEK 978 (~$93 million) represents a 25% increase compared to Q2 2000 (See Figure 1).

Figure 1.

As a result of significantly improved capacity utilization, Intentia's consulting margin increased to 16%, which contributed significantly to an operating profit of SEK 7 million (~$0.7 million). Net loss of $0.9 million, attributable mainly to acquisitions of operations in Australia, the US and Norway, was nevertheless significantly lower compared to a $14.8 million net loss from a year ago (See Figure 1). All geographic regions reportedly posted growth and higher operating earnings for the first half of 2001. Net revenue in the Americas increased by 29% to SEK 126 million (~$12 million), mostly due to higher consulting revenue stemming from higher workloads in ongoing projects, although this is still less than 7% of total revenue.

In order to integrate and thereby make more effective its US operations and support infrastructure, Intentia has acquired the customer base and personnel from the previous owners of Intentia West in the US. Also employing the model it introduced in Europe, Intentia coupled the takeover with the establishment of a US organization consisting of four operating units: Midwest, East, South, and West. Also, upon acquiring a 49% stake in the Norwegian software company Scase AS earlier in the quarter, Intentia became one of the first providers of enterprise systems to the food industry that provides integrated origin marking throughout the supply chain (see Is Intentia Truly Industry's First In Food Traceability?).

During 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. Intentia believes with the release of Movex version 12, its product position is stronger than ever. Pilot installations of version 12 were implemented at a number of customers during the period where the product is still up and running.

Based on substantially improved breadth and functionality, the company hopes the new release will further strengthen its leadership in the markets on which it focuses. These applications include Multi-Site Planner, e-Collaborator, and Movex Business Messages (XML-based business transactions). Additional new functionality includes Call Center Integration, Demand Planner, and Employee Self-service. Movex version 12 also offers new functionality in the areas of point-of-sales (POS) integration, scarce and alternate sources of supply identification, cross-docking, vendor managed inventory (VMI), self-billing, e-billing, Web-based product configuration and personalized corporate portals.

Intentia claims that the successful shift in technology, the evolution toward e-collaboration and the considerably improved functionality of prioritized industry applications have made Movex more competitive than ever before. Movex NextGen, the Java-based version of Movex, reportedly accounts for a steadily growing percentage of Intentia's license revenue. Intentia also touts benchmark tests performed this year demonstrate that Movex NextGen provides scalability superior to that of competing products. Finally, although the market remains highly uncertain about the seriousness and length of the economic slowdown, based on its prospect pipeline, order backlog and the current customer base, Intentia anticipates positive operating earnings and considerably improved cash flow for the full fiscal year.

Market Impact

Like many Swedish-made products, Intentia's Movex has shown endurance during unpleasant environmental conditions, but one cannot help feeling that the product holds much more quality and potential than the market is aware thereof. As a matter of fact, with a steady increase in license revenue in a sluggish market where the competition is fierce, and with a scant contribution from the important US market, likely indicates the depth and breadth of the product that sells despite much marketing glitz.

Intentia has indeed rounded out its platform-independent product portfolio, which also features strong industry-specific functionality and expertise (see User Recommendations). Movex NextGen release, the flagship ERP system launched in 1999, is now a Java-based software suite deployable across multiple platforms. Intentia has also articulated an attractive strategy to support e-marketplaces with new developments in its portal technology for corporate and private trading exchanges (PTX). Very impressive is e-Collaborator, which should handle the transmission of almost all types of business information among companies over the Internet and thereby extend the customer's ability to interact outside the four walls of the enterprise.

Also relatively new is Movex Supply Chain Planner, a solution that, inter alia, offers forecasting and supply chain execution (SCE) capabilities, and is integrated with Movex. Consequently, Intentia now offers a set of applications that expand far beyond traditional ERP functionality to natively provide Supply Chain Planning & Execution (SCP/E), Customer Relationship Management (CRM), Partner Relationship Management (PRM), Business Performance Measurement and integrated e-business components. We believe its open platform approach, e-Business capabilities, vertical focus, and more proactive partnerships should bode well for the company's overall standing.

One fails to understand why the company with such a product and technology in hand is not doing a much better job in advertising it with more vigor. Its US counterparts start hyping (and often selling) the product while it is only in the vaporware stage.

One reason for the company's inactive marketing may stem from cultural reasons - in a small, close-knit but highly contested domestic Scandinavian ERP market, Intentia's name is well-known, The company is regarded as a leading ERP vendor (on par with the likes of SAP) and almost no ERP selection goes without Intentia's participation. Therefore, the delivery of an immaculately functioning product has long been the company's priority, for the product was sold more through word of mouth than through active marketing (according to the adage "good wine needs no hype"). The same mindset is far from being applicable in the Americas, where any CIO is overwhelmed with the hype from several dozen vendors and will only be aware of Intentia through some meaningful channel. The similar initial situation existed, until recently, for another Swedish vendor, IFS. IFS launched an aggressive marketing campaign, which when bundled with a slick product seems to have turned the tide and the US market now contributes a respectable 30% to IFS top line.

What might have additionally hurt Intentia in its North American expansion would be its traditional confinement to the IBM iSeries (formerly AS/400) platform, where it has faced strong competition from incumbent players like J.D. Edwards and MAPICS. Although Intentia has been platform independent since 1999, it still has one more myth to debunk on top of its otherwise low brand recognition in Americas.

Therefore, the company's big challenge remains its still nascent toehold in North America, without which no vendor can have a strong global competitive position. Recent alliances like the ones with Sun Microsystems, IBM and MRO.COM marketplace, might promote Intentia's visibility and give it a quantum leap. The company has also struck an alliance with Manhattan Associates to offer a jointly developed interface between PkMS, Manhattan's warehouse management system (WMS), and Movex (see Manhattan Associates Partners with Intentia). These, bundled with the recent restructuring of the US operations could boost Intentia's penetration of the North American applications market after a number of dismal former attempts. Intentia must market the Movex product more aggressively with the flashy media blitz and audacity that is peculiar to its US-based counterparts. Without it, Movex will likely remain confined mainly to the apparel/fashion customer base in the US, which it has captured mostly owing to a good word of mouth, to a dearth of suitable products, and to a bad publicity of some competitor's failures (see SAP sets up Apparel and Footwear team).

User Recommendations

Intentia's functionality footprint, technological innovativeness and expertise, and sharp vertical focus should be attractive to mid-size and large global enterprises within the following industries: automotive, aviation, apparel/fashion, food & beverage, industrial goods, electronics, furniture, MRO, paper, retail & distribution, service & rental, and steel. European enterprises that run on the iSeries server are the best candidates to benefit from deploying Movex. However, many companies from different geographic regions running on other platforms and within the above industries may benefit from allowing Intentia to give the other vendors in the selection a run for their money. However, while the above-mentioned performance benchmarks are trustworthy, one should rely more on performance in a real-world environment. Therefore, question the company's ability to provide reference sites that closely fit your business description.

On top of Intentia's challenge to manage brand recognition and channel development, the company will have to carefully balance its new technology strategy with a more aggressive marketing effort to gain acceptance as a cross-platform provider of enterprise applications without impairing its strong functionality development and reputation. More comprehensive recommendations for both current and potential Intentia users can be found in Intentia Possibly Seeing Daylight.