J.D. Edwards and Numetrix Ponder the Future as One

Vendor Summary

Headquartered in Toronto, Numetrix was one of the pioneers of the advanced planning and scheduling (APS) software market. Founded in 1977 by Josef Schengili, the company introduced its first major product, Schedulex, in 1978. An update to Schedulex in 1983 was one of the first finite scheduling tools to incorporate advanced algorithms and offer graphical elements in the user interface. The company expanded into supply chain planning in the early 1990s with the release of Linx, its optimization software. Regarded as another first in the industry, Linx was the fastest selling optimization product on the market at that time. The advances that followed in later years further established its reputation for technological innovation.

Fig. 1

Vendor Strategy and Trajectory

In spite of a well-executed product suite, Numetrix has not grown as rapidly as many of its competitors. In fact, total revenues have increased at a slower average rate than the rest of the market over the last five years (Fig. 1). Numetrix experienced a peak in 1997 (due primarily to a single, large contract), but declined in the years following. Total revenues decreased from $34 million in 1997 to $28 million in 1998 with an estimated $24 million in revenues for FY 1999. In addition, losses of $8.3 million and $4.5 million (est.) were posted in 1998 and 1999. Reasons why Numetrix failed to grow market share center around a heavy-handed focus on product development and an insufficient emphasis on sales and marketing.

Two years ago, Numetrix incorporated their existing products with a statistical forecasting engine, resulting in the current Numetrix/3 suite. A solution for Internet distribution and deployment collaboration, Numetrix/xtr@, was released last year. The suite owes its completion to Numetrix's rabid development focus that prompted it to cancel a planned IPO in 1997 and slash 58% of its sales force immediately afterward. Due in part to a lukewarm response from institutional investors, Numetrix abandoned another attempted IPO earlier this year. Instead, Numetrix was sold to J. D. Edwards & Co. for $80 million (USD). Although J. D. Edwards plans to operate Numetrix as a distinct business entity, CEO Schengili and President Veerle Battiau will step down. J. D. Edwards hosted a forum in late September that detailed their strategies to deliver solutions for supply chain optimization and trading partner collaboration.

Vendor Strengths

• Product functionality: Numetrix's strong focus on product innovation has produced arguably the most functional and technologically stable supply chain application targeted for the process industries. Among the high points: Schedulex's thoughtfully implemented linear optimization routines and the high-level, strategic planning tool in Linx. Also to their credit, Numetrix responded early to customer requirements for providing visibility into financial aspects of the supply chain.

• Experienced consultants: An emphasis on technological excellence has produced a consulting staff with skills to match, though some expertise was lost during corporate restructuring in 1997.

• Highly referenceable client base: Those clients who have installed Numetrix, primarily process industry companies (especially food & beverage, and consumer packaged goods), report significant improvements in critical performance areas of inventory control, order lead time, and cost reduction.

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Vendor Challenges

• Marketing and business development: Numetrix has built its technological leadership largely at the expense of its ability to develop new business. Although J. D. Edwards inherits one of the most advanced, feature-rich supply chain products, they will need to move quickly to develop a matching sales and marketing strategy.

• Strategic alliances and integration: Numetrix maintained few partnerships with complementary software providers that would have increased product value for customers. Robust interfaces to legacy systems are also lacking.

• Product integration: J. D. Edwards must decide how best to distribute its spending in R&D and marketing to avoid starving one or more components of its newly extended supply chain offering. SCOREx, though not targeted for the same niche as Numetrix, still has some potential for overlap.

Fig. 3

Vendor Predictions

• Significant revenue growth will be difficult for J. D. Edwards during the rest of calendar year 1999, as it works to integrate sales organizations of Numetrix and sales automation software provider, Premisys (65% probability).

• For the next 12-18 months, the Numetrix suite will continue to be sold as a standalone SCM solution. True functional and architectural integration between Numetrix and parts of the OneWorld suite will not begin to appear until 2001 (70% probability).

• J. D. Edwards should begin to see clear revenue growth from Numetrix licenses (> 5%) as early as next year. While competition from other SCM offerings will be strong, J. D. Edwards should begin to penetrate the SCM market by selling to their substantial customer base (5,000 corporate licenses) (60% probability).

Vendor Recommendations

• Integrate Numetrix/3 suite into its OneWorld software at multiple levels:

• Functional: Work top-down to develop integration strategies that incorporate the best parts of the existing ERP suite and new supply chain optimization components.

• Technical: Concentrate first on putting together a set of applications that operate cohesively on UNIX, a platform native to Numetrix, before replicating full integration on NT.

• Sales and Marketing: Embark on an aggressive program of cross-training to retain expertise in the form of acquired sales personnel a dwindling commodity (~15% of total employees), because the 1997 restructuring primarily eliminated sales jobs.

• Resist the temptation to embed the Numetrix product deeply within the "marketecture" of OneWorld to the extent that it ceases to be visible. Early indications from J. D. Edwards suggest that it has learned a lesson from PeopleSoft in this regard.

• Capitalize on Numetrix's considerable advances in web-enabled collaborative planning to jump-start extensions to their product suite and industry coverage, as well as to enhance existing initiatives in CRM, Business Intelligence and E-Commerce (see TEC's note, "J.D. Edwards Creating OneWorld of Mid-sized ERP Users").

User Recommendations

Numetrix has always built their business around the technology and were committed to satisfying customer requirements. Unfortunately, pursuit of technological excellence to the exclusion of adequate concentration on sales and marketing is never good in the long term not for the company or its clients. In general, users should look favorably on the recent acquisition by J. D. Edwards, as it has given Numetrix another chance to establish itself in the marketplace.

Some points to consider:

• Numetrix was a very customer-driven software company. It remains to be seen how much of that aspect survives the acquisition. Current Numetrix users should seek some assurance that qualified maintenance personnel will continue to be available for consultation.

• Companies who were sold on Numetrix as a stand-alone SCM product should not necessarily rethink their decision to buy, but they may want to use the transition period to revisit other options.

• J. D. Edwards' users who want a solid supply chain product and can handle a bumpy ride may elect to adopt the Numetrix solution right away. However, other solutions with a longer history of integration (such as i2, Manugistics, SynQuest) may be less painful.