Kewill And Microsoft Great Plains To Further Mutually Complement

Event Summary

On October 3, Kewill Systems Plc. (LSE: KWL), a UK-based provider of business applications for small-to-medium enterprises (SMEs) announced an extended partnership with Microsoft Great Plains Business Solutions, a business applications division of Microsoft Corporation (NASDAQ: MSFT). Under the new agreement, Microsoft Great Plains will begin distributing an integration module for Kewill's multi-carrier shipping systems that will be activated via the Kewill.Net business portal.

The companies maintain the integration module from Microsoft Great Plains will seamlessly connect Kewill.Ship, a multi-carrier shipping system, to Dynamics and the eEnterprise sales order processing module. Customers should therefore be able to automate transportation routing and cost calculations for parcel shipments, and create bar coded tracking labels and electronic manifests for multiple carriers.

Additionally, Kewill will integrate its JobBoss shop management application to Dynamics and eEnterprise business management solutions. This integration will provide customers with a seamless integration to ERP and shop management applications for specialty contract, make-to-order, discrete and mixed-mode manufacturing in the small and medium-size enterprise (SME) market.

Kewill.Ship will be deployed by utilizing Microsoft Great Plains' extensive reseller network of 2,200 channel partners. An estimated 40,000 customers will reportedly have the ability to automate more of their business processes, quickly and efficiently.

Market Impact

The partnership extension should be mutually beneficial, as the companies will extend their combined market reach while filling their respective product gaps and inferior areas. Microsoft Great Plains is the leading provider of enterprise applications to SMEs (Tier 2 and Tier 3 companies). Currently, it has one of the largest customer bases in the market segment, but primarily in North America. Also, to date, Great Plains has been successful at addressing the needs of Tier 2 and Tier 3 companies mainly in accounting and back-office functions.

Although, since the end of 2000 the company has focused on the discrete manufacturing sector, it has contracted less than a couple hundred customers in that area (for more information, see How Great Is Great Plains' Manufacturing Offering (Did Somebody Say Microsoft)?

In our opinion, the reasons for this meager penetration are twofold:

1. The product still features many functional holes that have long been offered as a matter of course by many incumbent Tier 2 and Tier 3 manufacturing ERP software providers (e.g., Syspro, Navision, Epicor, Pronto, Lilly, Scala, etc.).
   
   
2. Manufacturing enterprises do not typically feel comfortable buying their manufacturing software from a traditional accounting software provider, whose parent's name has also been associated with the desktop and office management applications.

Another Microsoft Great Plains' strategic focus remains global expansion, particularly in Europe and Asia/Pacific, where Kewill's presence should also help.

The alliance has a great meaning for less known Kewill too, which should gain access to Microsoft Great Plains' global network of over 2,200 channel partners. This should significantly boost Kewill's sales channel that has so far conducted a lot of business only over the phone and over the Internet. While Kewill Systems is well known for its e-commerce and shipping management solutions (with high-profile customers like Federal Express, Siemens, Marks and Spencer and Verizon), Kewill ERP, the company's division that offers ERP software packages, has its stronghold in the lower-end of Tier 3 and Tier 2 manufacturing markets.

The Minneapolis-based division has long offered two flagship ERP solutions aimed at SME manufacturers: MAX and JobBOSS. Additionally, Kewill recently bolstered its product portfolio with its recent acquisition of Alliance Manufacturing Software, a provider of ERP solutions to fledgling manufacturers with annual revenues of $1 million to $15 million.

Kewill's ERP products exhibit different strengths. While JobBOSS is a suite of shop management applications for job shops and make-to-order (MTO) manufacturers that place high priority on the ability to track actual cost and labor, MAX and Alliance/MFG are ERP product suites tailored for repetitive and mixed-mode manufacturers. MAX has a broader-based appeal, by offering integrated applications that include material requirements planning (MRP), advanced planning & scheduling (APS), product configuration, and customer relationship management (CRM).

From the above it should be obvious that JobBOSS has the least overlap with Microsoft Great Plains' products and it lends itself well for a partnership. The fact that the companies have long been partnering for a JobBOSS and Dynamics integrated offering should speak in that regard and should provide valuable experiences for impending integration with eEnterprise. Also, both companies' reliance on the Microsoft's technology, and Kewill's stability and profitability owing to a lean operating business model, must have also played the part in Microsoft Great Plains opting for this partnership. One should imagine many other competitors preferring to partner rather than to compete with Microsoft Great Plains, but the inevitable products overlap and competing channels were the likely impediment to any further alliance talks.

Integration Is Key

Nevertheless, the job of gaining traction outside of the current customer base will by no means be easy for the alliance, as the competition will be fierce, and will cite their single-product expertise within their large respective customer bases. Furthermore, Although Microsoft Great Plains has an impressive track record of integrating partners' products with its products, integrating Kewill.Ship and JobBOSS products to two major back office products, as well as to a broader set of trading services such as suppliers' integration, procurement cards, and payment settlement services, remains a major undertaking.

However, the company has been there many times, witness the challenge of training the affiliate channel in the new application for the Siebel and/or Logility modules. Microsoft Great Plains faces the challenge of offering too many third-party products though (J.D. Edwards' syndrome), which may not be the appropriate for its target market. Competitors like, e.g., Navision, Epicor, Syspro, or Made2Manage, will cite their products that cover many bases natively. Still, this might not be that grave, provided it is transparent to the customer. The main ingredients of the 'transparency magic formula' are the tight integration and a single point of contact, which again points to having an immaculate channel with expertise in both product lines.

User Recommendations

Organizations using Microsoft Great Plains and Kewill back office applications that have respective product needs should react positively to this news. Existing Microsoft Great Plains customers should evaluate the Kewill add-ons as a way to add value to their existing applications whether with an impending integration effort now or by waiting for the company to supply a generally available integrated solution. Therefore, approach the companies to obtain the firm delivery schedule of Kewill for the above Microsoft Great Plains flagship back-office applications.

Small to medium discrete manufacturing and/or distribution companies considering new enterprise solutions should place Microsoft Great Plains and Kewill on their list bearing in mind what the other competitors can offer, possibly within a single product. These companies should consider the added functionality from this alliance for an addition to their requirements list. Some companies might find this combination as one holding significant value in terms of both cost savings and increased efficiency notwithstanding.