Made2Manage Systems 'One Year After': Reenergized and Growing Part One: Event Summary

Event Summary

Over the past year or so, we have had a fair share of mixed feelings about the change of ownership at Made2Manage Systems Inc., a former public provider of broad enterprise business systems for small and mid-size discrete manufacturers. Namely, going private originally seemed as a promising move for the small innovative but hardly known globally enterprise software provider in its bid for securing the future amid still ongoing takeover and makeover feats in the market. To refresh our memory, what looked like an honorable exit strategy from the public eye happened in early June 2003, when Made2Manage announced it would be acquired by Battery Ventures, one of the leading venture capital firms focused on technology investments, which manages nearly $2 billion (USD) in committed capital and has a twenty-year history in successfully making investments in software companies (see Examples Of How Some Mid-Market Vendors Might Remain Within The Future Three (Dozen)?).

Yet, soon after the transaction closing, although layoffs and headcount cuts are nothing new and uncommon in the software market, particularly after an acquisition and at the general and administrative (G&A) staff level, the extent of the former Made2Manage top management and some sales, marketing, and product development staffers' exodus in August 2003 seemed quite severe, given the vendor had not been a real money-burning machine prior to the acquisition (see Battery Power Shakes Up Made2Manage).

At that time, the company's officials confirmed to a doubtful and consternated user and analyst community that a restructuring of the company had been made with three objectives in mind:

1. to align the organizational structure with current characteristics of the market (i.e., to produce a more tightly focused target market and results-based new system sales and marketing operations; and to maintain emphasis solely in practical product and services development while protecting technology investment);
   
   
2. to improve stability of operations and the staying power of company (i.e., to achieve profitable growth, financial strength, access to capital, and operational excellence; and to maintain consistent profitability and positive cash flow—a feat which the public independent company had not accomplished since 1998); and
   
   
3. to increase the focus on adding value primarily to existing customers (i.e., to institute redefined product management and development priorities; to focus on enriching a software ownership experience rather than a software buying experience; and to continue with vertical and niche product enhancements, albeit with focus on quality rather than speed, product performance and stability, depth of functionality, and customer needs).

To that end, the company's customer support hotline and other customer service functions were not really affected, nor were the development and maintenance of its current product line. The cuts were reportedly spurred by the new management's above review of the company's operations, not by any specific events in the software market.

Now, a year after the analyst tour and our meeting with new executives in the fall of 2003, the time has come for them to prove their strategy right in terms of improved customer satisfaction levels, financial results, and operational performance since being acquired and taken private. To that end, in the fall of 2004, Made2Manage Systems announced five consecutive quarters of enviable profitability, cash flow, and operating results as of the third quarter, ended September 30, 2004. Fiscal year to date, Made2Manage Systems has also executed two acquisitions (to be detailed later on) and continues to lead the industry with strong operating results.

The management believes the improved performance reaffirms the vendor's strategy to deliver increased value to its more than 1,700 customers (excluding new acquisitions). The vendor believes enterprise software is now a mature market where the grow-at-all-costs strategies of the ebullient 1990s simply do not work any longer, and yet, most of its competitors are still focused and spending most of their resources on acquiring new customers instead of delivering real value to the customers they already have. As a result, the overall software industry has very low levels of customer satisfaction and financial performance. Conversely, possibly unique to enterprise resource planning (ERP) solution providers within the small and mid-size enterprise (SME) market, Made2Manage Systems' strategic goal remains focusing more resources on servicing existing customers than on attracting new ones. Its balanced approach to success is supported by several key initiatives across the business, which are driven by actual customer needs versus vendors' needs imposed upon customers.

This is Part One of a five-part note.

Part Two will present future direction.

Part Three will discuss the market impact.

Part Four will present quality management processes.

Part Five will detail challenges and make user recommendations.

Accomplishments

Made2Manage Systems has become focused on enriching the software ownership experience for its customers—to the point where they even volunteer to influence prospective buyers. Small and mid-size manufacturing companies across the US and Canada reportedly continue to join the Made2Manage Systems family of customers based on the vendor's ability to better cater to the specific needs of manufacturing operations within specific vertical industries and deliver sound professional services. As a result of setting this strategy in motion, Made2Manage Systems has since seen virtually unprecedented performance. Namely, through various customer-centric initiatives, Made2Manage Systems has reportedly achieved the highest net income levels in the company's nineteen-year history. On January 26, the company announced it has also achieved its sixth consecutive quarter of profitability, with a 34 percent increase in revenue over the fourth quarter of 2003. For the year, operating income increased by $4.0 million (USD) over 2003 and generated $8.7 million in positive cash flow from operations. Other significant operating metrics for both the year and Q4 2004 would include

• 24 percent increase in purchases of software by existing Made2Manage customers over 2003 results.
  
  
• 32 percent increase in purchases of professional services by existing Made2Manage customers over 2003 results.
  
  
• 46 customer win-backs (or customers that have chosen to reinstate their annual maintenance contracts) in 2004.
  
  
• 84 new system implementations and a 94 percent "very good" to "excellent" consulting service satisfaction rating by Made2Manage customers in 2004.
  
  
• 11 percent staffing increase within service, support, and research and development (R&D) departments in 2004.
  
  
• Significantly improved customer satisfaction and loyalty metrics over 2003 results, such as a 10 percent improvement (Q304 over Q303) in a number of support queries (via phone and web) resolved on first contact with customer.
  
  
• More than 50 manufacturers added to a 2,000-strong customer base in 2004 across a variety of vertical manufacturing industries, including industrial and commercial machinery, electronics, and fabricated metals.
  
  
• Won 50 percent of all purchase decisions entered into in the fourth quarter of 2004.

The above feats have not come at the expense of product development, given the end of 2003 delivery of reportedly the highest-quality release of Made2Manage software to date, Version 5.5 of the Made2Manage Enterprise Business System, which included more than 200 customer-driven enhancements built directly into the core product to improve production, financial, and supply chain management (SCM) functionality. In addition, several new standalone and vertical industry-specific features have been added to help small manufacturing organizations streamline operations and optimize their existing enterprise software investment.

Accordingly, key enhancements found in version 5.5 support the improved system management of shop floor resources, inter-facility materials, inventory, job orders, bills of material (BOM), sales commissions, and shipments. New features and functionality (some of which may seem insignificant to be analyzed in a research article, but that have proven to be meaningful to existing customers) include, but are not limited to

• Form editing and customization tools, which is the M2M FastForms product
  
  
• Automated shipment of high-quantity orders (multiple shipment queue)
  
  
• BOM reference designators
  
  
• Extended split commission options
  
  
• Yield management by operation
  
  
• Alternate resource and work center allocation
  
  
• Add-and-carry shippers and receivers
  
  
• Enhanced multi-facility capabilities

Also found in version 5.5 is M2M FastForms, a fully integrated editing tool that allows users to personalize and tailor the enterprise system to meet the distinctive needs of their manufacturing organization. It allows manufacturers to reasonably quickly and easily edit, create, and modify standard forms and fields found in the system without disrupting system availability, contacting Made2Manage for assistance, or paying for pricey technical resources.

Addressing Vertical Markets

New Made2Manage leadership has plans to further develop its solutions to cater to specific vertical markets, as the future direction for Made2Manage remains the spotlight on required functionality, with the product quality in the background. While the Microsoft .NET technology adoption initiative is still judiciously underway, the vendor has become aware that the customers in its market are not necessarily asking for it in the near term. Therefore, the vendor will not build technology just for the sake of technology, but it rather plans to center on the true needs of its customers and those of the prospective buyers in the target market, while only sensibly applying technology enhancements that protect its customers' investment in business solutions.

Therefore, Made2Manage Systems' going-forward technology strategy will center on a phased implementation of a service oriented architecture (SOA), which should enable improved application-to-application (A2A) and business-to-business (B2B) relationships via a systems environment that is specifically architected to leverage freestanding, self-describing units of functional code (or web services), each possessing a published interface that 1) does not require knowledge of the programming language used to create and deploy it, and 2) is able to communicate with other services about specific activities within an information technology (IT) landscape or business process (for more information, see Understanding SOA, Web Services, BPM, BPEL, and More). A phased approach to implementing an SOA should allow Made2Manage Systems to take advantage of infrastructure changes as they are applied, rather than having to wait until the entire product is SOA-enabled.

Although it will be invisible to the customers, the vendor believes that the implementation of an SOA will offer them a number of tangible benefits including

• Improved product quality and reduced number of change requests
  
  
• 40 percent reduction in release delivery timeframe, reductions in time needed for quality assurance (QA)
  
  
• True application programming interfaces (API), whereby the open architecture facilitates improved integration with the software of Made2Manage Systems' third-party business partners.

Another important benefit of an SOA might be the vendor's ability to manage, maintain, and enhance multiple product offerings on disparate platforms. As Made2Manage Systems plans to continue to grow through acquisitions and new system sales, an SOA should help it streamline development processes and create synergies among products.

As for examples in terms of product functionality, version 5.5's new reference designator feature could confirm Made2Manage Systems' continued focus on meeting the vertical market specifications of its customer base. The reference designator tool, which allows manufacturers to assign specific components to their geographical locations on a circuit board (sometimes referred to as "bubble numbers" on drawings), is fully integrated with the system's BOM functionality and should appeal to the company's strong electronics manufacturing customer base.

M2M Sales Center

Further, M2M Sales Center, a new browser-based, manufacturing-specific customer relationship management (CRM) solution, has accompanied the release of Made2Manage Version 5.5 and thus provided enhanced account, contact, and opportunity management functionality within the standard Made2Manage Enterprise Business System offering at no additional cost. M2M Sales Center uses a secure web interface to give remote sales management and sales support personnel crucial CRM functionality and near real-time access to the customer data contained within the Made2Manage Enterprise Resource Planning (M2M ERP) back-office system.

Using a connected client via Made2Manage Systems' technology infrastructure, M2M Gateway, manufacturers should now be able to access M2M Sales Center from basically any location at any time to retrieve critical CRM data, including account status, field service information, shipment times, product pricing, and product catalogs. With this product, sales personnel should thereafter also be able to store and retrieve opportunity information, such as stage, potential, probability of close, products, activities, and contacts. In addition, M2M Sales Center provides remote employees with complete quote and sales order functionality, including a built-in product configurator that helps manufacturers perform detailed, complex quoting. Users should also benefit from the solution's integration with Microsoft Outlook, which enhances the management of contacts and activities.

The release of M2M Sales Center in October 2003 may show Made2Manage Systems' ongoing strategy to sensibly leverage technology as to meet the differing CRM needs of both small and mid-size manufacturers across varying customer sizes. Namely, M2M Sales Center is designed specifically to meet the requirements of small and mid-size manufacturers with limited IT resources and little tolerance for operational disruption. Because it is built on the same data platform as the existing Made2Manage application, there are no data integrations to manage and little to no setup, training, or administration required. On the other hand, M2M Sales Center does not replace the company's original equipment manufacturer (OEM)-like integrated Best Software's SalesLogix solution through CRM Connect, which appeals to larger manufacturers that need forecasting, unfettered access, automated work flow management, and other advanced features. Instead, M2M Sales Center is designed to serve smaller manufacturers that require less complex CRM functionality but increased visibility into their enterprise-wide customer data.

M2M Shop Floor Data Collection

Along similar lines, Made2Manage Systems announced in October, 2003, the availability of M2M Shop Floor Data Collection (SFDC). Also incorporated into version 5.5 of the Made2Manage Enterprise Business System, M2M SFDC uses leading wireless transmission methods, including bar code, radio frequency (RF), and local area network (LAN)/wide area network (WAN), to collect real-time data from the shop floor and integrate it into the enterprise system for improved operational efficiency and a more efficient manufacturing environment by replacing paper-based reporting and manual data entry with wireless technology capabilities.

The solution enables the retrieval of receiving, inventory, shipping, and labor functions at the source, as well as automated synchronization of this mission-critical data with the Made2Manage Enterprise Business System. As a result, M2M SFDC should provide greater visibility into the enterprise, enhanced communication with suppliers and business partners, and overall process improvement that typically translate to cost savings. Hardware independent, M2M SFDC supports input terminal devices from Symbol, Intermec, and Zebra that utilize a thin-client architecture to collect and transmit data. In addition, the M2M SFDC intelligent login module initiates a user's menu either in English or Spanish, based on assigned access rights.

This concludes Part One of a five-part note.

Part Two will present future direction.

Part Three will discuss the market impact.

Part Four will present quality management processes.

Part Five will detail Challenges and make user recommendations.