MAPICS Moving On Pragmatically Part 2: Market Impact

Market Impact

For the last several months, MAPICS, Inc. (NASDAQ: MAPX), a global provider of extended ERP applications for world-class mid-sized manufacturers, has embarked on a painstaking process of producing a strategy going forward that would pragmatically blend the company's traditional values and success factors with new approaches to stay in tune with market trends.

According to the proverb that "an old ox makes a straight furrow", an ERP veteran, MAPICS, while not being a high-flyer lately in terms of growth, nor having excelled in communicating messages to the market until very lately, has rarely lacked in executing well financially (see Figures 1 & 2) and in its deep industrial expertise. Despite difficult times for everyone across the board, and with an additional burden of resolving some internal issues, MAPICS' impervious financial position coupled with its new tack on delivering value-based solutions to manufacturing customers, should position it to take advantage of the enterprise applications marketplace's eventual recovery.

Figure 1.

Figure 2.

* Primarily represents a goodwill write down of the PivotPoint acquisition

The company indeed belongs to a group of vendors recently benefiting from the market sobering up from its recent 1990s infatuation with cool' (and often unproven and immature) technologies at any cost and from its subsequent reversal to a back to basics' philosophy illustrated in a pragmatic home improvement' approach to utilize and/or rationalize already implemented software to excess ("shelfware") and to deploy new technology incrementally with a proven quick return on investment (ROI).

Having long believed in traditional values like partnership, expertise, customer satisfaction, and dependability, MAPICS has for last several years additionally pursued in-house development and additional partnering arrangements intended to help manufacturers move into a collaborative e-business realm prudently and less painfully. The company has lately focused on opening and extending its applications so that all customers' data and business processes remain in place as they embark onto e-business collaborative expansion of their back-office investments.

In fact, MAPICS had long developed a strong business model that, partly, the company could be depicted as a virtual software developer given that some functional add-on's, as well as almost the entire sales and professional services, have been executed by an extensive partners' network worldwide. This efficient model combined with the revenue generated from its over 3,000 service & maintenance paying customers have rendered the vendor a good cash producer and should position it well even throughout the 2000s.

This is Part Two of a four-part note on MAPICS.

Part One covered recent announcements.

Part Three will discuss Challenges.

Part Four will cover the Competition and make User Recommendations.

Challenges and Responses

Still, MAPICS' strong cash position and no debt, the size of its widespread customer base (3,000 in 70 countries) and proven business model, the breadth and functional astuteness of its product offerings (available in 19 languages), and depressed stock prices of most software vendors lately, plus the company's frequent repurchases of its own stock have been good defensive moves to preserve its decision making majority. This should put MAPICS in a position of strength to pursue its stated strategy of acquisition going forward.

Nevertheless, in the second half of the exuberant 1990s, MAPICS prolonged existence in the market, its former IBM AS/400 (now iSeries) platform confinement, and its inability then to rejuvenate its own mature product has given it a negative "old and uncool" perception. Although the company had long sought to embrace new technologies while at the same time providing a smooth migration path for existing customers, it had suffered then from continually being perceived as late to market with its new technology forays. Its protracted inability to deliver an all-the-rage Windows NT platform-based product made it struggle to sustain momentum in then booming mid-market increasingly intrigued with the low-cost and pervasive Microsoft technology. Although the company had for instance upgraded its erstwhile unconvincing "visual workplace" graphical user interface (GUI) to a more compelling Smalltalk-based metaphor, which included user-productivity enhancements such as drag-and-drop' features (long before their popularity nowadays), and although it had attempted the inclusion of object technology in its future-generation products, it still lacked a real quantum leap.

To that end, owing to the acquisition of former struggling competitor Pivotpoint (see How Has MAPICS Been Extending?), MAPICS had delivered over the last two years a plethora of new e-business modules and expanded its platform reach from its solely IBM iSeries and DB2 platforms to include Microsoft Windows NT, UNIX and Linux operation systems and Oracle database platforms. However, while expanding its offering and platform support bundled with a functionally strong Pivotpoint's Point.Man ERP product for high-tech industries (electronics and semiconductor) and suited to enterprises that wish to modify the software for a custom fit and still maintain eligibility for upgrades, the company has since been burdened with an immense task of blending different corporate cultures (i.e., less formal Pivotpoint's vs. more rigid MAPICS' one) and with inherited problems of Pivotpoint, which, at that time, had been undergoing a state of a flux, poor financial viability, channel erosion, employee exodus, and a poor service & support record.

Consequently, the fact that the license revenue in the 2000s were largely flat or less than those in 1999 and 1998 (see Figure 2), when MAPICS only had the single, outdated product, indicated the company's ensued difficulties, despite the fact that most of its peers have concurrently experienced sagging revenues as well.

The management of dual flagship product lines had initially and long after been awkward for MAPICS and its affiliate channel. While winning new accounts continued to be a tall order, the existing loyal client base had long been (and still remains) the company's greatest strength and asset, and the company had to figure out how to be more effective in selling new extended-ERP modules to it. Out of over 3,500 combined customers, the majority of these accounts may have only been on a service & maintenance basis, without any active programs directed to selling to the base, until recently. Therefore, the company had to figure out how to more efficiently mine its client base by doing a better job of selling the broadened offering, by getting its affiliate channel both excited about the product portfolio and by upgrading the channel's ability to sell. To that end, MAPICS has had to resolve the predicament of its association with the ancient looking green-screen, AS/400-based product.

Despite IBM's efforts to counter the AS/400 platform's image of being proprietary (even by renaming it into iSeries), the market had largely been slow in warming up to it for e-business implementations. Given the fact that the market opportunity for Point.Man had then appeared to be much larger than for MAPICS XA, due to Point.Man's strong personalization, interoperability and scalability capabilities, one should have envisioned Point.Man to tacitly become the main offering for MAPICS in the long run. Catch 22 however is the fact that MAPICS XA has been and is still functionally a stronger product than Point.Man across the range. Moreover, the product/platform cultures clash and the fear of Pivotpoint's brand being suffocated under MAPICS had, in fact, prompted additional exodus of remaining former Pivotpoint's executives and/or staff.

Innovative Damage Control

Nevertheless, MAPICS seems to have controlled the damage better than many other companies would have, as seen in its stable financial performance (i.e, with no debt and with many profitable quarters lately), and the ongoing delivery of enhanced functionality in its ever converging newest product releases. The former Point.Man product now for instance includes multi-currency functionality, and comes in several languages, which should make it more competitive.

Moreover, at the beginning of 2002, MAPICS became one of the first software companies to have an entire virtual division, although both former Pivotpoint and MAPICS had initially been utilizing a virtual development team approach to a degree. By using the best talent available, regardless of geography, the disperse teams had been able to put together some innovative enterprise software. Using tools like team-specific web sites, teleconferencing, collaboration portals, instant messaging (IM), and virtual private networks (VPNs), the teams had developed amity and a can-do attitude that many would desire. MAPICS then further expanded on the idea while it blended the two organizations after the merger, and in January, it announced that the entire division focused on the MAPICS ERP for Extended Enterprise (former Point.Man) product, was going virtual.

This bold innovative approach should allow MAPICS to draw on the best and most appropriate talent available, regardless of geographic considerations, and to also present to its customers a proof of concept for collaboration. It also allows the team to better balance work and family lives, an important consideration for people-oriented MAPICS, as shown in the recognition by the Atlanta Business Chronicle.

Looking at the company's ranking, with ~$128 million in revenues in 2002 and currently with over 450 employees, MAPICS still belongs within the Top 20 ERP vendors, although, with its sole mid-market discrete manufacturing focus, it could occupy higher positions, particularly in certain markets, like Europe, South America or the Asia-Pacific region. During last 12 months, the company has put additional considerable effort into restructuring and introducing direct sales for strategic customers while also re-qualifying some of its value added resellers (VARs) and further re-branding its applications offerings.

Technology Shift

IBM's recent bolstering of iSeries with J2EE and/or WebSphere platform compatibility, and MAPICS' latest initiatives to architecturally rejuvenate the product via enabling it for both J2EE and Microsoft .NET and BizTalk eXtensible Markup Language (XML)-based technologies and service-oriented architecture (i.e., that exposes discrete business functionality as callable units over the Internet), to thereby render it deployable to any client device (including mobile technologies too) in a secure manner, and by componentizing it based on core business processes, in the MAPICS ERP for iSeries (former MAPICS XA) product Release 7.0, may prove to be crucial in overcoming the above proverbial perception. The initiative promises to be the biggest technological shift in the product's long history, and should certainly breathe a fresh air into its life

Further, the product offering's acceptance should benefit from the recent functional enhancements too, and from the market's recent realization that product technology sooner or later will reach a commodity status (is there any vendor out there not announcing support for J2EE and/or .NET?), while the real differentiation remains in the vendor's ability to solve true business issues for the customer.

Consequently, MAPICS still basically has two key ERP offerings: MAPICS ERP for iSeries (the original venerable flagship MAPICS XA AS/400-based offering) and the elegantly named MAPICS ERP for Extended Systems (deriving from the acquired Point.Man), plus a plethora of ERP-adjacent products like MAPICS SCM (from former Thru-Put), an enterprise asset management (EAM) product called MAPICS Maintenance & Calibration (former Maincor EAM) products. Other recent solutions worth mentioning include a business intelligence (BI) product MAPICS Analytics, MAPICS Portal (formerly TeamWeRX, an enterprise portal that integrates business collaboration processes across the value chain, and MAPICS Commerce, an Internet-based, interactive buying & selling environment), and MAPICS PLM software, which utilizes Magik! product from a product partner vendor CEIMIS Enterprises, Inc.

MAPICS ERP Strengths

Since its inception in 1978, the MAPICS ERP for iSeries product has evolved to a broad range of functionality for discrete manufacturing enterprises. Its strength remains largely in the discrete manufacturing arena, and until not long ago, its sweet spot has been within single plant installations. With features such as rate-based planning, serial number traceability, and product data management (PDM), the product can handle make-to-stock (MTS), assemble-to-order (ATO) and less-intricate engineer-to-order (ETO) manufacturing environments. With the addition of its International Financial Management module a few product releases back, its corporate financial functionality had become even more competitive. Also, a payroll module has long been available, which always represents an attractive extra for its target market. MAPICS' focus has also long been on embedding workflow functionality designed to support business processes across many functional areas, having first delivered this capability for design and engineering functions, and having recently expanded workflow throughout the entire product.

On the other hand, MAPICS ERP for Extended Enterprise has stronger MTS and repetitive manufacturing capability, including "pay point" processing, with the ability to report material, labor and/or overhead costs from individual operations within the entire routing sequence. An important differentiator should be the product's ability to support virtual manufacturing enterprises that outsource manufacturing operations to third party subcontractors. An engineering change management (ECM) capability and actual costing have also been available. Contrary to its iSeries counterpart, the Extended Enterprise product (as the name suggests) has also long offered multi-site interdependent functions, centralized sales and purchase order management, but it has partnered with niche specialists to harness forecasting, quotation, payroll, tooling and preventive maintenance functionality. Its financial modules are capable of consolidation and drill-down functions across multiple entities, although they have been best used and proven in US-based enterprises.

Furthermore, MAPICS has used the last year to bring reality to its endeavor of delivering strategic extensions components that span the above two ERP systems and take them further out to include supply chain and PLM collaboration. The systems now both link to substantial suites of MAPICS CRM (customer relationship management), a MAPICS MES (manufacturing execution system spanning the schedule, make, pick, pack and ship phases), MAPICS PLM (including levels of PDM, multimedia data attachment, integrated workflow, enquiries, etc.), and financial reporting and business analytics. There is also a broad APS (advanced planning & scheduling) capability from former Thru-Put product, covering what-if scenarios and simultaneous fast scheduling of materials and resources, as well as above mentioned maintenance and calibration management software for automated EAM, and so called "collaboration process management" software via the MAPICS Portal, linking in customers, suppliers and partners via the web.

Although some of these come from strategic alliances (e.g., Cameleon Product Configurator, SalesLogix CRM, FRx Reporting, and Magik! PLM), MAPICS emphasizes that all of these are OEMed, with MAPICS owning product upgrades and support so that the origin is effectively transparent. MAPICS has indeed maintained an active focus on additional partnering arrangements intended to help manufacturers move into a collaborative e-business land in a more controlled manner. To that end, its multiple partnership initiatives, like those with Vanguard Solutions Group for BI add-on modules, Best Software for its SalesLogix sales force automaton (SFA) product, and Access Commerce, which also has a similar agreement with QAD for its attractive Cameleon product configurator (for more information, see MAPICS XA Expands BI Offering Through Partnership With Vanguard,MAPICS Unifies The Brand And Interacts For CRM Solutions and Access Commerce Spices Up North American CRM Fray) have been well thought-out.

If one is to look for differentiators, they would revolve around MAPICS' total focus on discrete mid-market manufacturers encompassing everything from flexible, phased implementation methodologies to appropriate broad and deep functionality, as well as the newer advanced modules to meet modern expectations of integrated ERP, SCM, CRM, PLM and EAM. As of lately, the company could also cite its increasingly open solutions for all major hardware platforms and its low total cost of ownership (TCO).

MAPICS has indeed consistently scored above average in following key industry customer-service & support surveyed benchmarks: reliability, quality of support, vendor stability, overall relationship, ease of doing business, affiliate product and industry knowledge. It has a proven affiliate network of nearly 100 VARs with over 950 affiliates' employees in total and several call-centers around the world, and now with the in-house professional services for those strategic multi-site, multi-national companies that need the coordinated, standardized, world-wide approach. For the future, MAPICS plans to further realign its organization, with possibly 30% of its implementation business being delivered internally within the next three years. The firm also expects to drive growth in additional vertical markets building incrementally on its strength in certain manufacturing industries and by expanding its affiliate network.

This concludes Part Two of a four-part article on MAPICS.

Part One covered recent events,

Part Three will discuss Challenges, and

Part Four will cover the Competition and make User Recommendations.