MAPICS, Frontstep History
On
November 25, MAPICS, Inc. (NASDAQ: MAPX) and Frontstep,
Inc. (NASDAQ: FSTP), renowned global providers of extended enterprise
solutions for world-class manufacturers, announced the signing of a definitive
agreement whereby MAPICS will acquire Frontstep, formerly known as Symix
Systems and headquartered in Columbus, OH. This transaction should
create one of the largest providers of extended ERP, CRM and SCM applications
that are focused exclusively to solving the challenges of discrete and batch
process manufacturers. The combined company will have solutions that have been
implemented in more than 10,000 customer sites worldwide in only a handful of
industries of focus. Both MAPICS and Frontstep customers should now be served
by a much larger, global company with a heritage of continual delivery of practical
business solutions, and excellent service and support.
Nevertheless,
there will ultimately be inevitable rationalization within the maze of likely
redundant product sets detailed in Part Two. The companies do even have a short
partnering stint in the past. Former Symix was even regarded by some as the
originator of the extended ERP concept (i.e., with its erstwhile CSRP (Customer
Synchronized Resource Planning) concept), which had once proven to be so attractive
to mid-market enterprises that two other leading mid-market vendors (i.e., MAPICS
and former JBA International, now part of Geac)
had entered into specific R&D and licensing agreements with Symix to gain access
to its former SyteAPS product.
One
should therefore note the irony that MAPICS, which had been a Pritsker
APS system user until its acquisition by Symix at the time, and then itself
bought Pivotpoint with its ThruPut APS product, now also owns
the Pritsker technology too. While it might be contested that different approaches
to APS technology (i.e., different APS algorithms) are applicable in different
environments and industries, it is highly unlikely both will benefit from MAPICS'
finite R&D pool. One could imagine a number of other similar conundrums analogical
to a coach that has an extremely crowded reserve bench and has to let many good
players go. It would be fair to say that there is considerable overlap, both
in terms of functional offerings and geographies, which are bound to lead to
staff and/or product roster reductions as MAPICS will inevitably look for economies
of scale.
Despite the similar value proposition structure of the two entities, it should still take a serious pondering to figure out how to fully integrate organizational structure where employees are best integrated, service offerings best coordinated and cross-selling opportunities best tracked and pursued in real life. As a result, the deal might not add a number of new sales people hitting the street every day and additional visibility to MAPICS, as it would be in the case of simple algebraic addition calculus. Furthermore, MAPICS will now have a massive scope of functionality to cover through external partnerships, which gets increasingly complicated to track for many products and their multiple releases, inadvertently leading to additional integration costs and complicating service & support arrangements.
While the benefit of obtaining .NET-based product is evident, the downside is also that due to the companies' dissimilar technologies in the past, MAPICS will now be burdened to look after both its AS/400 and Frontstep's Progress based customers, whose the only common trait at this stage might be anxiety. Some of existing SyteLine customers' exodus should also be reckoned with (for, e.g., Progress loyalty or simply for reluctance to change), although Frontstep has taken many steps to protect their current technology investment.
Existing customers will be given several years (during which, they will be supported as usual) to make a decision to migrate to the new SyteLine 7 environment, which means a departure from Unix OS.
It will be a maintenance upgrade rather than a new system implementation, which should supposedly be much less steep and expensive. Although the pledge has been reiterated by MAPICS' CEO as well to support the commitment after the merger, time will only tell whether this approach will prove to be the right one.
This
is Part Three of a three-part note.
Part
One detailed the acquisition of Frontstep by MAPICS and began an analysis of
the Market Impact.
Part
Two continued the Market Impact.
Challenges
Despite notable functional and technological initiatives, the biggest challenge for MAPICS and its affiliate channel remains the management of treble flagship ERP product lines. Also, while the products may have their separate niches, they will in many more instances be similar enough to confuse former separate Frontstep, MAPICS and Pivotpoint direct sales reps and value-added resellers (VARs) in selling the combined portfolio.
The management team will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. It will also have to vigorously deliver an assuring message to the current customers about the support, enhancement, and migration plans for their respective products. It is still likely that the sales channel will face some conflict in terms of market overlaps, as well as traditional association with a certain product line regardless whether it is the best fit for a certain opportunity. Not to mention the effort of cross-training in case of direct sales/VARs willing to forsake their attachments to certain product lines. The company will have to further fine-tune its sales strategy of how to optimize the sales of three product lines with somewhat overlapping functionality and avoid a likely internal competition, while resolving the need of showing 'one face' to customers.
A
mitigating factor could be that Frontstep may solve ERP for Extended Systems'
shortcomings in terms of limited multi-national features that it could only
run on Oracle database. Not providing support for Microsoft SQL Server
has resulted in a number of missed opportunities especially with the MAPICS'
focus on the cost conscious mid-market segment.
The positive news is also that using the applications such as portals, PLM, or EAM (and supplier relationship management (SRM) in the future) as coarse grained Web Services (e.g., the pricing, inventory, supplier performance, order management, and catalog components within SRM) on top of both .NET- and J2EE-based ERP products' foundations via a Web Services interface layer should result in synergies, despite the downside that it cannot be done within the core ERP products owing to a huge gap between the products' technologies and functional capabilities.
While
the idea to enable the R&D team to gain economies of scale by building common
application components as commodities that can be deployed within the entire
product portfolio is tempting and promising in a very long run, the flagship
back-office product lines will likely remain on separate tracks for quite some
time to come, owing to their disparate proprietary technologies and respective
user bases that are still using these. If Microsoft Business Solutions (MBS),
with its huge resources and a single .NET and SQL Server platform foundation
delivered in-house does not foresee delivering a unified ERP foundation for
at least next three years (see Microsoft
Lays Enforced-Concrete Foundation For Its Business Solutions Part 3: Challenges),
one can only assume that it would take MAPICS significantly longer, given its
much more modest resources and a task of deploying onto multiple platforms.
The technological foundation disparity of the products will likely take its
toll by multiplying the development expenses and in delivering products integration.
This also complicates the tracking of third-party partnerships to compensate
the products' different weak areas.
As a summary, the merger looks initially like a positive move for both companies and their customers, since MAPICS needed a .NET alternative, Frontstep needed a savior, and both companies needed increased visibility and clout. Nevertheless, the job of gaining traction will by no means be easy for the merged companies, both being long in a conundrum of declining or flat revenues, while the competition will not ease any time soon. MAPICS may have done the acquisition in time, as to be ready with a compelling product portfolio when the market eventually recovers. Meanwhile, however, MAPICS will either have to produce significantly higher revenues or it will have to protract its products delivery milestones, given its dedication on preserving profitable bottom line at the same time.
User Recommendations
Combined
respective MAPICS and Frontstep customers and partners should consider this
event as a move toward a more viable position for their IT investment, and treat
it in a business as usual manner' but with open eyes. Users will benefit from
approaching MAPICS and informing themselves about what the company plans for
future service & support (or discontinuation and/or product stabilization?)
of its individual products are, and what would the ramifications of migrating
(or not) to its new product offering be. Existing users of AS/400 and Progress
based products as well as of Frontstep's non-mainstream products (SyteCentre
and SyteDistribution) would benefit the most from doing so.
Small and medium size enterprises using MAPICS' and/or Frontstep's back office applications that have solid SCM, CRM, EAM, PLM and collaboration functional needs should react positively to this news. They should evaluate the recent functional enhancements as a way to add value to their existing applications, although a thorough exercise should be conducted to determine whether their business strategy will be supported by new functional and technology features so much that it would outweigh the pain associated with the OS and DB platform conversion, learning curve for new technologies for both users and administrators, and a need to move current system modifications to new platform and development environment. If you are a more complex enterprise, with multiple-platform and strong scalability requirements, ask MAPICS to clarify the integration or significant application customization implications, and its current ability in that regard.
Frontstep's target market, mid-size discrete to-order' manufacturers or divisions of Fortune 500 companies, as well as multi-site and multi-national enterprises with up to $1 billion in revenues, should consider the company's value proposition while being informed about other competitive offerings. Frontstep focuses on discrete make-to-order (MTO), configure-to-order (CTO), and assemble-to-order (ATO) and hybrid manufacturing environments rather than on pure make-to-stock (MTS) or highly engineered (design-driven) environments. Frontstep's strongest vertical sectors are aerospace, industrial equipment and specialty vehicles & automotive, but the vendor also competes in furniture & fixtures, electronic equipment, semiconductors, high-tech, and transportation equipment industries.
Frontstep customers with complex products and complex sales processes looking for collaborative commerce solutions with CRM, and supply chain functionality should put Frontstep solutions on the short list. The company is usually a good fit with companies that are very demand pull-driven and need to respond fast and often proactively across their supply chains in a complex MTO environment to compress lead times.
Repetitive and process manufacturers and large global corporations with a centralized management philosophy looking for strong global corporate financial and HR modules, for a highly scalable cross-platforms solution, and for much broader functionality beyond traditional ERP boundaries (e.g., more intricate CRM, e-procurement, and PLM) from a single vendor may benefit from evaluating other products, including MAPICS' at this stage. Prospective customers in the above-cited industries of focus should consider evaluating MAPICS, given its understanding of manufacturer's business problems, its excellent track record of customer service and its set of solutions for discrete manufacturing companies with revenues in the range $20 to over $1 billion.
The
MAPICS ERP for iSeries product focuses on complex discrete,
MTO and ETO and project-based manufacturing involving deep bills of materials
(BOMs), targeting particularly automotive parts suppliers, electronic and electrical
suppliers, industrial equipment, fabricated metals, heavy duty transport suppliers
and measurement and control device manufacturers. MAPICS ERP for Extended
Systems, on the other hand, has recently moved beyond its semiconductor
industry roots to include the high-tech and discrete manufacturing and the medical
instrumentation markets.
Mid-market manufacturers in high-technology industries considering ERP for Extended Systems should first seek reference sites and determine the experience level and dedication to the product of the local MAPICS' affiliate. Although MAPICS might be successful in up-selling newly introduced add-on functionality to the iSeries base and is determined in expanding its platform support via J2EE- and WebSphere-based enhancements, still, for the time being, only those complex discrete manufacturers viewing iSeries as a strategic platform may benefit from considering the ERP for iSeries solution, given likely product immaturity on new platforms.
Existing MAPICS core ERP customers should review the above-mentioned enhancements (both developed by MAPICS and through alliances) with their local affiliate, while new customers evaluating MAPICS should consider the necessary enhancement modules as an essential part of MAPICS product and insist on reviewing them as part of their evaluation. MAPICS, for its part, should educate its existing user base in the value of PLM, EAM, CRM and BI and push to make the entire offering available as quickly as possible.
Very
detailed information about MAPICS ERP for iSeries and SyteLine
7 is contained in the ERP
Evaluation Center at http://www.erpevaluation.com.