Jakovljevic - May 11, 2000
Navision Software is an international provider of financial and business
management software solutions for the small-to-medium enterprises (SME)
market. Founded in 1984, with headquarters in Vedbaek, Denmark, the Company
is currently one of the fastest-growing enterprise applications vendors,
with approximately $92 million in revenue in fiscal 1999 (136% revenue
growth compared to 1998). Navision Software went public in 1999 and currently
trades on the Copenhagen Stock Exchange.
Navision Software (originally Personal Computing & Consulting ApS) initially
focused on leveraging the PC technology as a platform for financial and
business management software solutions for small business. In 1985, it
released its first product, a single user accounting system named PCPLUS,
that it marketed through a network of dealers in Denmark and Norway.
In 1987, Navision released a new PC based multi-user application suite
with financial management capabilities called NAVISION (originally called
NAVIGATOR). That product exhibited a number of then new, innovative software
technologies for the PC platform. Concepts like client/server, relational
database, transaction management, version management, screen designer,
and report writer were introduced with its proprietary technology called
Sum Indexed Flow Technology (SIFT). This proprietary database technology
provides the user with rapid online information in online analytical processing
(OLAP) and remains one of Navision Software's key technology components.
In 1990, Navision's new product generation showed an open, object-oriented
architecture along with integrated 4GL development tools that allowed
customers and dealers to modify the functionality of the product. Furthermore,
the object-oriented architecture of the product made it feasible to develop
international country- and language-specific versions of the product with
different local regulatory functionality for different geographical markets.
1993, Navision initiated a major development effort with the purpose of
creating a new generation of its products with a highly customizable graphical
user interface (GUI). In 1995, it released the first release of the latest
generation of products developed specifically for Microsoft Windows 95
and NT called Navision Financials. The next version, Navision Financials
2.60, which was released on March 31, has received the Microsoft Windows
2000 Professional logo.
Trajectory and Strategy
Navision has been an important contender in the SME ERP market over recent
years. Its modern solutions, competitive pricing, and simple no-fuss delivery
model has allowed it to fend off competition from big vendors like J.D.
Edwards, Oracle, and SAP better than most other mid-market vendors. Soon
after its inception and success in the Danish market, Navision branched
out into Western Europe in the early 1990s, and began selling in the U.S.
and U.K. in 1994.
Software's solutions today are sold exclusively through a worldwide network
of over 900 partners called Navision Solution Centers (NSCs) and staffed
with certified professionals dedicated to providing customized solutions,
training, support and service. The company currently has local representation
in 23 countries as well as more than 39,000 installations in 89 countries
and derives 20% of its revenue from the international market outside of
At present, Navision looks set to continue its march into the ERP mid-market
(companies with $5 million - $250 million in revenues), focusing on maintaining
and enhancing existing functionality of its Navision Financials solution.
Over the last two years, Navision has delivered a slew of new functionality
so that its solution currently includes all of the normal ERP functions
- Financials, Manufacturing, Distribution and so on - and is e-commerce
enabled. We expect the company to continue expanding Internet deployment
and CRM capabilities. It is very likely that Navision will start pursuing
alliances with ASPs to further its penetration into this increasingly
Navision is committed to the Microsoft platform and has recently collected
all of the new badges associated with W2K, such as "Certified for Windows
2000 Server" and "Certified for Windows 2000 Professional". It has recently
taken its relationship with Microsoft one step further by signing a global
sales and distribution agreement allowing its Solution Centres to sell
BackOffice products with Navision systems. This will enable the delivery
of complete single source solutions to smaller companies.
expect Navision to continue providing breadth of horizontal functionality
in a price competitive integrated business application delivered through
a strong indirect channel. We also expect the number of NSCs to grow worldwide.
These centers will add additional value by developing geographical and
vertical product extensions, allowing Navision to focus on core product
Navision Software has established strong branding and penetration within
the Small-to-Medium Enterprises (SME) segment of the European and recently
the U.S. ERP market, with a large customer base and a developed partner
channel within the industry.
with the componentization of its product suite, Navision has also developed
a tightly integrated broad functional solution that matches the SMEs'
needs. Navision Financials offers the Web Storefront, HR/Payroll, warehouse
management system (WMS), and innate OLAP and data warehouse (DW) functionality,
in addition to traditional ERP modules. Furthermore, the Company was one
of the first vendors to achieve Euro compliance and has also developed
23 localized, country-specific product versions.
is very competitive in speed of implementation, feasibility of customization,
total cost of ownership (TCO), and price/performance ratio. The product
architecture has been devised entirely from scratch in-house within the
Microsoft context, which provides for flexibility and ongoing agility.
End users of less complex smaller enterprises have been impressed with
its intuitive user interface, ease of system navigation, and its drag-and-drop
forms designer that allows less technically oriented users to perform
Navision has exhibited a very strong long-term track record. The Company
is currently one of the fastest-growing and most profitable ERP vendors:
its high market capitalization that is several times higher than its revenues,
guards the Company against an unwanted acquisition and provides much needed
capital for R&D and/or future acquisitions.
Navision currently does not offer the following functionality: business-to-business
(B2B) e-commerce, more comprehensive Customer Relationship Management
(CRM) suite, and solutions for service industries. Moreover, the distribution
and manufacturing modules are currently available only in 5 country-specific
versions. This may result in a number of lost opportunities in the future,
since certain customers prefer more complete solutions from a single vendor.
In addition to the above product functionality gap, Navision does not
exhibit much of a vertical focus. Its distributors (NSCs) offer vertical
solutions on an opportunity-by-opportunity basis only, which we believe
is insufficient to satisfy the stringent requirements of a highly competitive
company has low brand awareness and an undeveloped channel outside of
the European market, particularly in Latin America and the Pacific Rim,
which contribute only 2% of its revenues. While Navision has done a respectable
job of establishing its U.S. network, it has been facing a fierce challenge
from domestic competitors like Great Plains, Epicor Software, and Solomon
Software. Moreover, it is going to be challenged with combining its country-specific
variants of applications into a single-code, global product in order to
be selected as a global strategic partner of a centrally run global organization.
has long depended on its proprietary development (database and 4GL), which
was a drawback for the following reasons: 1) a need for a special skill
set (in spite of its user-friendliness) and 2) scalability and integration
difficulties for the higher end of the mid-market. While its recently
released MS SQL Server version of the product may mitigate the above concerns,
it is likely to exhibit problems related to its product immaturity. Furthermore,
Navision's two-pronged product database strategy, although creating more
options for a customer, inevitably creates some duplication of Navision's
R&D and Service & Support resources.
Navision will achieve over 50% annual growth rate during the next two
years (70% probability), based on the still largely untapped SME market
and on the potential of mining its large existing customer base. This
will enable the company to become one of the Top 3 vendors within the
global SME market within the next three years (60% probability).
believe that, within the next 12 months, the company will significantly
enhance, by using its own resources, its customer relationship management
(CRM), human resources, field service, B2B e-commerce, and supply chain
management capabilities (60% probability).
the next 4 years, more than 30% of Navision's revenues will come from
outside of the European market (60% probability), with the license revenue
contributing more than 60% of its total revenue within the same period
of time (70% probability). Within the same time span, more than 40% of
its customers will run on the MS SQL Server.
Navision should promptly resolve any outstanding product interconnectivity
issues with other vendors' products in order to attract the high end of
the SME market. It should also expedite the availability of the 'thin
client' product architecture and the uniform global availability of all
Navision should further fortify its strong position within the Small-to-Medium
Enterprises (SME) market segment in the following ways:
- Expand business in its existing customer base, by upgrading older
versions of software and by offering new extended ERP modules and enterprise
- Further expand its global presence, both by opening new offices and
developing new affiliate partnerships. Consider acquiring or partnering
with affiliates of faltering competitors, e.g., SSA, Epicor, and Baan.
- Deliver more focused and pre-configured vertical solutions and consider
offering application outsourcing.
must remain committed to new product features and expedite the introduction
of additional enhancements (see Vendor Challenges). We also encourage
the company to consider undertaking a more aggressive marketing campaign
concurrently with these developments, particularly in the markets outside
We generally recommend including Navision in a long list of an enterprise
application selection to lower-end of the mid-market companies (with $5M-$250M
in revenue) and divisions of larger enterprises, which have limited IT
budget and smaller community of users (less than 75), and have significant
financial accounting, distribution, and discrete manufacturing requirements,
while currently not needing complex CRM and B2B e-commerce functionality.
Global, centrally managed organizations that need a single-code product
for all their international business units, companies with more than 80
users, enterprises in service-related industries, and companies looking
for a broader functionality and a particular industry focus from a single
vendor may benefit from evaluating other products at this stage.
Current and future users interested in running on the MS SQL Server database
may want to inquire about Navision's strategy regarding the product's
business intelligence and data warehousing capabilities, bearing in mind
that those are innate within the proprietary Navision Server database.
organization evaluating Navision Software should consider existing functionality
only, and, in the case of final selection, should negotiate incorporation
of new applications components now at negotiated license fees, in expectation
of Navision's future product introductions. Potential clients should also
conduct a preliminary research on industry expertise and reference sites
of a regional Navision Solution Center (NSC), particularly outside Europe
and the United States.