Founded in 1981, Aspen has evolved over the years into a vendor of a broad
array of applications for supply chain management, process design and
control, and e-business. Aspen Technology takes its name from ASPEN (Advanced
System for Process Engineering), a synthetic fuels research project begun
by the Department of Energy in the mid 1970s. CEO Lawrence Evans, then
a chemical engineering professor at MIT, was made the principal investigator
for the project and later enlisted chemical engineers Joseph Boston and
Herbert Britt. In 1981, the trio formed Aspen Technology to develop and
market computer-aided chemical engineering software to process manufacturers.
first applications supported simulation and design for the process manufacturing
industry. In contrast to discrete manufacturing, process manufacturing
involves a combination of complex chemical reactions and material transport
operations that requires precisely designed production equipment.
company used proceeds from its IPO in 1994 to embark on a series of acquisitions
to expand its suite to cover other areas of process manufacturing. Acquisitions
of Industrial Systems (1995) and Setpoint (1996) extended Aspen's suite
with software for controlling and monitoring the daily operations of chemical
processing plants. In 1998, Aspen acquired Chesapeake Decision Sciences,
a maker of supply chain planning software and soon after reorganized its
product offerings around the fast-growing area of supply chain management
(SCM). In all, Aspen has made twenty material acquisitions of software
and integration firms during the last decade.
1999, with revenues suffering under a downturn in its target markets and
Y2K spending delays, Aspen implemented a restructuring program intended
to reduce its operating costs and improve productivity. In connection
with this restructuring, Aspen reduced its staff by approximately 200
employees, about 12 percent of the global workforce, closed offices, and
streamlined operations. Following a brief respite, the company launched
a focused hiring program to build staff in its supply chain management
product areas, indicating a new emphasis on supply chain and digital marketplace
breadth and diversity of its applications has given Aspen a dominant presence
in the chemical, petroleum and pharmaceutical industries with some penetration
into semiconductors. The company reported total revenues of $268.1 million
in fiscal 2000, compared with $226.5 million in the previous year. Revenue
mix of products and services was almost 50:50 for fiscal 2000, and represents
a shift toward licenses since last year (42:58) that indicates a revival
of new license growth. For the quarter ended September 30, 2000, software
license revenues were $32.6 million, while services revenues totaled $36.9
million. Net profit for the second fiscal quarter fell negative at $3.7
million compared with a net loss of $3.1 million for the same period in
Strategy and Trajectory
Demand for Aspen's SCM offerings has increased steadily since its acquisition
of Chesapeake Decision Sciences' MIMI product suite, although the company
continues to receive substantial revenues from sales of its process design
and control software. Aspen estimated that revenues from supply chain
applications made up 30% of total revenues for FY 2000 and projected the
percentage would increase in subsequent quarters.
long-term strategy is to continue integrating its higher-level supply
chain management and Internet collaboration solutions to lower-level process
plant control and operations monitoring applications. This commitment
to process control will strengthen its already firm hold on the process
industries (PI) but will make it difficult to extend its reach into other
industry verticals. Because of the generally lower penetration of SCM
technology into CPI, this strategy should represent no barrier to growth
over the next 3-5 years.
marketplaces are Aspen's latest product addition and the company is quickly
establishing itself as an enabler of web-based buying and selling in its
core process industry verticals. PetroVantage, a digital marketplace for
the petroleum industry formed with technology partner IBM, will enable
faster and more profitable trading and logistics decisions for crude oil
and refined products. e-Catalysts.com, an on-line, collaborative marketplace
for the $10 billion catalysts industry, will leverage Aspen's supply chain,
collaboration and netmarket solutions to help companies make faster, more
efficient decisions in the purchase and sale of catalysts and related
products and services. ChemCross, the largest Asian chemicals exchange
initiative, recently selected components of Aspen's Marketplace Solution.
While digital marketplace related offerings comprised just 5% of Aspen's
total revenues for FY 2000, the company expects this to double in FY 2001.
Aspen eSupply Chain Suite is highly flexible and can be tailored to
fulfill virtually any business requirement a process manufacturer may
have. eSupply Chain is based largely on Chesapeake's MIMI application
and its feature-rich modeling language that enables users to address
a large variety of industrial problems.
loyal customer base in the chemical process industries (CPI): Aspen's
customers include 46 of the 50 largest chemical companies, 23 of the
25 largest petroleum refiners, and 18 of the 20 largest pharmaceutical
companies. In fiscal 2000, 75% of its total revenues were derived from
existing customers indicating a high level of satisfaction with Aspen
products and support services.
implementation and customer support personnel: Chesapeake has received
high praise from consultants and clients for their staff of bright,
experienced process engineers and modelers.
up for late start in e-business: Aspen announced it would develop applications
for conducting business over the Internet in late 1999, placing it months
behind other enterprise application vendors like SAP, J.D. Edwards,
Manugistics, and i2. In recent months, the company has managed to take
initial positions in e-business with PetroVantage, e-Catalysts.com,
and the win at ChemCross. However, Aspen still needs to work hard to
convince customers that its late entry into the e-business arena does
not imply a lack of vision.
packaged functionality and flexibility: Prospective clients are lured
to Aspen by the flexibility of its solutions but often are disappointed
upon discovering the amount of work required to customize a viable solution
from the toolset. A shortage of experienced modelers adds to the concerns
of users who fear becoming embroiled in what is essentially a joint
development project. Although some templates and pre-configured modules
exist, Aspen eSupply Chain is largely a toolkit that requires extensive
training when experienced modelers cannot be found.
- A broad
footprint that invites competition on multiple fronts: The Plantelligence,
Engineering and eSupply Chain suites are almost ungainly in their variety
of applications. Judicious pruning of all but the most profitable applications
is needed to better focus corporate resources.
revenue growth (15-20% total revenue) during FY2001 fueled by market
acceptance of Aspen's new digital marketplace offering, Aspen Market
Solution, and its supply chain management applications. (70% probability)
will review potential partnerships with an application service provider
(ASP) to deploy its solutions via the web independently from its digital
marketplace initiatives. Given its near stranglehold on the process
industries and its conservative nature, the company will wait until
the middle of calendar 2001 before actively pursuing an ASP model. (60%
the information portal that marked Aspen's debut on the Internet, will
slowly evolve into a portal offering collaborative planning capabilities
and services for process industry participants in addition to news,
forums, and job search features. (70% probability)
focusing marketing and R&D efforts on integrating core supply chain
functionality to its digital marketplace solutions. Aspen should also
revise its template solutions for SCM such as Chesapeake's Semiconductor
Global Planner announced in June 1999 with recent implementation experience.
investment in sales and marketing to boost revenues and push its digital
marketplace offerings: Aspen's sales and marketing investment as a percentage
of total revenue fell 4% in fiscal 2000, in spite of plans to increase
its staff by 20% annually.
its position in the process industry to increase demand for Aspen Marketplace
Solution: Aspen needs to market its digital marketplace capabilities
to petroleum, chemical, and other process manufacturers who have purchased
its SCM modules.
its successful launch of PetroVantage, Aspen should consider partnering
with one of its larger chemicals clients, such as E. I. Dupont de Nemours
or Dow Chemical, and Extricity to build additional vertical Internet
marketplaces for the chemicals and pharmaceuticals industries.
Aspen Technology should occupy a prominent role in enterprise software
selections for process manufacturers, especially those who produce chemicals,
pharmaceuticals, and refined oil products.
supply chain management, Aspen is the only vendor that can offer deep
functionality for the process industries with the added capability to
deliver process simulation and control functionality and integrate them.
The main caveat is that most of Aspen's SCM applications are essentially
toolkits in which desired features can be developed, not packaged solutions
that can merely be configured. Exceptions are applications from Petrolsoft,
Broner, PIMS and Aspen's polymer supply chain suite, all of which are
the customization effort required for many of the applications, experienced
resources are a must for implementations. That being said, Aspen is attempting
to reformulate some of its more popular functionality as packaged modules
and templates to speed implementations. Users should also bear in mind
that Aspen's digital marketplaces, such as PetroVantage and e-Catalysts.com,
have strong potential but are largely experimental at this stage.
offers a unique value proposition for process manufacturers that have
already implemented SCADA (Supervisory Control And Data Acquisition) systems
or DCS (Distributed Control Systems). Unlike more generic enterprise application
providers like SAP, Oracle and others, Aspen focuses on integrating its
supply chain functionality to lower-level plant control and monitoring
systems like SCADA and DCS, rather than attempting to create a link to
higher level financial and accounting applications.
in complex manufacturing industries (high tech, automotive), or those
seeking a transportation planning solution, should pass over eSupply Chain
unless complex business processes require custom modeling.