Software, a Dutch-based provider of integrated accounting, payroll,
customer relationship management (CRM), enterprise resource planning
(ERP), and business process management (BPM) software solutions, and
a division of Exact Holding N.V. (EURONEXT: EXACT) continues
to expand its products footprint and operations worldwide, lately with a particular
emphasis on the expansion in North America. Two thousand and three was indeed
a busy and transitional year for the vendor with the acquisitions of certain
resellers, the subsequent opening of new US offices, and a launch of new products
to the market.
after nearly two decades of prominence, mainly within the mid-market of financial
and accounting, HRM, project management, and logistics administration solutions
with its flagship Exact Globe 2000 back-office product, Exact
begun making big strides in the early 2000s to extend its reach into North America
and into the manufacturing segments. It turned into a full-fledged comprehensive
e-business software provider for small and medium size enterprises
(SME). The first major step in that direction was the 2001acquisition of former
Macola Technologies Inc., which almost instantly made Exact
a $200 million (USD) player in the mid-market enterprise applications segment.
While not really a household name in North America before the Macola acquisition,
Exact has always been a force to reckon with in the lower end of the ERP mid-market
in Europe, and occasionally, to a degree, elsewhere in the world.
Exact's experience with Macola so far has been a case of a successful merger
and assimilation effort. Despite the tough economic climate, the company has
since closed a number of deals, partly because it is a bigger organization with
broader geographic sales and support coverage. A weaker demand for enterprise
applications worldwide has also been compensated with an increase in add-on,
up- and cross-sales revenue from customers who have migrated to Exact Globe
2000 and Macola ES and by brand new users of e-Synergy. For
additional information on e-Synergy see Part One.
this brings us to the fact that Exact is not without hurdles. To begin with,
in addition to brutal competition coming from both above and underneath, the
vendor has a lower stature and brand recognition compared to its direct foes,
Microsoft, and Sage/Best Software. Exact also
has a far smaller channel by the mere number of resellers and with revenue of
well over $200 million (USD), it still derives less revenue from the enterprise
applications market than the other two. The size of any vendor in this market
segment certainly counts, as well as the consequent size of the research and
development budget. While Exact's solid cash position of over 80 million and
its cash flow operations are impressive, they are dwarfed by the above competitors'
respective resources. In fact, one can never discount the possibility of either
of these vendors simply acquiring their archrival if it is necessary to remove
a major recurring competitive hurdle.
value added resellers (VAR) channel strategy also seems to be unclear
at this stage. Namely, like its competitors, the former Macola had long made
a conscious decision to go for product distribution solely through partners
and VARs, which at one stage numbered over 400 and whose current numbers have
dwindled to 130. Leveraging VARs has often proven to be advantageous in keeping
costs down for vendors targeting SMEs and selling through partners requires
a higher quality of product support and accompanying documentation. However,
Exact has seemingly decided to weed out resellers that have not been fully committed
to or have been serious about selling its product portfolio. For example, the
imposition of a $12,500 (USD) annual fee for the Total Partner Support Plan,
which provides participating partners with complete product accreditation, support,
and access to corporate lead generation and marketing programs has caused some
shockwaves among the reseller base.
despite not being an uncommon practice by competitors, the recent acquisitions
of a few best performing VARs have caused speculations about whether Exact Software
is reverting to a direct model or if it is unable to attract new resellers.
Thus one has to see how these "mixed-signal moves" to nurture relationships,
morale, and make Exact's VARs more successful (profitable) will play against
MBS's and Best's enticing financing arrangements for their own respective VARs
and customers--particularly during these days of cash scarcity. Also, one should
not forget about the ongoing recruiting effort of SAP's channel
for its SAP Business One product, which, with its bag of tricks,
has been attracting many of competitors' disgruntled VARs.
situation becomes additionally blurred by Exact's differing divisional and product
lines' distribution models within North America. So far, only Progression,
Macola ES, and e-Synergy have been offered
through business partners and VARs (and of late, through regional sales offices).
Contrary to this, the Max, JobBOSS, and Alliance/MFG
products are still only offered through separate direct sales forces. They also
sell e-Synergy to their installed bases, while e-Synergy also has its separate
direct sales force to new expansion markets.
is Part Six of a six-part note.
One and Two detailed the event summary.
Three, Four, and Five discussed the market impact.
Defining the Market
based on the above product descriptions, it appears that the former Kewill
products have some material management and manufacturing functionality overlap
with Macola ES product. This, in addition to the always-inevitable effort to
integrate and migrate paths, cannot discount the pain of the appropriate positioning
of these products, despite the complementary nature and somewhat different target
markets of the product lines. It is always possible that the direct sales forces
or channel partners will face conflict in terms of market overlaps, as well
as traditional associations with a certain product lines regardless of whether
it is the best fit for a certain opportunity. The management team will have
to further 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 current customers about the support,
enhancement, and migration plans for their respective products, such as the
upgrade of Macola Progression Series to SQL Server transaction tables to be
also admits the challenge of properly positioning and marketing e-Synergy. At
a strategic level, the product has the features of a BPM solution for configuring
how its own modules will handle specific business processes. On the tactical
level, the system also offers built-in document management, collaboration, and
visualization of all the requests related to a particular business process.
Last but not least, the product offers modules for a plethora of diverse functional
areas with a scope so multifaceted that it is almost impossible to categorize
(It ranges from the elements of workflow and BPM via sales force automation
[SFA], call center and help desk, PSA, HRM, etc., to web publishing). However,
a product that is a mile wide in scope but an inch deep in individual functional
modules is 1) difficult to identify a likely buyer for, and 2) disadvantaged
when competing against best-of-breed packages within the aforementioned categories
and with prospects' deep functional needs.
the full fledged BPM area is not easy to compete within either because of wealthy
and viable competitors coming from enterprise application integration
(EAI) specialists, infrastructure (platform and tools) providers, and packaged
applications vendors. Therefore, Exact Sofware has to position itself more clearly
as to avoid strong competition from many directions. Competition from best-of-breed
BPM vendors (such as Intalio, Fuego, Handysoft,
Savvion, Longview, Cartesis,
Comshare, etc.), business modeling players (IDS Scheer,
among others), workflow management vendors (including Filenet
and Staffware), infrastructure providers (for example, IBM,
Microsoft, BEA Systems, Sun Microsystems,
etc.), EAI/middleware providers (including webMethods, Tibco,
SeeBeyond, and Vitria), and many large enterprise
vendors' (SAP, Siebel, PeopleSoft, and Oracle
for example) intrusion into the BPM arena, in the manner they have done with
the CRM or supply chain management (SCM).
although Exact has a notable worldwide presence, it has no market leadership
in many crucial mainstream regions nor in certain vertical segments because
of the fierce channel competition from the more aggressive, better known, and
wealthier competitors mentioned previously. Exact still has some geographic
regions where it has neither reseller nor direct presence as yet, and its recent
bid to acquire Softline in order to improve its presence in
the Southern Hemisphere has gone the Sage Group's way. Furthermore, many prospective
customers have long outgrown their entry-level accounting solutions a l QuickBooks,
DacEasy, Peachtree or ACCPAC Simply
Accounting, and are looking to their original provider for functional
expansion opportunities in contact management and SFA, CRM, HR and payroll,
EDI, WMS, all of which are things Exact has tackled. However, often in that
quest, they turn to a trusted adviser (such as their accountant) for an advice,
where Exact has not yet made major strides to increase its clout and to entice
the accountant referral program. Exact does not have a so-called "feeder" entry
accounting product, which Sage/Best, Intuit, and ACCPAC (soon
to be part of Sage/Best) will have long been successfully leveraged, while MBS
is working feverishly to deliver similar products through MBS Small
Exact might have also inherited the baggage of unclear market image that former Macola had at its time. Namely, the market had often been in doubt whether Macola provided accounting in addition to manufacturing and distribution. This had occasionally hurt its sales given the accounting specialists' VARs would "accuse" Macola of being only a manufacturing specialist or only an accounting specialist. Exact might have a similar conundrum with e-Synergy and Globe 2000 entering the picture. There are also some indications that BAM and BPM ironically still have low penetration in areas where they are most needed—measuring and monitoring business activities and processes to improve operational performance management—which will require a strong evangelistic effort from Exact.
Also, not only may Exact be plagued with these perception issues, but its VARs have long been accustomed to deploying accounting and manufacturing solutions, and it will take much doing to retrain these to become full-fledged implementers of a broad, still difficult to categorize, enterprise solution like e-Synergy. Current Exact VARs will not have many CRM experts and CRM implementation experience. The same would hold for e-business, PSA, document management, and many other add-on applications that the company has recently delivered. Thus, one of the biggest challenges for the company has been helping traditional accounting VARs get up to speed on the new offerings' paradigm shifts and teaching them how to sell, market, and implement them.
downside is that Exact largely segments its market by company size and general
manufacturing environments (such as job shop versus repetitive) rather than
by vertical segments, which falls behind the current trend of delivering sharply
focused vertical solutions. Although functionally adept for the target prospects,
Exact's native manufacturing ERP functionality across the board has not been
one of the strongest in the market—the product is well suited for general light
discrete manufacturing environments with almost no support for complex/engineer-to-order
(ETO) nor for lean/flow repetitive manufacturing, which is pale given the fact
that some of its competitors offer a sharp vertical focus even to the precision
of six-digit Standard Industrial Classification (SIC) codes within an industry
(for example MBS Navision, Syspro, and Epicor).
company should, therefore, try to interest its resellers in industry specialization
and provision of vertical extensions or should internally vertically incline
its product offering and develop industry templates, wizards, and implementation
methodologies to further decrease the time and expense of implementation projects.
Moreover, outside work-in-progress (WIP) management, data collection,
and labor performance shop-floor capability, Exact's product lines do not offer
distinguishing intrinsic manufacturing ERP functionality such as hazardous materials
reporting, sales and purchase contracts, field repair, and plant maintenance.
A slew of manufacturing-centric competitors may boast many of these capabilities,
in addition to having a solid financial modules and multinational coverage,
not to mention the capabilities of tier one ERP intruders.
Exact Software remains a stalwart vendor within the small and mid-market accounting,
manufacturing and distribution software markets with its recent forays in becoming
a more unified global provider of end-to-end business applications. The current
market trend is towards vendors that can provide comprehensive solutions for
SMEs with a justifiable return on investment (ROI), and Exact seems
to have a fair shot. Moreover, with its global coverage, multinational product's
capabilities, compact cross-module integration, and technological consistency,
the vendor seems poised to give run for the money to almost any contender within
Software's target market, single and multisite and multinational accounting,
light manufacturing and distribution companies and their satellite subsidiaries
with up to $250 million-a-year (USD) revenue range, should consider the company's
value proposition, but avoid selecting it without looking at what the other
vendors have to offer. These companies generally are rapidly growing and agile
but have a limited a IT budget or staff, a conformist IT strategy (a staunch
Microsoft shop), and a solid accounting, payroll, distribution, CRM, and business
to business (B2B) e-commerce collaboration requirements. Where the vendor
does target vertical sectors they would include manufacturing, distribution,
retail, and service organizations via third-party add-ons and resellers' functional
generally, Exact Software North America should be attractive to small to midsize
growth-oriented businesses in various industries with a need to integrate back-office
ERP (manufacturing; distribution; HR and payroll; and accounting), CRM, and
e-commerce applications. Thus, existing and prospective customers should evaluate
the new products add-on's as a way to add value to their existing applications.
Enterprises should nevertheless monitor the consistency between the announced
strategy and Exact's actions in continuing to support acquired legacy products
strategically. While we believe that the above announced strategy blueprint
should be beneficial in the long run, some outstanding integration issues, intra-company
organizational alignment, and discontinuation of redundant products are always
to be expected. Consequently, users evaluating the above individual products
should keep themselves informed, and consider generally available (GA)
functionality only. They should insist on the firm delivery schedule of migration
strategy for all Exact's major back-office applications.
Enterprises looking for a much broader functionality beyond traditional ERP boundaries (such as a more intricate CRM and supplier relationship management [SRM] functions, product life cycle management [PLM], direct materials procurement, plant maintenance, or complex project management/engineer-to-order [ETO] functionality) from a single vendor may benefit from evaluating other products at this stage. Moreover, global enterprises that have integration needs outside of the Microsoft environment, with multiple-platform and strong scalability requirements, should earnestly evaluate other providers with either their on premise or hosted deployment options.
Potential clients should conduct preliminary research on the industry expertise and reference accounts of Exact's regional offices or affiliate service providers. Existing customers with products based on a proprietary technology, custom systems or products from other vendors should review the affiliate's development capabilities in order to gain data integration between their various systems.
a more general note, business activity monitoring (BAM) and business
performance management (BPM) tools hold significant potential for end user
organizations, as they can accelerate the velocity of the business and deal
with the details of everyday needs. The challenge is to fine-tune the system
to dynamically combine event and contextual data. If done correctly, these tools
can enhance the value of existing data warehouses by analyzing data even while
it is being loaded into the warehouse and enable users to detect critical events
in near real-time, possibly initiating the optimal response. Users should determine
if these applications have a role in their business and if so, develop a plan
to learn about the concept and launch a pilot operation, as to better understand
the benefits and limitations of the concepts.
Exact needs to communicate its value proposition for e-Synergy and Exact Event Manager in business terms, using realistic examples to communicate both what BAM/BPM are and how they generates business value (such as improved consistency and fewer issues "falling through the cracks", lower training costs for new users or employees, lower IT costs, continuous process improvement, decreased organizational stress, and frustrations, etc.). Exact, as well as other application vendors should look at the like products as an extension to their existing products in order to deliver greater value to their customers and generate additional revenue. Vendors with mature enterprise application products with large install bases can be especially well served with these add-on products.
information about the Macola ES product is contained in the
ERP Evaluation Center at http://www.erpevaluation.com/,
while detailed information about the e-Synergy product is contained
in the CRM Evaluation Center at http://www.crmevaluation.com/