Introduction
This
is the third of three articles about Great Plains resulting from TEC analysts
attending the Great Plains partners' meeting, Stampede 2000, in September.
The meeting provided the opportunity for in-depth research on how Siebel
and Great Plains operate. The TEC analysts were able to interview both
Great Plains managers and partners.
Event Summary
As
announced in a press release from September 12, Great Plains Software,
Inc., a leading small-to-mid-market provider of back-office and e-business
solutions, announced financial results for the fiscal quarter ended August
31, 2000. The announcement preceded its annual partners' conference, Stampede
2000, which took place in Fargo, ND, September 13-16.
Great
Plains' first quarter revenues increased 68% over the same period last
fiscal year and increased 13% sequentially over the fourth quarter of
fiscal year 2000. Revenues for the first quarter of fiscal 2001 were a
record $67.1 million, compared to $39.9 million for the first quarter
of fiscal 2000. For the quarter ending August 31, 2000, net loss and net
loss per share, including the effect of amortization of acquired intangibles
and a $4.6 million non-recurring restructuring charge, were $22.7 million
and $1.14, respectively. For the same period last fiscal year, net income
and diluted earnings per share were $3.5 million and $0.22 per share,
respectively (See Figure 1).
Figure
1.
During
the quarter, Great Plains claims to have seen significant interest from
customers and partners for Release 6.0, the most recent version of its
e-business enterprise solutions, Dynamics and eEnterprise. Additionally,
Great Plains continued to see strong contributions from acquired operations
including those from its most recent acquisitions of Solomon Software
and FRx Software. Revenues from services, up 121% over the same period
last fiscal year, contributed significantly to the company's growth this
quarter.
"We
delivered strong operating performance in our core business and gained
solid contributions from our strategic acquisitions, resulting in another
quarter of record revenues," said Doug Burgum, Great Plains chairman and
CEO. "In particular, our acquisition of Solomon solidifies our leadership
position in the mid-market. We continue to execute our strategy of providing
value across our e-business solutions of back office, front office, e-commerce,
analytics and supply chain management."
The
following are some of the most important highlights that were announced
or occurred during Great Plains' first fiscal quarter:
Note
that some of them have been studied more thoroughly in pertinent TEC's
news analyses:
- On June
9, 2000, Great Plains acquired Solomon Software, a leading provider
of flexible business management and e-business solutions. With the acquisition
finalized, Great Plains now has more than 130,000 customers, 2,000 team
members and a worldwide network of 2,000 channel partners (For more
information see Will
Solomon Finally Satisfy Great Plains' Insatiable Appetite?).
- Great
Plains released eEnterprise and Dynamics Release 6.0, likely the most
comprehensive release in the company's history. eEnterprise Release
6.0 showcases significant enhancements in the areas of e-business, sales
and purchasing, major product series enhancements, and multinational
and international features, as well as a new user interface and reporting
functionality. Dynamics Release 6.0 delivers significant enhancements
that encompass the distribution series, project series, system manager
suite and e-business applications, as well as a new more intuitive interface.
- Great
Plains partnered with Logility, Inc. to deliver supply chain management
solutions that enable manufacturers, distributors and retailers to more
effectively collaborate supply chain planning and execution operations
with trading partners via the Internet. Through an OEM agreement, Great
Plains will add components of the Logility Voyager Solutions application
suite to its e-business solutions to more efficiently and accurately
coordinate the planning, forecasting, warehousing and delivery of goods
throughout the supply chain (For more information see Great
Plains Supply Chain Series To Be Powered By Logility).
- Great
Plains announced its plans to integrate the Solomon IV product line
with the Great Plains Siebel Front Office suite of eBusiness applications
to deliver a comprehensive, integrated, front and back office solution
for Solomon customers (For more information see Winner
Takes All - Siebel Ousts SalesLogix From Solomon's Deal).
- Great
Plains signed a worldwide OEM agreement with Knosys, Inc., the leading
analytical tools vendor on the Microsoft SQL Server platform, to embed
the analytical functionality of the ProClarity Analytical Platform
into Great Plains eEnterprise, Solomon and Dynamics.
- Three
new Solomon IV distribution series modules, e-Commerce Gateway - EDI
Edition, Advance Shipping Management and Web Order, were released for
Solomon customers. These new applications provide enhanced distribution
capabilities, additional e-business functionality and extended flexibility
to customers who already benefit from the Solomon suite of e-business
and business management solutions.
- Solomon
Desktop, a browser-based portal that provides employees and business
partners secure access anytime and anywhere to 100 percent of the capabilities
of Solomon IV, released to customers. Solomon Desktop brings an integrated,
personalized view of Solomon IV to an individual's desktop and enables
better decision-making by providing immediate access to key business
information.
- FRx Software,
a Great Plains business unit, announced partnerships with Geac Enterprise
Solutions, SOFTRAX Corporation and MAPICS to extend FRx's financial
reporting tools to the mid-market customer community (For more information
see Geac
Trying Its Luck in Partnering).
Market
Impact
Great Plains has been following through on its projections from over a
year ago when it indicated that front-office applications and e-commerce
were two strategic areas of focus for the forthcoming period. Great Plains
has recently created a great noise and established itself as an undisputed
global small-to-medium enterprises (SME) market leader. It now derives
almost 20% of revenue outside of the US market and has the potential of
reaching $300 million in revenues in fiscal 2001. Its extensive and efficient
global indirect channel model that consists of over 2,000 partners has
been admired industry-wide.
Further
bolstering its channel architecture is the company's endorsement of the
Application Service Provider model. Started more than two years ago, Great
Plains has developed an ASP model using a similar strategy employed within
their partner program. Through the continuous refinement of their product
and pricing solutions, Great Plains offers applications on a license basis
as well as "rentable" solutions available via the Internet. (license,
lease and subscription pricing are all available)
The
company has extended its product offering and geographic coverage by striking
almost a perfect balance between doing it through both strategic partnerships,
acquisitions, and in-house product development. Great Plains has indeed
been impressive in selecting and attracting renowned vendors as its partners
and in integrating disparate products.
Siebel
Systems selected Great Plains as the partner to create a fully integrated
back-office and front-office solution for medium-sized companies. Great
Plains Siebel Front Office includes functionality for call centers, marketing,
and sales, with a number of other CRM modules being slated for the future
release. We are not aware of any other ERP vendor offering such tightly
integrated out-of-box Siebel functionality with its back-office applications
(125 touch points) and through such an extensive reseller channel (over
500 of its partners have so far opted for distributing Siebel with Great
Plains products).
We
also believe that its OEM partnership agreement to sell Logility's Voyager
Solutions will follow the similar path and should bode well for both companies.
Great Plains will be able to offer a set of SCM and e-business products
from a notable best-of-breed SCM vendor, that are positioned as affordable
to SMEs and as requiring less time and resources to implement. Logility,
on the other side, will get a coveted access to one of the strongest distribution
channels in a relatively non-penetrated SME market.
As
for its acquisition ventures, the combination of Great Plains and Solomon
Software has resulted in a juggernaut within the SME market, with a formidable
combination of customers and channel partners. The following factors should
contribute to the synergy of this merger:
- Products
technology compatibility (Great Plains touts its commitment to Microsoft's
technology by being one of very rare vendors that has a number of its
R&D team members located at the Microsoft premises and working directly
with Microsoft's counterparts)
- The companies'
similar market segment focus
- A similar
service & support business model (with 10%-15% of their affiliate partners
already specializing in distributing both products)
Further,
its acquisition of FRx Software, although less publicized, can be branded
as an example of a prudent acquisition. By letting the company run independently
under a widely recognized brand name (FRx has basically been a widely
accepted standard within the financial reporting market), Great Plains
has put itself into a very pleasant (and somewhat intriguing) position
of getting 'money for jam' even from a number of its direct competitors
like Geac, J.D. Edwards and MAPICS to name but a few.
Nevertheless,
we believe that the company should now take a deep breath, and carefully
devise its future moves. Additional acquisitions may lead to an unmanageable
product portfolio and financial indigestion. Both unavoidable acquisition
charges and exorbitant costs of training its staff in Siebel and other
3rd-party applications as well as for in-house major product enhancements
and cross trainings in acquired products are major contributors to a significantly
lower bottom line in recent times. While there may be a reason for concern
due to weakened profitability and the effects of recent restructuring
(170 job cuts), there is no real cause for users' concern. Great Plains
continues to grow healthily, while heavily investing in R&D. This is generally
not the case with its major competitors.
The company
has been trying hard to allay any doubts in the minds of partners and/or
customers regarding its intention to further invest in the Solomon product
line. We believe that most of them have been relieved since it became
apparent that Solomon would benefit from following in the steps of its
parent, particularly in terms of partnerships with Siebel Systems and
Logility. Solomon, on the other hand, touts that two can play the game
of continued synergistic R&D endeavors in the future. It will leverage
Great Plains' experience in developing internally its manufacturing functionality,
and its parent may benefit from gaining insight in Solomon's experience
in developing a fully browser-based portal Solomon Desktop (Great Plains
still has to resort to use of Citrix thin client to web enable its products).
Great Plains
offers fully integrated front office/back office business applications
for the SME market. Its flagship product, eEnterprise, provides integrated
modules for financial, distribution, enterprise reporting, manufacturing,
payroll, human resources, service management, electronic commerce, and
Internet self-service. Great Plains' Dynamics product provides similar
functionality for the lower-end of the market. Solomon, on the other hand,
offers a range of similar applications, also on a Microsoft-based architecture.
Solomon IV, its flagship product, contains over 50 modules for financials,
project management, bill of materials, systems management, distribution,
e-Business, and service management.
While the
merger has been completed impressively smoothly (with a minimal attrition),
the downside of it was that it did not expand combined product functionality
per se. Great Plains therefore had to internally develop enhancements
for its multi-site manufacturing and distribution functionality, field
service, and multi-national capabilities (support for 8 languages, etc.)
to name but a few. A more detailed analysis of its product strategy and
major release of eEnterprise, 6.0 will be the subject of another forthcoming
separate TEC research note.
A major challenge
for Great Plains and its affiliate channel remains the management of multiple
flagship product lines. It will be difficult to support existing customers
and existing products, while juggling competitive product lines. Since
the product lines should remain separate for at least two more years,
it will add additional development costs, as well as provide a challenge
in explaining the position of the different products.
The company
will have to revise its sales strategy of how to optimize the sales of
two product lines with very much overlapping functionality and avoid a
likely internal competition within the resellers' channel. Not to mention
the need of showing 'one face' to customers. One way to resolve this is
by slating eEnterprise, Solomon and Dynamics product lines for different
market segments, either by company size or vertical industries. Consequently,
Great Plains can expect growing pains in merging disparate product lines
and training and possibly specializing its large affiliate channel.
While Great
Plains' e-commerce solution set that includes e.Order Internet storefront,
e.View, browser accessed financial and business information, to name but
a few, is impressive, it yet has to provide a crisp e-procurement and
vertical digital marketplaces solutions. During our attendance of Stampede
we were made aware that some alliance negotiations were in progress, and
the market should expect related press releases in the near future. Any
protracted delay in delivering these would aggravate the challenge of
protecting Great Plains turf from Tier 1 intruders (e.g., Oracle) that
currently have a more comprehensive offering. Even if the Tier 1 vendors'
offering is toned down for the smaller market segment, one should also
not overlook the fierce competition from direct competitors like Navision,
Epicor, and Sage Software.
User
Recommendations
Existing Great Plains customers should certainly consider the new offering
and carefully determine their needs and/or time framework for a migration/update,
bearing in mind problems typical with major product releases. Although
all current Dynamics and eEnterprise customers on a maintenance contract
will automatically receive Release 6.0 at no additional charge, we recommend
identifying your clear e-business strategy and conducting a thorough comparison-shopping,
at least for the information leverage sake. Each component should be put
through its paces using a well-documented set of requirements, scripted
scenario demonstrations and rigorous reference checking.
As
for potential users, we generally recommend including Great Plains in
a long list of an enterprise application selection to the lower-end of
the mid-market companies (with $2M-$500M in revenue), which are staunch
users of Microsoft technology and have significant financial accounting,
project management, distribution, and service requirements, while currently
not needing complex manufacturing functionality. Great Plains should be
included on any package selection short list within the SME market where
electronic business, distribution, services and accounting modules are
the main pillars of an enterprise application.
As
with all new releases, users should employ a critical approach in their
evaluation of eEnterprise, Dynamics and/or Solomon IV, and require all
potential vendors to demonstrate specific business processes. Though demonstrations
do not guarantee a trouble-free implementation, they can go a long way
toward helping users understand how the software might behave in their
environments.
As
for the new added CRM functionality through the partnership with Siebel,
users are advised to ask for firm assurances on the availability and future
upgrades timeframes, and more detailed scope of combined product functionality.
One caveat to be borne in mind is that although this suite was developed
from existing Siebel products, it is a first version release. This means
there are inevitable bug fixes to be made over the next few months.
Current
users of Great Plains eEnterprise with additional warehousing or transportation
management requirements may benefit from acquiring the Great Plains-branded
supply chain execution products from Logility. Improved technological
integration is seldom guaranteed by joint marketing arrangements, and
only comes after the arrangement yields considerable implementation experience.
Therefore, in the short term, these users should expect some bumpy ground
since Great Plains and Logility still need time in which to polish their
collaboration on delivering technical support for the products. As Great
Plains partners become familiar with Logility's products and the OEM partnership
solidifies, these problems are likely to diminish.
Potential
clients should conduct preliminary research on industry expertise and
reference sites of a regional Great Plains affiliate service provider
when the Great Plains' product is selected. They should also familiarize
themselves with products' strengths/weaknesses within certain vertical
industries. Great Plains distributors generally offer vertical solutions
on an opportunity-by-opportunity basis only.
Organizations
seeking a Web-based solution and out-of-box functionality with little
or no re-engineering effort may benefit from evaluating Great Plains'
ASP offering. Support, connectivity, ease of use, security, acceptance,
and scalability are only a few regular considerations. Current users of
its traditional client/server product may benefit from informing themselves
of the ramifications of switching to the ASP mode.
For
more information on Great Plains see the following articles:
Siebel:
Great Plans for Great Plains
Great
Plains ASP - Evolution, Revolution, Innovations