Event
Summary
On October 24, Intentia International AB, a Swedish provider of enterprise
business applications, reported financial results for the third quarter
of fiscal 2000. License revenue increased 46% over the third quarter of
1999, and 23% for the first nine months of the year. The figure represents
the most rapid growth in license revenue for a single quarter since the
third quarter of 1998. However, consultancy revenue continued to hold
back total revenue by declining 9% from the same quarter in 1999. Net
income for the quarter was significant, $19.7 million (See Figure 1).
Figure
1.
Over
the past year, Intentia has focused on developing a complete range of
integrated e-business components. It has repositioned itself from being
a traditional ERP vendor to an e-collaboration provider. To that end,
on November 7, Intentia and MRO.COM, Subsidiary of PSDI, a supplier of
MRO supply chain solutions, formed a strategic alliance. The companies
plan primarily to target businesses that use Intentia's Movex e-collaboration
software, and enable those businesses to implement an Internet-based e-commerce
system in just four to six weeks. The companies claim the solution will
integrate seamlessly with the trading community of the MRO.COM marketplace.
Today,
as part of achieving greater efficiency and a profitable growth, Intentia's
strategy is to expand within the framework of its existing cost structure
until it achieves satisfactory profitability. Thus, it plans to make every
effort to curb product development costs until license revenue has grown
by 50%. Further, its consulting organization will not expand further until
the consultancy margin has reached 15% (it was only 9% in the last quarter).
Therefore, from the beginning of the year until the end of the period,
the total number of employees declined from 3,366 to 3,243.
Market
Impact
Intentia seems to be changing for the better. One encouraging sign is
a notable increase in license revenue, but heavy losses have not yet been
curbed. The company has posted its seventh consecutive loss, which gives
serious concern to its shareholders. The company's cash and stockholders'
equity values have more than halved during the last 12 months. Intentia,
like many of its competitors, has had the misfortune of concurrently tackling
international expansion and ambitious product development in a sluggish
and morphing market.
On
a positive side, there seems to be a light at the end of a tunnel. Intentia
claims to have rounded out its platform-independent extended ERP product
portfolio, which also features strong industry-specific functionality
and expertise. Movex NextGen release, its enterprise resources planning
(ERP) system launched in 1999, is now a Java-based software suite deployable
across multiple platforms. Intentia continues to perform well in Europe
and has articulated an attractive strategy to support e-marketplaces.
For example, it has launched e-Collaborator, which should uniformly and
efficiently handle the transmission of all types of business information
among companies over the Internet.
The
company relies on a transformation of all business information to XML
format to provide a uniform procedure for exchanging information. Its
Enterprise Business Portal is intended for large international companies
that wish to create either an external marketplace or an internal portal
for coordination among the group's various units. A parent company can
use Enterprise Business Portal internally to create a joint portal that
coordinates divisional functions such as purchasing, production, distribution
and marketing. Customers, suppliers and even competitors can also be included
in an external portal aimed at creating a common marketplace. The company
says that Enterprise Business Portal can handle the full range of business
transactions, including requests for proposal (RFP), placing orders, invoicing
and payment using only the Internet.
Intentia
now offers extended ERP applications that expand far beyond traditional
ERP functionality to include Supply Chain Management (SCM), Customer Relationship
Management (CRM), Partner Relationship Management, Business Performance
Measurement and integrated e-business components. The e-business components
consist of applications for B2B (business-to-business) and B2C (business-to-consumer)
Web shops, MRO Procurement, Strategic Procurement, e-Collaborator, Employee
Self-service, Corporate Portal and Enterprise Business Portal.
Gaining
platform independence and providing a comprehensive product offering for
the new economy tremendously expands Intentia's opportunities. However,
the company's challenges remain its low traction in North America, which
has traditionally hindered the significant improvement of its competitive
position. Recent alliances with Sun Microsystems (for more information,
see Intentia's
Growing Pains) and IBM (a joint project to develop e-business applications
based on IBM's WebSphere technology) might well expand Intentia's visibility.
Intentia will also benefit from providing an implementation of the Movex
solution for the MRO.COM marketplace.
However,
the task of curbing costs of product development and sales & marketing,
with a fledgling license growth and the low utilization of a bloated consulting
practice remains daunting despite the company's determination to address
it.
User
Recommendations
Intentia's customers should certainly consider the new product offering,
but avoid selecting it without looking at what the other vendors have
to offer. We encourage users to familiarize themselves with the company's
ambitious new products offerings and their availability, at least to better
leverage their negotiating position with other vendors involved in a particular
selection exercise.
As
for potential customers, Intentia should be included on a long list of
an enterprise application selection to mid-market and low end Tier 1 companies
(with $50M-$2B in revenue) within the following industries: Automotive;
Aviation; Furniture; Fashion; Food and Beverage; Paper; Pharmaceuticals;
Steel; Wholesale and Retail. Potential clients in North America, however,
should conduct thorough research on industry expertise and speak with
reference sites of their regional Intentia office or affiliate service
provider when Intentia is included in the selection process.
Current
and potential users may want to inquire about the company's plans regarding
Internet marketplaces in their respective industries. Ask which specific
market places does (or will) Intentia connect with, and what methodology
does (or will) the company subscribe to. Due consideration should be given
to product availability dates and to the company's endorsement of "web
standards." Should the industry as a whole adopt a different XML standard
after your installation, identify who will be responsible for accommodating
the change and what measures have been engineered into the application
to support evolving standards.
Future
clients are also advised to request the Company's written commitment to
promised functionality, general availability date, price, length of implementation,
and seamless future upgrades. Given that the product has been only recently
released, each component should be put through its paces using a well-documented
set of requirements, scripted scenario demonstrations and rigorous reference
checking.
As
with all new releases, users should employ a critical approach in their
evaluation of Movex and require the vendor 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.