Event
Summary
On August 15, Intentia International AB (XSSE: INT B), a Swedish
provider of enterprise business applications for mid-size and large enterprises,
reported results for the second quarter of 2001. The profitability restoration
plan, which was launched in 2000 with the intention to ensure the company
will continue to generate higher license revenue within the constraints
of its current product development and sales organization, has apparently
resulted in improved earnings and cash flow. Cash flow from in Q2 2001
operating activities improved by SEK 222 million ($21.1 million) and was
SEK 65 million ($6.2 million). License revenue for the quarter grew up
26% to SEK 274 million (~26.1 million), while consulting revenue rose
36% to SEK 689 million (~$65.6 million). Total revenue of SEK 978 (~$93
million) represents a 25% increase compared to Q2 2000 (See Figure 1).
Figure
1.
As
a result of significantly improved capacity utilization, Intentia's consulting
margin increased to 16%, which contributed significantly to an operating
profit of SEK 7 million (~$0.7 million). Net loss of $0.9 million, attributable
mainly to acquisitions of operations in Australia, the US and Norway,
was nevertheless significantly lower compared to a $14.8 million net loss
from a year ago (See Figure 1). All geographic regions reportedly posted
growth and higher operating earnings for the first half of 2001. Net revenue
in the Americas increased by 29% to SEK 126 million (~$12 million), mostly
due to higher consulting revenue stemming from higher workloads in ongoing
projects, although this is still less than 7% of total revenue.
In
order to integrate and thereby make more effective its US operations and
support infrastructure, Intentia has acquired the customer base and personnel
from the previous owners of Intentia West in the US. Also
employing the model it introduced in Europe, Intentia coupled the takeover
with the establishment of a US organization consisting of four operating
units: Midwest, East, South, and West. Also, upon acquiring a 49% stake
in the Norwegian software company Scase AS earlier in the
quarter, Intentia became one of the first providers of enterprise systems
to the food industry that provides integrated origin marking throughout
the supply chain (see Is
Intentia Truly Industry's First In Food Traceability?).
During
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. Intentia believes
with the release of Movex version 12, its product position is stronger
than ever. Pilot installations of version 12 were implemented at a number
of customers during the period where the product is still up and running.
Based
on substantially improved breadth and functionality, the company hopes
the new release will further strengthen its leadership in the markets
on which it focuses. These applications include Multi-Site Planner,
e-Collaborator, and Movex Business Messages (XML-based business
transactions). Additional new functionality includes Call Center Integration,
Demand Planner, and Employee Self-service. Movex version
12 also offers new functionality in the areas of point-of-sales (POS)
integration, scarce and alternate sources of supply identification, cross-docking,
vendor managed inventory (VMI), self-billing, e-billing, Web-based product
configuration and personalized corporate portals.
Intentia
claims that the successful shift in technology, the evolution toward e-collaboration
and the considerably improved functionality of prioritized industry applications
have made Movex more competitive than ever before. Movex NextGen, the
Java-based version of Movex, reportedly accounts for a steadily growing
percentage of Intentia's license revenue. Intentia also touts benchmark
tests performed this year demonstrate that Movex NextGen provides scalability
superior to that of competing products. Finally, although the market remains
highly uncertain about the seriousness and length of the economic slowdown,
based on its prospect pipeline, order backlog and the current customer
base, Intentia anticipates positive operating earnings and considerably
improved cash flow for the full fiscal year.
Market
Impact
Like
many Swedish-made products, Intentia's Movex has shown endurance during
unpleasant environmental conditions, but one cannot help feeling that
the product holds much more quality and potential than the market is aware
thereof. As a matter of fact, with a steady increase in license revenue
in a sluggish market where the competition is fierce, and with a scant
contribution from the important US market, likely indicates the depth
and breadth of the product that sells despite much marketing glitz.
Intentia
has indeed rounded out its platform-independent product portfolio, which
also features strong industry-specific functionality and expertise (see
User Recommendations). Movex NextGen release, the flagship ERP system
launched in 1999, is now a Java-based software suite deployable across
multiple platforms. Intentia has also articulated an attractive strategy
to support e-marketplaces with new developments in its portal technology
for corporate and private trading exchanges (PTX). Very impressive is
e-Collaborator, which should handle the transmission of almost all types
of business information among companies over the Internet and thereby
extend the customer's ability to interact outside the four walls of the
enterprise.
Also
relatively new is Movex Supply Chain Planner, a solution that,
inter alia, offers forecasting and supply chain execution
(SCE) capabilities, and is integrated with Movex. Consequently, Intentia
now offers a set of applications that expand far beyond traditional ERP
functionality to natively provide Supply Chain Planning & Execution (SCP/E),
Customer Relationship Management (CRM), Partner Relationship Management
(PRM), Business Performance Measurement and integrated e-business components.
We believe its open platform approach, e-Business capabilities, vertical
focus, and more proactive partnerships should bode well for the company's
overall standing.
One
fails to understand why the company with such a product and technology
in hand is not doing a much better job in advertising it with more vigor.
Its US counterparts start hyping (and often selling) the product while
it is only in the vaporware stage.
One
reason for the company's inactive marketing may stem from cultural reasons
- in a small, close-knit but highly contested domestic Scandinavian ERP
market, Intentia's name is well-known, The company is regarded as a leading
ERP vendor (on par with the likes of SAP) and almost no ERP selection
goes without Intentia's participation. Therefore, the delivery of an immaculately
functioning product has long been the company's priority, for the product
was sold more through word of mouth than through active marketing (according
to the adage "good wine needs no hype"). The same mindset is far from
being applicable in the Americas, where any CIO is overwhelmed with the
hype from several dozen vendors and will only be aware of Intentia through
some meaningful channel. The similar initial situation existed, until
recently, for another Swedish vendor, IFS. IFS launched an aggressive
marketing campaign, which when bundled with a slick product seems to have
turned the tide and the US market now contributes a respectable 30% to
IFS top line.
What
might have additionally hurt Intentia in its North American expansion
would be its traditional confinement to the IBM iSeries (formerly
AS/400) platform, where it has faced strong competition from incumbent
players like J.D. Edwards and MAPICS. Although Intentia
has been platform independent since 1999, it still has one more myth to
debunk on top of its otherwise low brand recognition in Americas.
Therefore,
the company's big challenge remains its still nascent toehold in North
America, without which no vendor can have a strong global competitive
position. Recent alliances like the ones with Sun Microsystems, IBM and
MRO.COM marketplace, might promote Intentia's visibility and give it a
quantum leap. The company has also struck an alliance with Manhattan Associates
to offer a jointly developed interface between PkMS, Manhattan's warehouse
management system (WMS), and Movex (see Manhattan
Associates Partners with Intentia). These, bundled with the recent
restructuring of the US operations could boost Intentia's penetration
of the North American applications market after a number of dismal former
attempts. Intentia must market the Movex product more aggressively with
the flashy media blitz and audacity that is peculiar to its US-based counterparts.
Without it, Movex will likely remain confined mainly to the apparel/fashion
customer base in the US, which it has captured mostly owing to a good
word of mouth, to a dearth of suitable products, and to a bad publicity
of some competitor's failures (see SAP
sets up Apparel and Footwear team).
User
Recommendations
Intentia's functionality footprint, technological innovativeness and expertise,
and sharp vertical focus should be attractive to mid-size and large global
enterprises within the following industries: automotive, aviation, apparel/fashion,
food & beverage, industrial goods, electronics, furniture, MRO, paper,
retail & distribution, service & rental, and steel. European enterprises
that run on the iSeries server are the best candidates to benefit from
deploying Movex. However, many companies from different geographic regions
running on other platforms and within the above industries may benefit
from allowing Intentia to give the other vendors in the selection a run
for their money. However, while the above-mentioned performance benchmarks
are trustworthy, one should rely more on performance in a real-world environment.
Therefore, question the company's ability to provide reference sites that
closely fit your business description.
On
top of Intentia's challenge to manage brand recognition and channel development,
the company will have to carefully balance its new technology strategy
with a more aggressive marketing effort to gain acceptance as a cross-platform
provider of enterprise applications without impairing its strong functionality
development and reputation. More comprehensive recommendations for both
current and potential Intentia users can be found in Intentia
Possibly Seeing Daylight.