Lilly Software Visualizes Its eBusiness Offering, NOW. Part 2: Market Impact

Part 2: Market Impact
P.J. Jakovljevic - November 16, 2001

Event Summary 

On October 16, Lilly Software Associates (LSA) (www.lillysoftware.com), a privately held enterprise applications provider for small and medium sized manufacturing and distribution enterprises, announced VISUAL eBusiness version 3.0, the latest release of its online solution designed to help businesses streamline processes, improve productivity and increase efficiencies through the use of Internet technologies.

Simultaneously, Lilly also released VISUAL eBusiness NOW, a new application service provider (ASP) option that should deliver speed, flexibility, and affordability through Web hosting. Version 3.0 supports business-to-business (B2B) and business-to-consumer (B2C) transactions for both make-to-stock (MTS) and make-to-order (MTO) environments. It is an extension of Lilly's ERP and warehouse management system (WMS) products, allowing manufacturers and distributors to post catalogs and pricing information on the Web. The self-service features of the application allow customers and distribution partners to view pricing, order status, product features, and product availability.

Lilly believes that, with the opportunity to implement the application either through an integrated module within the VISUAL product suite or via Lilly's new ASP option, manufacturers and distributors can easily get started with their e-business initiatives.

This is Part Two of a two-part note discussing Lilly Software's recent announcements. Part One covered the announcements, this part discusses the Market Impact and makes User Recommendations.

Market Impact 

For the near future Lilly Software (LSA) will leverage its job shop manufacturing domain expertise, the latest technology and object-oriented architecture, and an established distribution channel to pursue mid-sized manufacturers, distributors and distribution-oriented manufacturers.

In the medium-to-long run, LSA will be broadening its offering out to manufacturers and distributors with mixed mode and make-to-stock (MTS) strategies, and mid market enterprises looking for interoperability with other enterprise applications. To that end, the Lilly has struck an alliance with Viewlocity to facilitate interoperability with other ERP systems.

From the technology standpoint, the company has long supported Microsoft's technologies (COM/DNA, ODBC and Office 2000), with a recent embracing and move to Microsoft .NET architecture framework. Its products support almost all relevant databases (SQL Server, Oracle, and IBM DB2/400) and operational systems (NT, Unix and OS/400) platforms.

Earlier this year, the company launched its portal product, called LSAGateway.com. The offering provides access to the Knowledge Center, a customer-support portal; Education Center, for information on education and training opportunities; Market Place, a place to identify other Lilly users as potential customers, vendors, and business partners; and Collaboration Center, for on-line design collaboration. Therefore, with VISUAL eBusiness as part of its solution, and with ASP/ hosting and integration services, Lilly rounds up an impressive arsenal for small and medium-sized enterprises (SMEs).

The real strength of VISUAL is its integration across all the functions of a manufacturing enterprise from design, via sell, make, distribute, to after-sales service. The fact that virtually all of LSA's applications have been developed in-house, instead of through multiple acquisitions, might be a significant differentiator in the areas of product consistency and integration. Another reason of Lilly's success is its distribution model, which is based solely on an indirect channel. The channel is comprised of over 500 companies and individuals that sell only Lilly's VISUAL product suite.

Challenges 

Nevertheless, Lilly Software will have to address certain challenges in order to continue to thrive in this cutthroat competitive environment and to move up-market. Its market awareness and global presence are still insignificant in spite of the recent international expansion like, e.g., in the UK and the Latin America.

Furthermore, the product shows inferior functionality in realms outside of job-shop manufacturing functionality on the plant level and of distribution, like the 'ivory tower' corporate level financial and human resources capability. Moreover, the product does not currently offer the ability to control repetitive production with rate-based scheduling techniques.

Creating and managing individual work orders is still a requirement; hence, it is not well suited for lean manufacturing/pure repetitive environments. Further, it offers only a limited standard costing method, cost simulation and planning tools compared to what most cost accountants are expecting in a "standard cost" system.

While VISUAL's multi-site and multi-national capabilities have been improving (the product currently supports 8 languages), it still has some limitations in handling distributed manufacturing entities - it requires either a completely centralized set of activities for manufacturing and accounting or a completely decentralized one. As an example, there is no ability to perform some functions like production control on a decentralized basis and then to have centralized order entry and accounts receivable. The product also still requires a single database per one manufacturing entity, and it has not been designed for high transaction volume environments.

On the technology front, while Lilly has embraced the above-mentioned trendy Microsoft technology that promises a building-block approach to application development, and XML-based interconnectivity, its vast majority of customers still run on a fat client two-tier client/server architecture. Migrating these onto new, more advanced product releases and/or continued concurrent support of diverse product architectures will demand duplicated R&D resources.

It is also somewhat intriguing that the company neither has multiple prominent functional and technology partners nor ready-made applications programming interfaces (APIs) to other prominent products, which may indicate insufficient product interconnectivity. The mitigating factor though is the company's decent approach towards not overselling its offering and declining to compete in instances where it does not seem its products fit. However, the company's need to re-deploy the product on a new technology and to deliver the needed functionality for its new desired markets, will demand the continued hefty R&D investment, which may put a significant strain on the company's resources in the long run, particularly if the top line remains flat or possibly even declines.

User Recommendations 

Lilly Software's target market, single-site job shop discrete manufacturing and distribution companies and/or divisions of global corporations with up to $200 million-a-year revenue range, should consider VISUAL Manufacturing and VISUAL APS products, but avoid selecting it without looking at what the other vendors have to offer. These companies generally have a limited IT budget, a conservative IT strategy, complex discrete job shop manufacturing and supply chain demands (strong capable-to-promise (CTP) requirements), and basic CRM and B2B e-commerce requirements.

The industries that would most likely benefit from Lilly's products are aerospace & defense (A&D), electronics, instrumentation, industrial machinery, fabricated metals, consumer packaged goods (CPG), wholesale distribution, automotive and transportation equipment.

Companies that require strong multi-site and multi-national capability, high-volume transaction processing, and 'white collar' functional depth at the corporate level may benefit from evaluating other offerings.

Mid-sized contract manufacturers with strong distribution requirements, distributing companies with value-added services, and third-party logistics (3PL) companies with up to $500 million in annual revenues may want to evaluate Lilly's VISUAL Distribution product.

Small and fledgling job-shop manufacturing outlets (e.g., tool and machine shops) with less than $10 million in annual revenues that already have small business accounting package (e.g., QuickBooks Pro) but are in need of manufacturing oriented software functionality, should evaluate VISUAL Jobshop product. Potential customers evaluating Lilly should consider the latest enhancement modules an essential part of Lilly's product offering and insist on reviewing them as part of their evaluation.

Existing Lilly customers should review the above-mentioned enhancements with their local LSA affiliate with an eye towards extending the value of existing applications. Lilly customers with custom systems or products from other vendors should review the LSA's development capabilities in order to gain data integration between their various systems. Current users should also inquire about any possible impact (or benefits) that Lilly's new product technology strategy might have on their current investments (e.g., the product migration strategy).