Made2Manage Systems Inc. (NASDAQ: MTMS) is a provider of enterprise-wide
software solutions for small and midsize discrete manufacturing operations.
Founded in 1986 with headquarters in Indianapolis, IN, USA, Made2Manage
generated $31.1 million in revenue in fiscal 1999. Approximately 56% of
the company's sales come from consulting, maintenance, and other support
services, while almost its entire revenue is derived from the North American
market. Made2Manage Systems went public in 1997.
flagship product, Made2Manage, is designed to meet the needs of small
and midsize discrete manufacturers engaged in engineer-to-order (ETO),
make-to-order (MTO), assemble-to-order (ATO), make-to-stock (MTS), and
mixed styles of production. The product is an application suite designed
to be the only business software these manufacturers need to effectively
manage their operations. It includes applications in sales and marketing,
engineering, materials management, production, quality management (through
a partnership with Powerway, Inc.), finance and accounting, human
resources (through a partnership with Best Software) and
web-based applications for customer and supplier collaboration. The Made2Manage
solution also offers advanced planning & scheduling (APS) and decision
support-executive information system (EIS) capabilities.
its founding, Made2Manage Systems has evolved its product while remaining
committed to Microsoft technology. With the release of Made2Manage
for Windows in late 1995, Made2Manage became an early adopter of Windows
NT and was the first manufacturing software application to receive
the "Designed for Windows 95" endorsement. In 1998, Made2Manage acquired
Bridgeware Inc. to deliver advanced planning and scheduling
Trajectory and Strategy
Made2manage began with a vision to produce business management software
that was very intuitive and, therefore, easy to use and implement. Realizing
early the importance of business use of the Internet, Made2Manage was
in 1997 one of the first ERP suppliers to offer web-based applications
for small and midsize manufacturers. During 1999 it embarked on a strategy
to provide e-commerce solutions for its target market. Made2Manage has
been completing its evolution from a vendor of traditional MRP software
to a provider of holistic business applications, including integrated
front office, back office, business intelligence and e-business capabilities
for its target market - small-to-medium manufacturing enterprises (SME).
has shown a good understanding of the needs of its customers, who typically
wish to acquire most of their business applications from a single source
while coping with very limited IT resources. To that end, Made2Manage
still offers its core ERP solution, which has recently been enhanced with
extended enterprise capabilities like advanced planning & scheduling (APS)
through the Bridgeware acquisition, and customer relationship management
(CRM), both through in-house development and the partnership with Interact
Commerce. The company has also made a notable effort to provide e-business
solutions with the launch of m2mEport site in March 2000, a Web-based
community offering information, tools, and services to meet the e-business
requirements of SME manufacturers. Recently, the following three separate
portals have supplanted the m2mEport.com site, each providing a more focused
set of functionality:
- provides manufacturers with customer relationship, collaboration and
- provides 24x7 customer support, education, and information
- provides a subscription-based hosted service for smaller customers
to improving Internet usability of its products, Made2Manage has also
begun an international expansion by opening its first overseas subsidiary
in the UK in 1999. By the end of 1999, the company had more than 1,300
customers, primarily North American discrete manufacturing SME organizations.
The company distributes its products and services through a multi-channel
sales and marketing approach that encompasses both a direct sales force
and a network of business partners (VARs) throughout North America and
the recently added distribution for Europe.
Made2Manage to continue its focus on the lower-end of the ERP mid-market
(companies with $5 million - $100 million in revenues), by rounding-up
the functionality of its solution. The product might be enhanced also
through third-party alliances in the area of Distribution Requirements
Planning (DRP) & Transportation, Plant Maintenance, and Manufacturing
Execution Systems (MES).
We also expect
the company to further pursue alliances for business-to-business (B2B)
e-commerce, Internet trade exchanges and supply chain collaboration within
its industries of interest like its recent alliance announcement with
Click Commerce, Inc. (for more information, see How
Has Made2Manage Systems Been Managing Itself?). Additionally, Made2Manage
will invest more aggressively in marketing, international business expansion
through distributors, and will seek to become more vertically focused.
It is very likely that it will also start pursuing alliances with more
ASPs to further its penetration into this increasingly popular marketplace.
has from its early days had a sole focus on the low-end of the ERP discrete
manufacturing market. The company has long demonstrated a deep understanding
of this market dynamics and its requirements of inexpensive products,
fast and simple implementations, and good service and support. These
risk-averse requirements have traditionally been entry barriers for
larger vendors. Made2Manage has been quite competitive in speed of implementation
and total cost of ownership (TCO). It has also achieved good experience
with its indirect channel, which is an important criterion for long-term
success in the SME market segment.
- The company
has, gradually, either developed in-house or incorporated through partnerships
a line of integrated e-business, customer relationship management (CRM),
business intelligence, and advanced planning and scheduling (APS) components
within its core ERP solutions. It also embarked early on web-enabling
its product and recognized the need for hosted applications within its
target niche. This promotes it as one of the first of the smaller ERP
vendors with the ability to embrace customer and supplier activities
tied to a core transactional back-office system. Made2Manage can, therefore,
often offer one-stop-shop functionality for small assembly-to-order
(ATO) or make-to-stock (MTS) discrete manufacturers.
has long embraced concepts of component technology in designing its
product. The object-oriented product architecture has been devised entirely
from scratch in-house within the Microsoft context, which provides for
flexibility and ongoing agility. End users of smaller enterprises have
also been impressed with its intuitive user interface, which provides
ease of system navigation ("Navigator" feature) and of information retrieval
("Locator" feature), and with underlying workflow & messaging system
capabilities ("Notifier" feature).
differentiating Made2Manage from its main competitors is the company's
readiness to provide smaller discrete manufacturers with the above-mentioned
portals that offer a broad range of collaborative, interactive, and
communications applications including collaborative engineering design,
tools, trading exchanges, and access to information resources. Made2Manage
has also been proactive in service and support cost reduction by harnessing
the latest technology, like CBT, to deliver inexpensive users' training.
The www.m2mexpert.com site hosts a full range of education, consulting
and support services, and includes a virtual classroom capability for
delivering instructor-led classroom education over the Web. While manufacturers
usually prefer to keep their ERP systems in-house, many may opt to use
Made2Manage hosted applications for collaborative commerce, which is
available through www.m2mexpress.com portal.
- The company's
strong growth has all but stalled since the second half of 1999 (See
Figures 1 & 2). This has put it in the difficult position of working
with constrained resources, while executing a visionary strategy. Moreover,
an increasingly competitive market and declining market growth caused
the company to post disappointing results for five consecutive quarters
(See Figure 2). The company has eroded its financial position in the
last 15 months due to the combined effects of decreased license revenue
and ongoing R&D, although the 86% growth of license revenues in the
last quarter is encouraging.
Made2Manage's low market capitalization of approx. $12 million, which
is almost a third of its revenues, makes the Company a very attractive
acquisition target, while its low available cash resources ($4.7 million)
do not provide for any real expansion and defensive corporate initiatives.
The corporate viability metrics expressed as revenue per all groups
of employees, (R&D, sales and marketing, etc.) have been much below
the market's respective averages. Particularly disconcerting is the
low revenue per sales and marketing employee ($0.43M vs. $0.84M market
average in 1999) owing to its large direct sales force, which we consider
as a cost ineffective sales approach within the SME market segment.
Also disappointing is the low revenue per R&D employee ($0.37M vs. $0.75M
market average in 1999), which illustrates the difficulties smaller
vendors have keeping up with the latest market requirements to deliver
advanced product functionality.
native core ERP functionality across the board, particularly multi-site
planning and distribution functionality has not been recognized as a
differentiator in the market. While the latest product version (3.2)
promises significant functionality enhancements in that regard, Made2manage
is still perceived as a strong contender mainly for less-complex single-site
enterprises. In addition to the above product functionality gap, the
company does not exhibit much of a vertical focus.
Given the fact that its bigger competitors offer a sharp vertical focus
even to the precision of single Standard Industrial Classification (SIC)
codes within an industry, Made2Manage's fast and cheap implementation
track may soon be emulated. Furthermore, its product does not provide
many standard interfaces to other packages, which limits its ability
to penetrate the customer base of bigger competitors.
to its confinement to small discrete manufacturers, Made2Manage has
only a small market presence in general, reflecting insignificant brand
awareness and an undeveloped channel outside of the North American market.
This is further aggravated by the fact that its product exhibits minimal
multi-national capabilities and supports only the English language.
A result may be a number of missed opportunities as companies are increasingly
seeking global providers for its supply chain management and collaboration
- The company
has long depended on less sophisticated database and development technology
(Visual FoxPro), which has served the purpose of simplicity but has
recently become a liability for the reason of scalability and integration
issues for the higher end of the SME market. While its recently released
MS SQL Server version of the product may mitigate these concerns, it
might also exhibit problems related to its product immaturity. Furthermore,
its continued two-pronged product database strategy will inevitably
create some duplication of its R&D and Service and Support resources.
Also, while the company's focus on Microsoft's proprietary technology
and integration standards as its sole product technology standard has
benefits on one hand, on the other hand it can be an impediment for
future scalability and interconnectivity with other vendors' components
Moreover, as digital market places and e-business transactions follow
a path similar to EDI (endorsing specific EDI standards to transmit
data), Made2Manage faces the challenge of overcoming the notion of suppliers
adapting to multiple standards in order to support multiple customers.
To make things even more complicated, different marketplaces indeed
describe their transactions differently and cover different verticals
faces the challenge of delivering multi-site and supply-chain management
(SCM) functionality footprint extension, and delivery of vertical solutions
as planned. Executing these initiatives with its ever-thinning resources
will be a notable challenge. Any hiccups and delays in its product development
execution, possibly bundled with continued poor sales execution, may
put further significant strain on the company's performance.
2000 will continue to be challenging for Made2manage. We predict flat
revenues or only a minor growth (less than 10%) as the best scenario,
with a return to profitability in fiscal 2001 (60% probability). We
also believe that, within the next 12 months, the company will put less
emphasis on technological development and more on functionality enhancement
of its product suite (60% probability).
service and support revenue will contribute more than 60% of its total
revenue within the next 4 fiscal years (60% probability), based on the
company's readiness to integrate its customers to Internet exchanges.
For the next two years, more than 70% of license revenue will come from
its existing customers, who will want either to replace an old DOS-based
product or add new modules to an existing Made2Manage instance (70%
probability). Within the next 3 years, more than 95% of Made2Manage's
revenues will come from the North American market (60% probability).
its low market value, we believe that the company is an unlikely candidate
for acquisition (30% probability) by a competitor within the next 2
years because of its awkwardly broad functional scope, the result of
recent product alliances. No major acquisitions by the company are expected
in the foreseeable future either (30% probability). Instead, the focus
will be on interfacing with partnered applications, as well as on expanding
its own product functionality and offering new vertical industry solutions.
should further fortify itself within the lower-end ERP market in the
business in its existing customer base, by upgrading older versions
of software and by offering new extended ERP components.
expand its global presence, both by opening new subsidiaries and
by developing new affiliate partnerships.
more focused and pre-configured vertical solutions for industries,
and vigorously market its differentiating ASP and portals value
proposition to make Made2Manage attractive to resource-constrained
must remain committed to ambitious new product introductions and enhancements
(e.g., multi-site capabilities and transportation) and take more decisive
steps regarding its e-commerce vertical marketplaces delivery, possibly
through product alliances.
must conduct ongoing cost and organization scrutiny and identify opportunities
for further improvements. In fiscal 1999, the sales and marketing personnel
count, as a percentage of a total number of employees, was very high,
27%, compared to the industry average of 21%. Therefore, Sales and Marketing
and General and Administrative costs as a percentage of net sales in
1999 were at exorbitant 51%, whereas the industry average was 38%. The
company should, therefore, nurture and expand its indirect resellers
should promptly resolve product interconnectivity issues with other
vendors' products in order to attract divisions of large global companies.
It should also ensure the full Web-enablement of its entire product
portfolio and significantly enhance its multi-national capabilities.
target market, general single-site discrete manufacturing companies
and their divisions with up to $100 million-a-year revenue range and
up to 100 concurrent users per site, should consider the company's value
proposition, but avoid selecting it without looking at what the other
vendors have to offer. We generally recommend including Made2Manage
in the long list of vendors considered for an enterprise application
selection by the lower-end of mid-market companies. These companies
generally have a limited IT budget, a conservative IT strategy, and
less complex discrete job shop manufacturing, CRM and B2B e-commerce
collaboration requirements. The industries that would most likely benefit
from using its products are electronics, instrumentation, machinery,
fabricated products, and transportation equipment.
fast growing, and companies looking for a deeper ERP functionality may
benefit from evaluating other products at this stage. Organizations
seeking a Web-based solution and out-of-box functionality with little
or no re-engineering effort may want to inquire about the company's
ASP offering. Support, connectivity, ease of use, security, acceptance,
and scalability are only a few of the regular considerations. Companies
with more intricate business processes may want to inquire how Made2Manage
would deal with the issues of customizations and 3rd-party products
bundling in an ASP setup.
users of earlier DOS-based product releases that face stabilization
or discontinuation may benefit from querying the company's future product
migration path, service and support, and scalability strategy.
should insist on a contractual timeframe for delivery of a solution,
and seek reference sites (preferably in their vertical market space),
which have been successful with the product suite. Each e-business component
should be put through its paces using a well-documented set of requirements,
scripted scenario demonstrations, and rigorous reference checking. As
for the new added functionality through partnerships, users are advised
to ask for firm assurances on the availability and future upgrades timeframes,
and more detailed scope of combined product functionality.