MAPICS Moving On Pragmatically Part 3: Challenges

Challenges

For the last several months, MAPICS, Inc. (NASDAQ: MAPX), a global provider of extended ERP applications for world-class mid-sized manufacturers, has embarked on a painstaking process of producing a strategy going forward that would pragmatically blend the company's traditional values and success factors with new approaches to stay in tune with market trends.

All the products mentioned in Part One will have lost their former trademarks. The applications discussed in Part Two outside the core ERP backbones can or will be used atop of both ERP systems, and will commonly be referred as e.g., MAPICS Portal, PLM, or SCM solution. The above initiatives should definitely help offset an apparent dip lately in new sales for the company's erstwhile breadwinner the MAPICS ERP for iSeries (still somewhere known as MAPICS XA), in addition to expanding opportunities for the entire product offering. Furthermore, while having a broad functional footprint remains important, MAPICS has recently departed from its traditional practice of pushing' the sale of the plethora of its components (spanning the design, sell, source, make, deliver and service individual functional areas) onto customers.

Going forward, it will rather try to solve challenges for its customers and/or prospects in their quest of becoming world-class manufacturers (i.e., the uppermost echelon of companies, measured in revenue per employee, shareholder value, and operational efficiency). In other words, owing to its vast experience and knowledge of challenges and best practices within a narrow set of selected industries of focus, MAPICS will try to reverse-engineer the user's objectives into obtaining an optimal set of needed applications to fulfill these (in a manufacturer's jargon, MAPICS is doing either a sort of a pull' or a back scheduling' approach). The approach should focus on the customer's needs and will also possibly obfuscate any impending platform and/or product brand allegiances. As an example, if one would like to address the major issue of cutting the operations costs, there would be the following challenges to solve:

• Lack of integration across separate systems (e.g., order entry, manufacturing, purchasing, etc.)
  
  
• Planning without capacity ad available material considerations
  
  
• Decentralized of fragmented buying processes (e.g., disparate part numbers and unconsolidated requirements across multiple sites)
  
  
• Excessive manual transactions
  
  
• Arms-length and casual customer and supplier relationships, with lack of information sharing Lack of sales and operational planning (SOP), and
  
  
• Critical equipment maintenance (unplanned downtime).

To eliminate these, MAPICS would come up with the following best practices of world-class performance:

• Integration across the enterprise
  
  
• Concurrent capacity and material-based planning
  
  
• Centralized buying processes (with drop shipments to local plants)
  
  
• Reduce transactions and implement paperless transactions (via, e.g., bar-coding and other paperless systems)
  
  
• Develop long-term relationships with customers and suppliers
  
  
• Improve mid and long-range planning process, and
  
  
• Manage critical assets (e.g., by proactive scheduled preventative maintenance).

To fulfill these, MAPICS would suggest the following bundle of its products and services:

• MAPICS ERP (currently one of the two solutions depending on the industry in case),
  
  
• MAPICS SCM (former Thru-Put)
  
  
• MAPICS Portal
  
  
• MAPICS Maintenance & Calibration (former Maincor), and
  
  
• MAPICS Professional Services

A similar analysis would be applicable to remaining several major world-class manufacturing issues some mentioned earlier (e.g., for the electronics industry, these would be faster time-to-market, manage outsourcing, manage channel/customer expectations, improve product innovation, reduce lead times, manage commodity pricing, and visibility of business performance).

This is Part Three of a four-part article on MAPICS.

Part One covered recent announcements.

Part Two discussed the Market Impact.

Part Four will cover the Competition and make User Recommendations.

Revised Focus

Incidentally, a sharp vertical focus founded on strong horizontal back-office applications has long been MAPICS' modus operandi. However, given its recent new sales difficulties and the protracted confinement to the iServer platform have made the company revise and rationalize its traditional industries of focus. Although its customers would come from over 20 manufacturing verticals, going forward, the company will from now on focus on gaining mind share and delivering a total world-class solution offering for the following three industries: automotive/transportation, industrial equipment, and electronics. The rationale for selecting these has been based on estimated high growth prospects, large existing client bases, existing close products' fit, and perceived competitive landscape. The other industries will be pursued mainly opportunistically for the time being until the economical climate and buying patterns significantly change, when the company expects to expand its industry focus (e.g., into fabricated metals, CPG and medical devices).

MAPICS seems to have done its homework, and it can materialize it in terms of contracts it desires and deserves, look for much stronger MAPICS in the making. Fundamentally, its vision seems to be sound in that it will continue to stress discrete manufacturing functionality and service & support as its primary strengths and marketing weapons. While competitive costs (low and flexible software license pricing and implementation costs) and outstanding global service (proven fast implementations and customer loyalty) will remain important requirements for success, particularly in the lower end of the market, vertical focus will be the key factor for survival.

Winning extended-ERP products will demonstrate deep industry functionality and tight integration with best-of-breed bolt-on' products in a particular vertical. By configuring parts of the package in advance for a given industry and circumventing functions not required in that industry, vendors can shorten and ease the implementation process, as there is no need for customizations and tweaking. Software that combines industry-specific functionality with the flexibility to accommodate each company's unique processes goes a long way toward improving the functional fit and the speed of implementation. Another advantage lies in the fact that industry-specific, global enterprise solutions based on open architecture and proven technology standards facilitate faster integration of companies being acquired as part of a corporate growth strategy.

Execution is Critical

However, MAPICS remains at a critical point in time, where immaculate execution without much space for missteps will determine its future. Despite notable functional and technological initiatives, the biggest challenge for MAPICS and its affiliate channel remains the management of still dual flagship ERP product lines. Also, while the products may have their separate niches, they may in some instances be similar enough to confuse former separate MAPICS and Pivotpoint direct sales reps and value-added resellers (VARs) in selling the combined portfolio. The management team will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. It will also have to vigorously deliver an assuring message to the current customers about the support, enhancement, and migration plans for their respective products.

It is still likely that the sales channel will face some conflict in terms of market overlaps, as well as traditional association with a certain product line regardless whether it is the best fit for a certain opportunity. Not to mention the effort of cross-training in case of direct sales/VARs willing to forsake their attachments to certain product lines. The company will have to further fine-tune its sales strategy of how to optimize the sales of two product lines with somewhat overlapping functionality and avoid a likely internal competition, while resolving the need of showing 'one face' to customers.

MAPICS' initial post-merger product strategy had been to offer two separate product lines, each providing a best in class solution optimized for the target platform. But segmenting the market into J2EE/Linux and .NET territories may not always be practical since deciding which product to present in a new opportunity may happen to be subjective. One apparent solution to this problem would be to additionally align the products with the above vertical industries of focus. However, in addition to some notable overlaps, what to do in a situation where, e.g., ERP for iSeries would be functionally stronger fit, but the customer is a staunch Unix/Oracle technology follower? Conversely, what to do when ERP for Extended Systems is a good fit, but in geography which language the product currently does not support? Namely, ERP for Extended Systems still exhibits minimal multi-national capabilities since its current support for six languages remains very modest compared to iSeries' support for 19 languages.

In addition, the following capabilities are also the product's weaker areas compared to its iSeries counterpart: shop floor control (tooling requirements, MES, PDM, hazardous material reporting, kitting), sales force automation (SFA), distribution requirements planning (DRP), and project management. Moreover, both products may not be a good fit for heavy distribution-oriented businesses that need a product to support and manage multiple distribution centers. Distribution functions are still centered on order management and shipping, and lack advanced native features such as logistics and warehousing management.

Furthermore, MAPICS products had long been deployed to a very narrow set of databases, i.e. former MAPICS XA could only run on IBM DB2 database, whereas former Point.Man could only run on Oracle database. Not providing support for Microsoft SQL Server will have resulted in a number of missed opportunities having known the MAPICS' focus on the cost conscious mid-market segment. While using Oracle stored rules and procedures had provided scalability (albeit less important given the size of enterprises former Pivotpoint had targeted), it may now inhibit object development and cause database-independent operation to be difficult. While the new technology framework MAPICS has recently embarked upon will provide both ERP foundations run on all the three DB platforms, MAPICS will likely have to fund one version of each product for SQL Server, for DB2 and for Oracle. While it is possible to limit the differences between these versions, inefficiencies in product quality, performance and service and support may be expected, partly given lack of real life implementations on new databases.

The above facts have likely consequently led to the situation with former Point.Man's poor acceptance by the MAPICS' indirect channel that predominantly has an MAPICS XA-based skill-set and installed customer base. To that end, the MAPICS initiative to unify the product brand might in the long run remedy the situation. The unification of brands typically means more effective marketing, which remains another big need at MAPICS. While there will be an initial confusion about brand recognition associated with the product names and logos, this realignment is a good first step towards MAPICS' ability to deliver a value proposition tailored to the customers' unique needs. Still, there is a long way to go before the company will have a large repository of components that can be assembled exactly to a customer's specifications.

While the idea to enable the R&D team to gain economies of scale by building common application components as commodities that can be deployed within the entire product portfolio is tempting and promising in a very long run, the flagship back-office product lines will likely remain on separate tracks for quite some time to come, owing to their disparate proprietary technologies and respective user bases that are still using these.

This concludes Part Three of a four-part article on MAPICS.

Part One detailed recent announcements.

Part Two discussed the Market Impact.

Part Four will cover Competition and make User Recommendations.