Systems, Inc. is a privately held provider of Enterprise Resource Planning
(ERP) systems for the small-to-medium enterprises (SME) market. Founded
in 1978, with headquarters in Minneapolis, MN, the privately held company
generated $23.1 million in revenue for fiscal 1999 (6% revenue growth
compared to 1998).
its inception, ROI Systems has dedicated its resources to providing software
solutions to discrete manufacturers, with particular focus on the electronics
industry. Its sole product, called MANAGE 2000, automates and manages
business processes across the supply chain. It runs on Windows NT, Unix,
and IBM AS/400 and integrates more than 40 applications for manufacturing,
planning, engineering, finance, sales, and service. MANAGE 2000 offers
the following technologies: a nested relational database management system
(RDBMS), fax & e-mail, EDI (Electronic Data Interchange), workflow, and
automated data collection. It is ODBC (Open Database Connectivity) compliant,
which provides for integration with applications such as Microsoft Office,
CAD, import/export, and MES (Manufacturing Execution Systems) software
products. The n-tier architecture, which was announced at the users conference
in April 2000, will be incrementally added to the product beginning in
the fourth quarter this year.
Trajectory and Strategy
ROI Systems is a conservative, North America-centric, discrete manufacturing
small-to-medium enterprises (SME)-focused ERP vendor. Over past two decades,
it has shown a commitment to deliver solid manufacturing functionality
and superior customer support, with the consequence of modest growth and
cautious new technology introduction. ROI sells and supports its product
through its eight offices in the U.S. and business partners located throughout
the world. By fiscal year end 1999, the Company had more than 600 customer
sites, primarily in North America.
expect ROI System to continue its focus on the lower-end of the ERP mid-market
(companies with $5 million - $250 million in revenues), by maintaining
and enhancing existing functionality of its MANAGE 2000 solution. The
product will likely be enhanced through 3rd-party alliances in the contact
management and marketing automation areas of Customer Relationship Management
(CRM). We also expect the company to continue expanding Internet deployment
that supports business-to-business (B2B) e-commerce and supply chain collaboration.
Additionally, ROI systems will invest more aggressively in sales and marketing,
international business expansion through distributors, and will seek to
become more verticalized, concentrating on the electronics and medical
- ROI Systems
has developed strong discrete manufacturing functionality for the Small-to-Medium
Enterprises (SME) segment of the market. Its Product Configurator, Repetitive
Manufacturing, and Field Service & Maintenance modules are recognized
as among the best in the industry. Moreover, ROI began delivering business
intelligence functionality and Windows NT capability before most of
its direct competitors.
- ROI is
generally very competitive in speed of implementation, total cost of
ownership (TCO), and price/performance ratio. Moreover, the company's
modus operandi is to retain its customer base and keep it enthusiastic.
It makes every effort to ensure an easy and bug free migration path
when introducing new technology and/or product releases. Very impressive
is the fact that all its customers are running on the latest product
version release, which relieves the R&D department from the burden of
maintaining old and new codes concurrently. Its product also has good
scalability within its target market segment.
we cannot disclose more detailed financial data due to the company being
private, we can state that ROI Systems has been a stable company and
has exhibited a solid long-term positive financial track record. It
has possibly the lowest collection period (DSO) of all vendors in the
space, less than half the industry average of 110 days. It also has
a low staff turnover and has shown a serious commitment to R&D (approximately
20% of revenue reinvested), while remaining debt-free.
- ROI Systems
is confined to discrete manufacturing markets and does not support process
manufacturing. This does not provide ROI much maneuverability within
an ERP market with a declining growth rate. Moreover some modules offer
only basic functionality within its "native" discrete manufacturing
area (e.g., job shop manufacturing, quality management, project management,
and warehouse management). Further, there is no human resources module.
to its slow growth, ROI 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 it supports only the English language. A result may be
a number of missed opportunities as companies are increasingly seeking
global partners for their supply chain management requirements, despite
the company's claims that it has deliberately chosen to pursue its narrow
niche and is happy with its position.
- The company's
conservative and prudent R&D strategy, combined with its content in
maintaining a very modest growth rate, has caused it to trail the market
with respect to technological development and innovation. ROI has only
recently started considering future initiatives regarding delivering
customer relationship management (CRM) and e-commerce functionality,
while it has seemingly been inactive regarding applications hosting
and Internet exchange (marketplace) initiatives. Furthermore, its product
has not been fully Web enabled and does not provide many standard interfaces
to other packages. Finally, while its service & support is very good,
it is not leading edge in terms of technology; support has primarily
been delivered traditionally on customers' sites or over the phone.
The company has, however, indicated the availability of Internet delivery
in the foreseeable future.
- ROI Systems
will not achieve more than 15% - 20% average annual growth rate during
the next three years (70% probability), based on its limited market
segment and conservative new product and technology introduction. The
fact that ROI can grow at all is based on our assumption that a few
thousand legacy systems within ROI's target industry are yet to be replaced.
- We believe
that, within the next 12 months, the company will have to either acquire
(25% probability) or partner with (75% probability) vendors whose products
would significantly enhance its customer relationship management (CRM),
e-commerce (Web Storefronts, e-procurement and marketplace exchanges),
and supply chain management (SCM) capabilities. The potential alliance
candidates for eCRM functionality are GoldMine, Pivotal, or SalesLogix,
while Adexa, WebPLAN and Synquest are candidates for a SCM alliance.
the next 3 years, more than 90% of ROI's revenues will still come from
the North American market (70% probability). Due to increasing competition
and visibility from its publicly traded competitors with significant
resources, we believe that the company will have to decide to either
go public (25% probability) or to seek additional capital (45% probability)
within the next 18 months. Failing to do so (35% probability) will put
ROI at a disadvantage compared to its competitors against the backdrop
of its above-mentioned challenges, particularly its international presence.
Since its inception, ROI Systems has focused on discrete manufacturing,
and has not developed any process manufacturing expertise. Current ROI
focus, resources and corporate culture make functionality diversification
an unnecessary option at this stage. Therefore, we recommend the following:
- ROI Systems
should promptly resolve product interconnectivity issues with other
vendors' products in order to attract the divisions of large global
companies. It should also expedite the full Web-enablement of its product
and significantly enhance its multi-national capabilities.
- ROI Systems
should expand its visibility within the Small-to-Medium Enterprises
(SME) market segment in the following ways:
business in its existing customer baseby offering new extended ERP
modules and enterprise applications. Additionally, expand business
by preying on sites with failed implementations of competitors'
expand its global presence, both by opening new offices and developing
new affiliate partnerships subject to availability of language support.
more new, focused and pre-configured vertical solutions (e.g., automotive,
furniture, consumer goods, etc.), and offer application outsourcing
to make MANAGE 2000 attractive to resource constrained smaller enterprises.
must remain committed to new product introductions and take more decisive
steps regarding extended ERP applications delivery, possibly through
product alliances. We also encourage the company to consider undertaking
more aggressive marketing campaigns concurrently with these developments;
cut-and-dried success story articles in a couple of professional magazines
seem somewhat insufficient compared to a spate of high-sounding press
announcements by its main competitors.
- We generally
recommend including ROI Systems in a long list of an enterprise application
selection to lower-end of the mid-market companies (with $5M-$200M in
revenue) and divisions of larger North American enterprises (or companies
from English-speaking countries), which have limited IT budget and conservative
IT strategy, and have significant discrete manufacturing requirements,
while currently not needing complex CRM, supply chain and B2B e-commerce
- ROI should
be included on a short list in any selection within the SME market where
configure-to-order assembly and field service modules are the main pillars
of an enterprise application. The industries that would most likely
benefit from using MANAGE 2000 are electronics, industrial equipment,
consumer products, and medical devices.
and companies looking for a broader functionality beyond traditional
ERP boundaries from a single vendor may benefit from evaluating other
products at this stage.