Event
Summary
Symix Systems, Inc., a leading mid-market enterprise applications vendor,
announced that it will seek shareholder approval at its annual meeting
on November 8, 2000 to change the name of the parent company to Frontstep,
Inc. Following approval, the company's common stock will be traded on
the NASDAQ National Market System under the symbol "FSTP."
The
company currently operates three primary sales and service channels and
an e-business consulting practice. The first channel, which will continue
to operate under the Symix name, offers a comprehensive business system
solution - e-business and ERP - to manufacturers through the company's
existing global direct sales force and business partners. The second channel,
which operates under the Frontstep name, markets the company's e-business
products through third-party channel partners such as consulting and services
firms, enterprise software resellers and ASPs. A third channel, also operating
under the Frontstep name, consists of a specialized staff that sells and
delivers e-business solutions to distribution companies and trading exchanges.
An e-business consulting practice - brightwhite solutions, inc. - provides
strategic e-business consulting and deployment services.
"This
name change to Frontstep signifies our new business model, the new products
and services we offer and the new opportunities we are pursuing," said
Stephen A. Sasser, president and chief executive officer of Symix. "We
have defined and are delivering a complete suite of e-business products
and services based on a network-centric, collaborative model. We've established
new sales channels, and we're offering new methods of software delivery
and pricing for customers. We've also added new e-business consulting
and services capabilities. We remain committed to our manufacturing enterprise
customers and are excited about the new capabilities we offer them. We
will continue to extend the capabilities of their business systems to
capitalize on the new opportunities and technologies surrounding the Internet."
The
company claims to have already enjoyed a number of e-business successes.
It forged partnerships with e-procurement leader Commerce One and application
service provider Agilera, and delivered products based on those partnerships.
It signed on more than 10 e-business partners to resell the Frontstep
E-business Suite - including resellers and implementers of competitive
ERP systems who will use Frontstep software to provide e-business solutions
for their customers. The company delivered e-business solutions or initiated
projects with more than 100 customers, including several trading exchanges
and "dot-com" companies. It also raised $13.6 million in funding for its
e?business initiatives from Morgan Stanley Dean Witter Private Equity
Group and Updata Venture Partners.
Earlier,
on September 7, Frontstep, Inc. and MOMENTIX, a provider of Internet technology
solutions for trade shows, announced a strategic alliance. As part of
this relationship, MOMENTIX will integrate Frontstep's eCRM technology
into its suite of Web-based trade show management solutions. The new MOMENTIX
offering will be marketed as DigitalCustomer, a Web-based customer management
system built specifically for the trade show industry. With DigitalCustomer,
trade show managers can more effectively manage a show's sales, marketing
and operational points of contact.
Also,
on August 9, Frontstep announced that Emerging Vision Inc. has chosen
Frontstep to provide supply chain and transaction processing for Emerging
Vision's trading exchange. The exchange, still under development at that
stage, is designed to facilitate business-to-business (B2B) exchange of
goods and services in the optical industry. Emerging Vision will use sales,
purchasing, and accounting software from Frontstep to process transactions
initiated on the trading exchange. Emerging Vision will also use Frontstep's
workflow automation solution to integrate these back-end functions with
front-end applications on the exchange, as well as with buyer and supplier
systems. The resulting integrated B2B information systems will provide
an effective supply-chain network for Emerging Vision's trading partners.
Emerging Vision will also use Frontstep's CRM software to support its
own marketing, sales, and customer service efforts. Frontstep will be
working closely with other well-known industry leaders, including Rare
Medium, Microsoft and webMethods, to develop critical components of Emerging
Vision's B2B optical portal.
However,
On July 27, Symix Systems, Inc. announced disappointing financial results
for the fourth fiscal quarter ended June 30, 2000. The company reported
a net loss of $9.5 million for the quarter, including non-recurring charges
of $3.0 million for divested operations. This compares to a net income
of $30,000 for the same period last year. Total revenue for the quarter
was $31.1 million, compared to $37.8 million for last year's comparable
quarter. For the fiscal year, the net loss was $10.1 million on total
revenue of $129.0 million. In the previous fiscal year ended June 30,
1999, the company realized a net income of $4.0 million on total revenue
of $129.1 million (See Figures 1 & 2).
Figure
1.
Figure
2.
"We
are disappointed in the overall revenue performance for the quarter. A
significant amount of anticipated traditional enterprise software sales
were deferred beyond June 30," said Stephen A. Sasser, "Software revenue
for the quarter declined 24 percent from last year's comparable quarter
to $15 million because of depressed market conditions for traditional
enterprise systems. We are making the changes necessary to focus resources
on the most important aspects of our business, those areas that will drive
future growth and return the business to profitability in the second half
of the current fiscal year. We are on track with our e-business plans
and are gratified by the initial market acceptance of what we have articulated
and delivered to date."
Symix
has also made several structural changes to reallocate resources to core
e-business initiatives. The company has discontinued efforts to enhance,
market and sell the Mongoose software-development toolset. In the fourth
quarter ended June 30, 2000, Symix sold its FieldPro standalone field-service
management software subsidiary, including the source code and customer
base, maintaining the right to incorporate the field service functionality
into its e-business suite. Non-recurring charges associated with these
restructuring efforts were $3.0 million.
"This
is a critical time for the company, and we are focusing our talents, efforts
and financial resources toward the execution of our e-business vision,"
said Sasser. "We are aligning the business to ensure our success as a
leading B2B provider in our manufacturing and distribution markets."
Market
Impact
After stellar 1998 and 1999 in which Symix, a traditionally strong player
in the mid-market ERP space, achieved an impressive growth, resolved some
functionality weaknesses in its own product and successfully partnered
with and/or acquired vendors that offered complementary functionality,
the company has recently felt the malaise of the shrinking ERP market.
However, it has made every effort to keep abreast of the enterprise applications
market trends by providing both front- and back-office solutions with
the initial release of eSyte, its family of e-Business applications, in
November 1999. This new venture into its non-traditional markets was not
unexpected. Symix, like many of its traditional ERP competitors, has been
negatively affected by heavy investments in new e-business product offerings
even as the sales of traditional ERP products decline.
Symix
has traditionally focused on delivering extended enterprise management
systems to mid-market manufacturers and distribution companies via direct
sales channels. In January 2000, it created an e-business subsidiary,
Frontstep, to accelerate delivery of B2B products and services to additional
target markets via new sales channels, including application service providers
(ASPs) and online trading exchanges. Through the brightwhite services
group, the company plans to provide the design and deployment services
required by customers to plan, build, launch and advance an e-business
strategy. Symix reliance on its direct sales and undeveloped indirect
channel, which has been a flaw in its otherwise successful mid-market
strategy in the past, should thereby be mitigated to a degree.
Symix
has been one of the more vibrant vendors dedicated to the industrial mid-market.
The company has long introduced its concept of Customer Synchronized Resource
Planning (CSRP) to expand its back-office ERP functionality and focus
on customer needs by acquiring Pritsker Corporation, an APS vendor, in
1997. Symix Systems' initial benefits from on-time release of its fully
integrated supply chain software (CSRP) have recently been counteracted
by competitors' similar offerings. As an example, MAPICS has abandoned
the OEM agreement with Symix in favor of the Pivotpoint Thru-Put product
it recently acquired.
Besides
its flagship traditional ERP product SyteLine, suitable for certain discrete
manufacturing markets like industrial equipment, specialty vehicles, electronics,
packaging, fabricated metals, and furniture, Symix offers a number of
other products. The company launched SyteCentre, an ERP suite for mid-market
repetitive consumer goods manufacturers in February 1999. For now, SyteCentre
is only available in the US.
In
June 1999, Symix purchased Distribution Architects International (DAI),
a supply chain management vendor, and added the SyteDistribution distribution
management suite to its products. The product features sales order management
and forecasting, inventory management, distribution planning, warehouse
management, and business intelligence functionality, and has been designed
to work closely with eSyte. As mentioned earlier, in November 1999, Symix
introduced eSyte, a suite of e-business products and services created
for mid-market companies. It is soon to be re-branded into eStep.
e-Syte
(soon to be eStep) Business Products
eSyte is an e-business, Internet-enabled suite targeted at manufacturers,
which integrates back-office systems, including Symix's SyteLine and SyteCentre.
It also integrates most ERP, CRM, APS, supply chain, business and financial
systems. It is an impressively comprehensive suite of web-based products,
either as stand-alone or complementary to both SyteLine and SyteCentre.
These e-business products include:
- eSyte
Customer Center provides a storefront to sell products and services.
It offers complex order management and fulfillment capabilities, including
sophisticated product catalog features, product configuration and available-to-promise
(ATP) capabilities. Other notable features available with the Customer
Center module are: product search, request for quote (RFQ), catalogues
with pricing and updated inventory, and order status forms.
- eSyte
Channel Center (including eCRM) provides Internet channel support
for sales representatives and dealers. Through multiple customer views
from the Customer Center, the Channel Center provides the sales organization
with order management, product configuration and ATP capabilities aimed
at a manufacturer's suppliers. Channel Center also is a web-centric
CRM solution providing marketing automation and sales and services management.
- eSyte
Procurement Center provides Internet procurement for company-wide
purchasing. Through its relationship with Commerce One, a leader in
global trading exchanges, Symix delivers Commerce One's eProcurement
software, BuySite, and access to Commerce One's MarketSite, the largest
trading network of buyers and sellers in the world. The Procurement
Center also can provide access to other trading communities such as
E-Steel and works.com. It is envisioned that users will have a range
of B2B service providers integrated into their ERP desktops to allow
for automated supply chains and production lines. They can then search
for more suppliers and get volume discounts when sourcing raw materials,
place and confirm purchase orders and process them.
- eSyte
Supply Chain Center provides real-time, Internet-based synchronization
of manufacturing, distribution and external supply to customer demand.
The system streamlines the planning process by providing real-time order
promising, dynamic synchronization, real-time intelligent messaging
and analysis in both single-site and multi-site, multi-ERP environments.
- eSyte
Intelligence delivers the infrastructure for collecting Web and
enterprise data. Through its relationship with Cognos, Symix provides
multidimensional analysis, business performance reporting and business
modeling.
- eSyte
Active Link provides messaging and workflow through e-mail to effectively
support a collaborative environment within the enterprise and outside
the enterprise with customers and suppliers. By leveraging advanced
workflow and data transfer technology, XML and SOAP technology and Microsoft's
BizTalk Framework, Active Link connects, automates and streamlines work
processes between the Frontstep E-business Suite and the transaction
enterprise business system. The Frontstep E-business Suite is independent
of the transaction enterprise system and therefore can be integrated
with non-Symix ERP systems through its messaging capabilities.
After each
module is integrated with a back-office system, discrete manufacturers,
their customers and suppliers, will be able to use the Internet to order
materials, initiate manufacturing processes and deliver products. We predict
that more than 20% of Symix future revenue will be driven by eSyte within
the next 18 months (60% probability).
How
Frontstep Fits In
Responsibility for delivering new e-Business systems lies within a new
Symix subsidiary called Frontstep. The Frontstep organization, announced
in January 2000, has been busily rounding out its e-Business product and
strategic consulting service offerings both through acquisitions, internal
development and partner relationships. These products and services have
still been brought to the manufacturing markets under the Symix brand
name. Here are the most prominent events during the organization's hectic
first few months (Note that some of them have been studied more thoroughly
in pertinent TEC news analyses):
- On February
10, Frontstep acquired Profit Solutions, Inc. (PSI) and its eCRM applications.
The new Web-based product provides marketing automation, sales management,
service management, and business intelligence functionality. (For more
information, see Symix
Expands Its Product Offering While Remaining Profitable)
- On February
18, Frontstep announced a partnership agreement with Commerce One, a
leading provider of e-commerce systems. Under terms of the agreement,
Frontstep customers can access Commerce One's MarketSite Global Trading
Portal to buy or sell products and services worldwide, and leverage
new purchasing management capabilities.
- On March
28, Frontstep signed agreement with Agilera.com, an ASP provider, to
provide e-Business applications in a hosted environment.
- On April
3, the company announced the eSyte product suite. (For more information
on the above-mentioned events, see Symix
Systems' Slips Into Red During Its E-Commerce Transition)
We believe
the company has aptly articulated an e-commerce vision that should have
an appeal to its mid-market users. In a nutshell, the mission is to deliver
tightly integrated traditional ERP systems (not confined to only Symix'
ones) and new e-Business components. The company's focus on the mid-market
in make-to-order and configure-to-order discrete manufacturing has not
been changed, however. While Symix has been promoting the concept of an
integrated solution, including both ERP and e-Business components, the
company is also pursuing stand-alone sales of its e-Business offerings,
both to manufacturing companies using a different back-end system, and
to organizations outside of the manufacturing industry, to a lesser degree.
System
Architecture
Moreover, Frontstep/Symix seems to have grasped underlying e-business
customer needs and business process intricacies while most of its competitors
have yet to figure those out and are mostly at the stage of providing
simple Web storefronts. Its comprehensive e-business offering, individual
parts of which have been described above, is generally available. Very
notable is the underlying Digital Supply Chain Network Architecture (DSCNA),
an open and formal framework, envisioned to provide many-to-many workflow
and messaging middleware functionality, both within an enterprise (internal
suppliers and customers) and beyond enterprise borders (external business
partners). The architecture consists of the following nine layers:
- Semantic
layer - provides the meaning of an entity or message;
- Content
layer - determines what an entity or message is;
- Application
layer - determines what the status of an entity is;
- Process
layer - determines what to do with the entity or message;
- Directory
layer - determines where to send the entity or message;
- Transport
layer - determines how the entity gets to its destination;
- Communications
layer - determines which network entity uses, ISP or VAN;
- Storage
layer - determines how the information is stored; and
- Physical
layer - determines which devices are used to move and access information.
Frontstep
has identified and defined the essential processes to conduct on-line
commerce. By understanding the transactional underpinnings of e-commerce
it has built a methodology to support a robust commerce solution. Frontstep's
eSyte (eStep) solution combines business logic with the strength and brand
of Commerce One's applications on a Microsoft platform. Further, embracing
XML and an Application Service Provider distribution model the solution
is poised to scale as the industry evolves. Should the company choose
to publish its transaction architecture, it would serve as a strong educational
tool within the market place.
Frontstep
Challenges
Brand Recognition: Symix' recent name change to Frontstep will
require a strong marketing initiative to inform new and existing clients
about the company.
Public
vs Private exchanges: Digital procurement solutions are becoming more
prevalent in multiple industry verticals. However, organizations must
decide if a public exchange, a private sales network or a combination
of the two serve the company's needs. This will require additional planning
and resources.
Evolution
of Standards: As with B2B transactions, the adoption of mutually understood
data and standards improve efficiency. Should new or modified versions
of existing standards evolve the solution set will need to accommodate
the changes. This requires continuous attention and possible application
modification.
Microsoft
only solution: While API's and XML promise to deliver technologically
agnostic solutions, mass adoption of a Microsoft only solution may still
represent sticking point in some organizations.
Frontstep
Strengths
Focused solution: Frontstep has developed a technically proficient
solution utilizing robust tools on a single platform.
Tight
integration among partners: By choosing brand name, industry accepted
partners the application suite leverages proven technology.
Well-defined
transactional methodology: Frontstep has identified and defined digital
transactions down to their elemental levels. The creation of business
rules to accommodate the transactions combine to make a powerful/adaptable
commerce solution.
ASP-delivered
solution: Delivering their solution via the Internet lowers the threshold
of entry and offers potential clients increased options.
Overall
Analysis of Symix
While there may be a reason for concern due to declining revenue, undervalued
market capitalization and a tainted profitability track, there is no real
cause for Symix users' jitters. We concur with Symix' justification of
its loss and also believe it had no choice but to extend its foothold
in the coveted small-to-medium (SME) ERP market segment and to fill the
gaps and/or diversify its product portfolio. We also believe that these
moves have been prudent and in tune with the current ERP market trends.
We also agree with Symix' plans of enhancing its core ERP product and
continued emphasis on integrating eSyte components with other back-office
systems. The openness and interconnectivity are one of the most important
tenets of competitiveness within the SME market in the new Internet economy.
However,
the entire company will be faced with some notable challenges.
First,
it will have to execute full integration of the newly released applications
with a slew of its back-office products if it wishes to mine its large
customer base.
Second,
the new products will further complicate the manageability of Symix' portfolio
of product suites that currently run on disparate platforms. The Frontstep
E-business Suite, SyteCentre, and various supporting modules for both
SyteLine and SyteCentre such as advanced planning and scheduling (APS)
and sales and order configuration, are written in C++ programming language,
operate in a Microsoft Windows NT operating environment and use SQL as
a database. On the other hand, the core enterprise system, SyteLine, operates
in either a Windows NT or UNIX operating environment and is written in
PROGRESS, a proprietary programming language licensed by Symix from Progress
Software Corporation. Dependence on Progress Software's continued viability
makes Symix SyteLine product development future rather vulnerable and
we are aware of its efforts to converge its products so that they run
on identical platforms in the foreseeable future.
Third,
the company faces the challenge of delivering its very ambitious undertakings
as planned and creating greater market recognition (mind share) for eSyte
outside of its current customer base. The company will have to give a
serious thought to how to best utilize its current sales & marketing resources
to sell its major product lines. Symix might have to attempt to create
mind share within the industries it had not targeted in the past (e.g.,
healthcare, hospitality/service, financial services), given that its current
narrow manufacturing focus does not grant a significant future growth.
There is an ever-increasing competition in the Small-to-Medium Enterprises
(SME) market within the discrete manufacturing segment of the ERP market,
with the intrusion of Tier 1 ERP vendors into an already crowded space.
Time will tell whether Symix will be the one that will be Stepping at
the (fore)Front of the pack.
User
Recommendations
Existing Symix' customers should certainly consider the new offering,
but avoid selecting it without looking at what the other vendors have
to offer. We recommend identifying your clear e-business strategy and
conducting a thorough comparison-shopping, at least for the negotiation
leverage sake.
As
for potential customers, We generally recommend including Symix Systems
in a long list of an enterprise application selection for mid-market companies
(with $30M-$500M in revenue), based on its broad product portfolio and
understanding of its target markets' needs. Symix should be included on
a short list in any selection within the SME market where discrete make-to-order
manufacturing and distribution modules are the main pillars of an enterprise
application. The industries that would most likely benefit from using
Symix products are industrial & consumer electronics, industrial equipment,
consumer products, fabricated metals, and furniture & fixtures, containers
& packaging, and consumer goods.
As
with all new releases, users should employ a critical approach in their
evaluation of eSyte and require all potential vendors to demonstrate specific
business processes. Though demonstrations do not guarantee a trouble-free
implementation, they can go a long way toward helping users understand
how the software might behave in their environments.
Future
clients are also advised to request the company's written commitment to
promised functionality, length of implementation, and seamless future
upgrades, particularly for recently announced partnered offerings. One
area of otherwise good overall Symix' service & support that the company
has not always performed well in the past is new release quality. The
company's readiness to provide a number of reference sites where the installation
of its partnership-enhanced product has gone without major glitches would
additionally alleviate existing anxieties within users' community.
The
following are only some of the issues associated with enterprise applications
integration (EAI) that users should be aware of: different security systems
and keys, package interfaces that do not provide the information in a
preferred format, systems may operate in different time zones and be geographically
dispersed, scalability, performance, disaster recovery and contingence.
Current
and potential users may want to inquire about the company's plans regarding
Internet marketplaces in their respective industries. While the Symix
technology platform is expected to make it easier to connect the components
to the Internet as well as to third-party applications, and the new platform
makes use of XML and industry specific communication standards, being
all things to all people is very unlikely. Companies outside of the above-mentioned
industries may benefit from evaluating eSyte components on a stand-alone
basis for their e-business needs and to leverage that information against
other vendors in the selection. Remotely hosted Internet solutions may
offer cost effective applications to small or mid-sized organizations,
bearing in mind necessary customizations' ramifications.