PSI AG To Become More Germane Globally Via Relevant Partnership

PSI AG To Become More Germane Globally Via Relevant Partnership
P.J. Jakovljevic - January 12, 2002

Event Summary

On December 19, Relevant Business Systems (www.relevant.com), a privately held ERP vendor for small to medium discrete complex manufacturing companies and PSI AG (Neuer Markt: PSA 2, WKN 696 822), a German provider of ERP solutions in the fields of energy, goods and information, announced that the two companies have entered into a partnership agreement. Consequently, the two organizations will be working together to extend their capabilities in the European, North American and Southeast Asian Markets. The arrangement reportedly involves close co-operation between the two companies that will allow both organizations to access the knowledge bases in the respective areas of specialist expertise that each possesses. In addition, they have agreed to pursue joint projects as well as provide facility and staff sharing arrangements to each other on independent projects.

'Both PSI and Relevant have similar business philosophies which will allow our organizations to work together effectively,' states Patrick Garrehy, President, CEO and Co-Founder of Relevant Business Systems. 'We both have incredibly strong products and offerings that compete in complementary market segments. This common approach to operations, combined with PSI AG's expansive target markets, should be beneficial to both companies.'

'Of Major significance is the potential that this relationship provides to both companies that allows us both to expand our presence in the key growth markets of the Asian-Pacific region, Europe, and North America' adds Dietrich Jaeschke, CEO and Founder of PSI AG. 'In the course of our negotiations, which began over a year ago, it became very apparent that by combining certain development, engineering, implementation and customer support resources our combined offerings provide us with an unmatched competitive advantage in today's challenging economy'.

Market Impact

At least at first glance, the partnership should be mutually beneficial, as the companies might thereby extend their combined market reach while complementing each other's respective product gaps and inferior areas. There might be a few compelling reasons for the alliance to be truly a partnership in practice and not just in name. The partnership has therefore reportedly been thoroughly orchestrated by the two companies' top managements over the course of almost 3 years of conversation and interaction. To that end, both companies pledge that instead of being yet another hyped PR item, this partnership will be the part and parcel of each organizations business plan.

There could be significant benefits for Relevant, the smaller and less visible partner, in this relationship. Limited financial resources, undeveloped global channel and brand recognition, which are almost non-existent outside the US, and limited product's global capabilities have been the challenges for the company to overcome so far. Having to deliver a number of functionalities through third-party solutions, which are natively offered by many competitors as a matter of course, may also deter some interface-adverse customers.

Given that Relevant's marketing efforts have only recently been ramped up in earnest, a larger, publicly established fellow ERP provider like PSI may be able to provide the invaluable exposure Relevant needs to accelerate it progress. PSI may also provide Relevant with the access to, and the means to deliver, many more of new functional modules and/or technologies to its existing and prospective customers in a much quicker manner than if it had attempted to do it on its own. Important should also be the additional global reach this alliance provides to Relevant in its quest to be better positioned and able to meet the needs of its multi-national existing and future customers.

On the other hand, the partnership should provide PSI with a foothold into the US market, which is something the company has long been looking to establish. In 1999, the German vendor had strong aspirations of its international expansion to boost the company from less than 200 customers into a significant ERP provider. However, both a lack of critical mass and of solid multi-national corporate financial software have stalled its erstwhile efforts in the UK and North America. Time will only tell how this new attempt through Relevant's alliance will pan out. PSI nonetheless remains a large European system house with an attractive, niche production and logistic solutions for the chemical and steel industries. Also, the company is a leading player in the European gas utilities market after it acquired the Gas Management Systems business of debis Systemhaus in 2000.

Moreover, Relevant may have much more to offer than meets the eye. The market has been well aware of the Pentagon's recent decision that the Joint Strike Fighter (JSF) plane will be developed and built by Lockheed Martin. A much less known fact is that Relevant Business Systems' INFIMACS II is the business management and execution ERP software used by Lockheed Martin to manage the JSF prototype project. Several years ago, when Lockheed Martin Skunk Works (LMSW) division embarked on the challenge of re-engineering its enterprise-wide business systems, it opted for Relevant's software and implementation expertise. Given the magnitude of the JSF contract, one should expect to hear more about Relevant and PSI within certain similar project-based and asset intensive industries.

Nevertheless, the job of gaining traction outside of the current customer base will by no means be easy for the alliance, as the competition will be fierce, and will tout their next to single-source offering within their large respective customer bases. Relevant and PSI have thereby encroached upon the stronghold of vendors like SAP, Oracle, Baan, Western Data Systems (WDS), Epicor Software, Mincom, Indus, Glovia, Friedman Corporation, Cincom Systems, MRO Software, and IFS. Still, the challenge of a concocted solution might not be that grave, provided it is transparent to the customer. The main ingredients of the 'transparency magic formula' are the tight integration and a single point of contact, which again points to having an immaculate channel with expertise in both product lines. The painstaking effort the two companies have reportedly invested prior to the official alliance announcements should bode well to resolve the above challenge, as well as to alleviate any products' overlap and the internal competition between the two companies sales forces and professional services.

User Recommendations

Organizations using Relevant INFIMACS II and PSI Psipenta back office applications that have respective product needs should react positively to this news. The combination allows these companies to address many of the extended supply chain needs with the added bonus of complex and asset-intensive industries specific solutions. Existing customers should evaluate the add-ons emanating from the alliance as a way to add value to their existing applications whether with an impending integration effort now or by waiting for the companies to supply a generally available integrated solution. Therefore, approach the companies to obtain the firm delivery schedule of intended combined offering.

Small to medium complex discrete manufacturing companies in Relevant and PSI respective industries of focus considering new enterprise solutions should place these vendors on their list bearing in mind what the other competitors can offer, possibly natively within a single product. These companies should consider the added functionality from this alliance for an addition to their requirements list. Some companies might find this combination as one holding significant value in terms of vertically focused product notwithstanding. Existing users of these two products that have been using other third-party modules should inquire whether this partnership would render these products obsolete/superfluous and consequently not further supported by either Relevant or PSI.

More comprehensive info for both current and potential Relevant users can be found in INFIMACS Becoming Ever More RELEVANT For Project-Based Industries