Event Summary
Our
visit to the Ross Systems' (NASDAQ: ROSS), a provider of enterprise
management software and e-business solutions for mid-market process manufacturers,
Rossworld user conference at the end of October saw enthusiastic
customers, and not just because the conference was held in New Orleans. Our
overall impression is that these are happy, successful customers, which included
both long-term customers and a somewhat surprising number of new customers who
have selected Ross in the last year.
A
highlight of the event was the recognition of those customers who benefited
the most from their use of Ross' iRenaissance suite of enterprise applications.
Some of those receiving awards were Berner Foods, Inc., IVACO,
Inc., Bongards' Creameries, and Nellson Neutraceuticals.
Another highlight, illustrating Ross's focus on specific process manufacturing
vertical segments, was a series of Industry Focused Sessions. Each of these
sessions featured an outside Industry Expert who guided the session and offered
insights about the industry as a whole, plus a Ross' executive with expertise
in the industry segment.
Each Industry Focus Session also included customer panels made up of executives from a variety of functional areas within companies currently using Ross products. The panelists shared their experiences and discussed key issues affecting manufacturers. These industry discussions provided ideas and insights specific for the attendee's industry, including food & beverage, life sciences, chemicals, metals and natural products.
From these sessions, a couple of things became clear. First, Ross is fully committed to addressing the critical and unique requirements in each of its target industries, as the company is establishing productive relationships with the strategic visionaries as well as the practitioners in each vertical market. Secondly, Ross' customers in these industries view Ross as more than a vendor of software applications. Rather, executives from these companies view the relationship with Ross as more strategic in nature and expect Ross to be an enabler of their success. With a focused commitment in each of the key vertical markets, Ross has made it clear that it intends to assume that leadership role.
Conference Highlights
The
kick-off presentation by Rick A. Marquardt, Senior Vice President, discussed
Ross's financial success over the last several quarters and its plans for the
future. Ross's financial success was reinforced shortly after the user conference
when Ross announced its fiscal 2003 first quarter results. In very difficult
times for software vendors, Ross announced a 45% net income improvement over
the prior year's same quarter. The key indicator of long-term health, furthermore,
software license revenue, showed an increase of 17% over the previous year's
same quarter and 3% from the previous quarter (see Figure 1).
Figure
1.
Having
experienced serious financial difficulty in 2000 (see Figure 2) Ross has since
achieved a miraculous turnaround by posting six consecutive profitable quarters
with constantly improving license revenues. Although net loss of $9.6 million
in fiscal 2002 that compares to a net loss of $0.8 million in 2001 may seem
pretty harsh, it included a large $10.9 million, non-cash, non-recurring charge
for Q4 2002, which was due to the release of its next generation of process
manufacturing software and related discontinued sale of certain earlier vintage
product. Despite a broken streak of profitable quarters, particularly good news
is that software license revenue remains driven by strong demand from new name
accounts.
Figure
2.
Mr.
Marquardt further discussed the addition of Supply Chain Management (SCM) and
Customer Relationship Management (CRM) products to the iRenaissance suite. The
CRM and SCM products were announced earlier in the previous quarter, and have
already been licensed in both North America and Europe with customers including
Litehouse Foods, Sarah Brownridge Whole Country Foods,
Vertex and Italceramica.
Breakout
sessions focused on these new products with discussion of functionality, integration
and customer experiences. Ross' alliance with Prescient Systems for the SCM
offering was earlier duly analyzed by TEC, see Two
Highly Focused Vendors Team For Their Markets' Good. To close possibly the
last major outstanding gap in its offering, in August, Ross further announced
its partnership with Selligent (www.selligent.com),
a provider of CRM solutions, under which agreement, Ross Systems
will integrate the Selligent Sales, Marketing and Customer
Care Applications into its iRenaissance suite as iRenaissance
CRM.
Ross Systems will market the CRM applications worldwide and also has exclusive rights to market them to process manufacturing companies in North America beginning with August 2002. In addition to typical sales force automation (SFA) requirements, Ross' customers reportedly often face the challenges of multi-tier distribution and revenue channels and the need to enhance the value of existing customer relationships, and the Selligent CRM applications seem well qualified to address these issues.
Mr.
Marquardt and presenters in other individual sessions addressed the availability
of next release of iRenaissance. Highlights of the release include technology
and performance enhancements including Microsoft .NET architectural
framework features, CFR 21 Part 11 (Code of Federal Regulations Title 21) regulatory
compliance support (electronic records and signatures), and the ability to run
iRenaissance over the web.
Most
recently after the conference, in mid-November, Ross announced the availability
of iRenaissance Validator for pharmaceutical and biotechnology
companies in manufacturing or clinical trials. The product should reduce the
efforts, costs and risks created by increasingly stringent FDA (Food & Drug
Administration) regulations, as it provides the master action plan, templates
and test scripts needed to quickly complete the IQ, OQ, and PQ (installation
qualification, operation qualification and performance qualification) processes,
and clearly defines and thoroughly documents each step in a proven process to
predictably achieve and maintain validation.
When we asked the customers why they thought Ross was thriving even in these difficult times, we got consistent feedback. These are pragmatic mid-market companies and they told us that Ross is providing them with pragmatic solutions tailored for their industries (i.e., Food & Beverage, Life Sciences, Chemicals, Metals, or Natural Products). These customers do appreciate the deep functionality in the Ross applications and were very positive on the recent expansion in breadth to include SCM and CRM capabilities. Services, support and training also consistently received high marks from customers in terms of quality and the feeling of true commitment to customer success. International companies further cited Ross's global capabilities, including both market coverage and localization, as unique benefits.
An added bonus for attending the user conference Ross unveiled its new technology platform for its customers. The platform has not been publicly announced as of this writing so we cannot share the details. We can tell you though that it includes a zero-footprint, Internet-based client and a 100% web-based architecture underneath. It provides secure access to enterprise applications from any computer with an Internet connection and a web browser. We saw a contemporary, user-friendly interface that can be described as the "my Yahoo" portal rendition of enterprise applications.
Customer response across the board was strong -- while end users were excited about the ease-of-use capabilities, IT managers were excited about ease-of-deployment and reduced maintenance, and company executives were excited about the overall cost-reduction afforded by the new architecture. For existing customers, all of their current applications, standard and customized, are immediately portable to the new architecture. New customers and prospects of Ross can expect to leverage the deep, customer-proven functionality of iRenaissance, with a contemporary architecture that fully leverages the benefits of the Internet. Customers with legacy products represent about 15% of the total customer base and will continue to be supported as well as provided with migration paths and incentives to move to the current iRenaissance product line.
Challenges
Ross is however not without challenges. Taking an aggressive approach to establishing a leadership position in process manufacturing and specifically in its key industries means development of in-depth functionality and Ross might be attempting to tackle too many requirements at once. Enhancing and upgrading its core systems with industry-specific applications, integrating new SCM and CRM applications, and launching a new technology platform is a full plate.
Ross'
competition has also intensified lately. Although the process manufacturing
and consumer packaged goods (CPG) target markets have long been under-served
by traditional ERP vendors who primarily designed their products for discrete
manufacturing, the situation has been rapidly changing recently, with the process
ERP market becoming quite cramped with competitors. The recent revival of its
direct competitors such as Geac, Baan Process,
SSA GT/Infinium and especially of its nemesis Agilisys
that seems to be getting its house in order lately (see Agilisys
Continues Agilely Post-SCT), while hinting a strong opportunity, also reveals
the internecine war all the players face.
Therefore,
a pure process enterprise applications player like Ross does need to be able
to further differentiate itself from increasing competition both from the larger
players, particularly SAP, Oracle, J.D.
Edwards, Intentia, IFS, Ramco
Systems, Geac, SSA GT and QAD,
which have recently made significant in-roads in the relevant sectors, and from
a growing number of process enterprise applications incumbents like Agilisys,
Baan Process/Invensys, ProcessProMFG, Process800,
MAI Systems (with its CIMPRO product), and
Best Software (with its BatchMaster for PfW
product). In addition to many of these ERP players that offer supply chain applications,
the pure SCM competition will include AspenTech, i2
Technologies, Manugistics, Logility,
and WAM Systems. Although Ross' stable financial performance
and eliminated debt have been an impressive feat, its current cash situation
of less than $5 million still present mere a pocket money for some of its above
formidable competitors.
The
market will therefore be watching closely to monitor Ross' progress, as the
company has long come out of anonymity. Still, if recent success in difficult
times (see Ross
Systems A Bright Spot On A Difficult Enterprise Application Landscapeand
Ross
Systems' Focus Yields More Value For Process Manufacturers) can be used
to predict future performance, Ross' financial performance and customer success
provide strong evidence that Ross is succeeding
User Recommendations
Ross Systems is seemingly taking advantage of the market that still has a need for payback-justifiable enterprise business applications, but with a dearth of true process manufacturing oriented software providers. Enterprises in the food & beverage, chemicals, life sciences, metals and natural products industries worldwide should look closely at Ross Systems. Mid-sized companies should view it as a single source vendor for all ERP, SCM and significant portions of their e-commerce and CRM needs, while large companies might consider it as a single source vendor for divisional level systems and as a plant level provider to corporate level systems
It is suggested that evaluations of Ross and all other vendors be conducted at a detail level, looking at not only what a vendor does, but also how it does it. Only by looking closely at "the how" aspects during the process of scripted software demonstrations can a company understand which vendors can meet their specific demands. Since requirements differ significantly among different types of process manufacturing companies, users should focus on those functions that make their kind of process industry unique. From any vendor in the selection contest, do obtain in-depth demonstrations of those functional areas. Each e-business component should be put through its paces using a well-documented set of requirements, scripted scenario demonstrations that mimic the real-life business processes, and rigorous reference checking.
Existing Ross customers should be active in the special interest groups to continue to push Ross into even greater functionality for their industry. As for the newly added and/or anticipated functional footprint, users are advised to ask for firm assurances on the availability and future upgrades timeframes, and more detailed scope of enhanced product functionality. They should also inquire about any possible impact (or benefits) of migrating towards more advanced offering.
Very
detailed information about iRenaissance ERP is contained in
the ERP Evaluation Center
at http://www.erpevaluation.com.