Epicor Reaches Better Vista From This Vantage Point Part Two: Market Impact

The announcements detailed in Part One are a part of the wider strategy and the product roadmap for the mid-market manufacturing industry, which was announced in March 2003, whereby development efforts for Epicor's manufacturing software solutions will focus on supporting discrete, mixed-mode manufacturers, a sector that encompasses the majority of Epicor's manufacturing customers today. The vendor believes that, with integrated end-to-end enterprise suites designed to help manufacturers increase collaboration with suppliers and customers, and improve operations throughout the value chain, its manufacturing software solutions are uniquely suited to support the needs of today's global manufacturers.

Although possibly not completely on an easy street (see Figure 2), it appears that Epicor is far beyond its most challenging days. Yes, its revenues have meanwhile shrunk both due to the soft market and divestitures, but so were the crippling losses, while staff reductions are left behind too, with likely profitable forthcoming fiscal 2003. The company deserves admiration for its traditional innovativeness and endurance despite a combination of hardships it has had to overcome during last several years.

To refresh our memory, Epicor Software Corporation, formerly Platinum Software, remains one of the largest providers of integrated enterprise software applications exclusively for mid-market companies as well as divisions and subsidiaries of larger global corporations. Founded in 1984 with headquarters in Irvine, CA, Epicor generated $143.5 million in revenue in fiscal 2002, which should still rank it amongst the twenty largest enterprise applications vendors in the world. The vendor currently has over 15,000 customers, and over 60% of the company's revenues come from consulting, maintenance, and other support services, while approximately 25% of its total revenue is derived outside of the US market.

Figure 2

Gerald Blackie, a former CEO of bankrupt software maker Heritage Computing, and two former associates founded Platinum Holdings in 1984. In 1985, they introduced the Platinum line of financial accounting software. In 1992, the company went public and changed its name to Platinum Software. After some trying years in the mid-1990s, the company reorganized itself by recruiting George Klaus as still ongoing CEO in 1996. With him at the helm, the company expanded into ERP applications through a number of acquisitions. In 1997, it bought CRM software developer Clientele Software and manufacturing and distribution software provider FocusSoft. These moves helped Platinum to a profitable fiscal 1998, its first in six years.

In late 1998, it bought much larger rival DataWorks Corporation (a mid-range manufacturing ERP supplier which with a history of acquisitions of its own, had a diverse set of products for different markets and/or company sizes), cut 15% of its workforce, and changed its fiscal year to December. In 1999, the company settled a trademark lawsuit, which was filed in 1997, with Platinum Technology (now part of Computer Associates), and changed its name to Epicor Software Corporation.

Unfortunately, until very recently, Epicor had not had to shuffle the many brand names/products that have emerged during last few years from now proverbial merger of its ancestors, former Platinum Software and DataWorks. DataWorks had also grown primarily through acquisitions, and created a single company out of a number of former smaller ERP vendors. After the merger with Interactive Group in 1997, DataWorks entered 1998 with overly ambitious plans to sell and support its extensive family of products, including six different ERP applications and an MRO (Maintenance, Repair & Overhaul) application. While former DataWorks was one of the best financially performing ERP mid-market vendors at the time, it had ventured far beyond its abilities. The foundation of DataWorks' mid-market competence, which Epicor is now building on too, was its ability to deliver low-cost products with strong service and support.

With the success of its own products and the 1996 purchase of DCD and the merger with Interactive Group in 1997, DataWorks had transformed itself from a niche US-centric vendor to a company with significant international presence. Thus, its revenue in fiscal 1997 was $147 million, which was higher than Epicor's 2002 revenues. However, DataWorks had six ERP products and was then developing a seventh under four product names, which was far more than any other ERP vendor at the time (little did we know about today SSA GT's formula of success for managing a dozen of products). The four brand names were Vista, Vantage, Avant and Impresa, covering the following seven distinct products:

1. Vista (developed by DCD),suitable for small Job shops and supporting then Microsoft Windows/NT, Novell NetWare, Artisoft's LANtastic, and Visual FoxPro (database and tools)

2. Vantage (developed by DCD), suitable for midsized Job shops and supporting then Windows/NT, NetWare, Progress Software's Progress database and tools

3. Avant for ETO (a.k.a. ManFact), suitable for mid-market engineer-to-order (ETO) manufacturers and supporting UNIX, Windows NT, Object Preview, and IBM UniData (then part of Ardent Software, today called Ascential Software)

4. Avant for Mixed-Mode (formerly Interactive Group's InfoFlo product), suitable for mid-market assemble-to-order (ATO) and make-to-stock (MTS) "mixed mode" manufacturers and supporting UNIX, Windows NT, System Builder, and IBM UniData

5. Avant for Repetitive (a.k.a. DataFlo), suitable for mid-market repetitive manufacturers and supporting UNIX, Windows NT, Object Preview, and UniData
6. Impresa for MRO (formerly Interactive Groups' JIT product acquired from former Fourth Shift), suitable for upper mid-market Maintenance, Repair, and Overhaul (MRO) operations and supporting UNIX, and Oracle (tools and database)
7. Impresa for BackOffice (formerly ECS), suitable for mid-market and large discrete manufacturers, and supporting Windows NT, Microsoft SQL Server, C++

With this arsenal of products featuring perplexing genealogy, former DataWorks was to position itself to compete in all but the largest ERP deals and to give its customers the opportunity to rely on the same vendor as they would grow. However, DataWorks insurmountable technological challenge was its wide diversity of technologies, given that among the seven products there were five different tool sets that natively supported four different databases -- overwhelming enough?
After the acquisition of Dataworks, Epicor Software thus found itself with multiple ERP products and the inherited daunting task of rationalizing its product development strategy. Soon after the acquisition was complete, the company went from actively marketing only four ERP products. Namely, former Platinum ERA (now e by Epicor) and Vantage were going to receive the major R&D investment.

While Epicor was going to continue to invest in Avant and Vista, the lion share of its development dollars was allocated to improve functionality and integration with Clientele CRM, Epicor APS (Advanced Planning & Scheduling), and the e-commerce side of each application. Epicor had indeed ever since strived to complete its evolution from a vendor of financial accounting software to a provider of holistic business performance solutions, including integrated front office, back office and e-business capabilities. The company had three primary areas of focus for its software products immediately after the merger:

1. Front Office applications, which included Clientele and Platinum ERA (Enterprise Ready Applications) sales force automation (SFA) and customer service & support applications for small and medium-sized companies

2. General Service and Distribution applications, which included Platinum ERA Financials, Platinum ERA Distribution, and Platinum for Windows (PFW), designed to satisfy the requirements of distributors and service organizations

3. Manufacturing applications, which included Platinum ERA Manufacturing an ERP suite designed for assemble-to-order (ATO) and light manufacturers, Avant an ERP solution for mid-sized manufacturers of discrete and highly engineered products, Vantage an integrated solution for engineer-to-order (ETO) and job shop manufacturers, Vista a Windows-based desktop business management system specifically designed for the needs of small job shops and make-to-order (MTO) departments of larger enterprises, and Impresa an ERP system specifically designed to manage the unique business requirements of MRO organizations

In February 2000, Epicor announced e by Epicor', initially envisioned as its next generation flagship e-business product suite for the mid-market. It was envisaged as a comprehensive line-up of solutions and an umbrella brand tailored to empower mid-market organizations seeking to take advantage of the Internet. e by Epicor' would deliver financials, budgeting, distribution, manufacturing, sales & marketing, and customer service solutions into an integrated suite of the following six applications: Epicor eCommerce, Epicor eFrontOffice, Epicor eBackOffice, Epicor ePortals, Epicor eIntelligence, and Epicor eIndustry. It then also incorporated Epicor's Platinum ERA (back-office system for non-manufacturing applications), Vantage (back-office system for manufacturing customers) and Clientele CRM suites. A year later in February 2001, Epicor launched Epicor eCentre, a comprehensive line of hosted applications and services.
The company has since made further attempts to logically group and brand still an unwieldy number of its products. The acquisition initially made Epicor one of the largest mid-market ERP vendors (with ~$250 million in 1999) and the company thereby gained some strong products and a large customer base in a number of new markets, especially in the realm of manufacturing, distribution and supply chain management (SCM). Nevertheless, the burden of an unfocused, multi-product and multi-technology (i.e., Microsoft, IBM, Oracle, Progress Software, etc.) strategy in markets with diverse dynamics also multiplied sales, R&D, and service & support costs, while many of these products could not have sustained long-term success in their respective target markets.

To that end, the sale of certain secondary and focus-diverting product lines like Impresa to Avexus and Platinum for Windows to Best Software (see Latest Development on Epicor's Trying The Divestiture Tack) has, in addition to bolstering its balance sheet, therefore allowed Epicor to lately concentrate almost solely on developing applications and functions based on Microsoft's .NET technology framework and SQL Server database. Consequently, it is more likely Epicor will at last succeed in integrating its internally developed applications by concurrently expanding its Web services and collaborative commerce capabilities.

Today, Epicor's pruned and revised product groups are still aligned according to the markets that they serve:

1. Customer Relationship Management (CRM), represented by Clientele,

2. Distribution and Services, represented by e by Epicor' (incorporates products formerly named Platinum ERA and Clientele and includes the following components: eFrontOffice, eBackOffice (featuring Financials, Distribution, People/Human Resources, Warehouse Management, Assembly), eCommerce Suite, ePortal, eIntelligence, and eIndustry), and

3. Manufacturing Solutions, represented by Avant, Vantage, and Vista.

In all three areas, Epicor's strategy is to offer a comprehensive suite of integrated software solutions for all pertinent areas like CRM, Financials, Manufacturing, SCM, Professional Services Automation (PSA) or Collaborative Commerce, which should also provide the scalability and flexibility to support long-term growth for the customer. Epicor's solutions are complemented by a full range of services, providing single point of accountability to promote rapid return on investment (ROI) and low TCO, now and in the future. The needs of SMEs such as having solutions that are scalable and reliable but cost-effective, functional but easy to deploy and customize, and open but have a relatively low barrier to entry (i.e., TCO), have yet to be met completely by any vendor, but Epicor is seemingly getting there by tackling major catchwords of mid-market success, such as integration, ease of use, one stop shop, low TCO, flexibility, broad & deep functionality, out of box' solutions, rapid implementation, rapid ROI, etc.

Epicor's technology direction currently embraces the Microsoft .NET Platform for XML-based Web services. Through .NET, which is the next generation of Microsoft's Distributed interNet Applications Architecture (DNA) and component object model (COM), the vendor hopes to be able to provide comprehensive support for Web services deployment and Enterprise Application Integration (EAI). With .NET and the emerging standards for data exchange such as XML, Epicor strives to be able to provide increased access to information both within and between organizations — no matter where their offices or employees are located. This technology strategy should enable Epicor's still diverse development teams to leverage Microsoft technology, while allowing each product group to continue to utilize the individual databases and development tools appropriate to the requirements of each product's target market.

Epicor's Manufacturing Solutions Group, which contains approximately half of the entire Epicor's customer base, features Vantage and Avant as its major mid-market ERP products and Vista for smaller discrete manufacturers. The the 'e by Epicor' solution remains an umbrella brand name for a number of above-announced products (e.g., eIntelligence, eFrontOffice, eCommerce, eBackOffice, eProject, ePortal, eCentre, etc) that cater to non-manufacturing service and distribution industries. As for specialization, Vantage remains the preferred system for make-to-order (MTO), job shop enterprises, while Avant leans towards complex manufacturing and project work environments; Vista, on its hand, is the low-end product for much smaller discrete manufacturing enterprises.

The rationale of Epicor focusing on Avant products as well as on the Vista annd Vantage products was that all run on the Windows operating system, which has long become one of the key requirements for success in the ERP mid-market. Also, the businesses have been similarly structured, since they sell to their own markets with their own products built with technology different than all other former DataWorks products. This strategy is therefore in tune to the growing market demand for vendors to focus on core competencies and products.

Epicor Reaches Better Vista From This Vantage Point

A true mid-market incumbent vendor that has not had much good news for last several years following up on its progenitors' merger and subsequent name change in 1999, seems to finally have been disseminating upbeat news both in terms of its financial performance and of its strategy clarity.

Namely, on April 23, Epicor Software Corporation (NASDAQ: EPIC), one of leading providers of integrated enterprise software solutions solely for the mid-market, announced its financial results for the first quarter ended March 31, 2003. Total revenues for Q1 2003 were $34.3 million, a 4.7% drop compared to $36 million for Q1 2002, while software license revenue totaled $7.8 million, a 7% drop compared to $8.4 million a year ago (see Figure 1). However, net income for the quarter, which includes $1.7 million in amortized capitalized software development costs and acquired intangible assets, was $2.4 million, which compares with a sizable net loss of $2.7 million in the comparable quarter last year.

More important, the company's balance sheet at March 31, 2003 showed healthy cash and cash equivalents of $40.4 million, given the company has reported positive operating cash flow for six consecutive quarters. The vendor has also maintained its guidance for Q2 2003 with license and total revenues expected to be flat to slightly up from the first quarter's revenue levels. The company also anticipates continued profitable operations during the second quarter due to continued controlled expenses.

Figure 1

The positive financial results coincide with the notion of Epicor also figuring out its manageable few core competencies. Recently in April, Epicor was also honored by the Progress Company, an operating unit of Progress Software Corporation (NASDAQ: PRGS) and a supplier of technology for building business applications, as its 2002 "Partner of the Year." Progress selects its partner award recipients based on their innovative use of Progress OpenEdge technology, their focus on high-value initiatives, and various collaborative efforts that have allowed them to deliver maximum business value in a challenging economy. Epicor reportedly received the top honor of "Partner of the Year" for its demonstrated success in the delivery of a broad range of end-user manufacturing solutions, using a single set of advanced business logic processes based on the Progress OpenEdge platform.

Preceding the event, Epicor's Manufacturing Solutions Group, with over 6,000 small to mid-market manufacturing solutions customers worldwide, and Progress announced last November a combined .NET Web services strategy, whereby both companies will support the Microsoft .NET framework. By adding the power of the Progress OpenEdge platform to a native Microsoft .NET User Interface (UI), Epicor strives to offer manufacturing customers new levels of scalability, reliability and flexibility in implementing enterprise solutions. Thus, over the next year or so, Epicor's small to mid-market manufacturing solutions customers worldwide should have the opportunity to move to the Progress OpenEdge platform supported through a Microsoft .NET UI. Epicor touts customers will be able to leverage the familiarity of the Microsoft UI, while benefiting from the flexibility and power of OpenEdge's operating system independence, low total cost of ownership (TCO) and support for multiple databases.

Epicor believes the combination of OpenEdge and .NET is a win-win for end users, as well as for Progress and Microsoft developers. In addition to giving .NET users access to best-of-breed-like Progress-based Web services, Progress OpenEdge support for .NET should provide the Progress developer community with an expanding market for their domain expertise. Namely, the OpenEdge platform offers application developers the option of supporting a wide variety of UI techniques and technologies via a single collection of business logic components within the platform. Working with Epicor, Progress has extended that independent approach to the .NET environment, while the platform is also J2EE compliant.

Support for .NET should help application developers leverage proven Progress-based business logic, while integrating with the Progress RDBMS (Relational Database Management System), one of the leading embedded databases for business applications around the world. As a result, Epicor's manufacturing solutions should be able to accommodate virtually any technology environment, while giving Epicor customers the benefit of a strong, scalable product.

The above announcement was part of the wider strategy and the product roadmap for the mid-market manufacturing industry, which was announced in March 2003, whereby development efforts for Epicor's manufacturing software solutions will focus on supporting discrete, mixed-mode manufacturers, a sector that encompasses the majority of Epicor's manufacturing customers today. The vendor believes that, with integrated end-to-end enterprise suites designed to help manufacturers increase collaboration with suppliers and customers, and improve operations throughout the value chain, its manufacturing software solutions are uniquely suited to support the needs of today's global manufacturers.

Epicor's manufacturing solutions have historically consisted of separate products architected for the lower, mid, and upper tiers of the mid-market. Contrary to this practice, the vendor recently announced it plans to develop a single business framework that would support multiple UIs that could be tailored to companies of different sizes and within different industries. This next generation of solutions will supposedly be operating system (OS) and database independent to accommodate virtually any technology environment and any size manufacturing operation. This should offer customers new capabilities and new levels of application reliability, scalability, system interoperability and flexibility, combined with a rich user experience and low TCO. Additionally, Epicor's product roadmap will provide manufacturers with an easy migration path to leverage Microsoft .NET and Web services. While the manufacturing industry has been slower than some to adopt Web services, the technology is reportedly gaining popularity. Epicor's product roadmap thus aims at enabling manufacturers to adopt Web services on their own timeframe and while protecting their technology investment.

Going forward, Epicor's next generation manufacturing solution will also deliver a single technology and business logic infrastructure to its entire range of customers, optimized for the .NET Framework. The solution will provide for different interface and workflow layers designed to fit the size and scope of manufacturers from the lower to upper mid-market. A critical component of the strategy is to provide choices to customers, who may choose from a number of database platforms, including Progress RDBMS, Microsoft SQL Server and Oracle 9i. And, the new product architecture will also allow a manufacturer to deploy the product on a number of operating systems including Windows NT, Windows 2000, Windows XP, Unix and Linux. This approach should offer several benefits to customers since, rather than purchase and deploy multiple solutions, large manufacturers could instead deploy a single solution that meets the needs of their small, medium and large divisions. Also, customers will supposedly be able to move seamlessly between solutions as they grow or their needs change.

Executing on a critical milestone of its product roadmap, Epicor has incorporated a single application framework across two of its existing manufacturing solutions, Vista 6.0 and Vantage 6.0, which was supported through the company's above alliance with Progress Software Corporation. While Vista and Vantage now share a common framework, their UIs and workflow are still unique to the markets that they serve.

Vista 6.0 was introduced in February 2003, as a major upgrade to Epicor's Vista manufacturing software solution designed to automate operations and improve workflow for small job shops and make-to-order (MTO) departments of large enterprises. Designed to fit the way a manufacturer does business, Vista 6.0 aims at providing an affordable and proven solution that easily manages scheduling, job tracking and integrates accounting functions to increase efficiency and productivity. Tailored to the needs of the small to midsize manufacturer, the new version of Vista affords technology choices offering support for both Microsoft SQL Server and Progress RDBMS.

The product has also been functionally enhanced, since the new Quality Assurance module aims at streamlining the quality process across the entire manufacturing operation. The Inspectors' Queue should give inspection teams a birds-eye-view into a shop's various quality processes — from Receiving Inspections to First Article Inspection, Non-Conformances and Corrective Actions — Vista's Quality Assurance module is integrated with other Vista modules and provides a full audit trail of shop processes.

Vista's new Advanced Inventory Management module brings a number of features to small and midsize manufactures, designed to handle the expanded tracking needs that customers require. With advanced features like Serial Tracking, Dimensional Inventory, and the ability to review substitute parts when making key buying decisions, the Advanced Inventory Management module should give a manufacturer's purchasing and inventory management employees a real-time visibility of inventory, enabling them to make better buying decisions.

Further, the Vista Dashboard puts all this critical business information at a manufacturer's and its employees' fingertips. A one-stop interface to Vista 6.0, integration with the Internet makes the Vista Dashboard easy to use and customize. The module provides real-time exception-driven indicator flags to users, like late jobs or expiring quotes, alerting them to business issues as they arise so adjustments can be made on the fly, resulting in a more proactively run business.

Vista's Advanced Bill of Materials (BOM) module offers complex multi-level assemblies that can be created, maintained and used for quotes or jobs within engineering and production departments. The Advanced BOM also enables multiple revisions tracking with effectivity dates and approvals for enhanced process documentation and tighter engineering control.

Because customer satisfaction and service is key to the success of the small to midsize manufacturer, Vista provides the basics of customer relationship management (CRM) with its new Contact Management module. Designed specifically for small to midsize manufacturers, it should enhance customer service by documenting and sharing customer communication with the entire organization. Offering integration across Vista modules for Sales, Customer Service and Production Support, should ensure a manufacturers' customers receive the personalized attention they require. Contact Management also combines strong user task control to improve a manufacturer's overall responsiveness to customer inquiries.

SAP - A Leader Under Reconstruction

Founded by five former IBM employees in 1972 and based in Walldorf, Germany, SAP AG is the No. 1 vendor in the Enterprise Business Applications market, (with approximately 30% of worldwide market), and one of the largest independent software companies in the world. The Company consists of SAP AG and its network of 62 operating subsidiaries and has a presence or a representation in over 100 countries.

For the year ended December 31, 1999, the Company's revenue was approximately Euro 5.1 billion, as compared with Euro 4.3 billion for the year ended December 31, 1998 (See Figure 1). Approximately 80% of its revenue comes from the international market (outside Germany). Although SAP experienced a drop in net income during the first half of 2000, it continues to be profitable (See Figure 2). Net income was Euro 601.0 million and Euro 526.9 million for fiscal 1999 and 1998, respectively.

Figure 1.

Figure 2.

SAP's first generation of software was introduced in 1973 and consisted of a modest financial accounting operation. In 1981, the Company introduced its second generation of application software, the R/2 System, that had the capacity to be installed enterprise-wide on mainframe computers. SAP's primary product is the R/3 System for client/server (distributed) architectures that was brought to market in the early 1990s.

In response to the impact of the Internet, SAP undertook a significant revamp of its product offerings during 1998 and 1999. The first step, initiated in 1998, was to finalize the EnjoySAP development initiative to improve the user-friendliness of its products. In parallel with that effort, the Company advanced its New Dimension products initiative to create independent, modular business solutions and sharpened its focus on the rapid development of Internet-based products. SAP has unified all of these initiatives under its comprehensive Internet strategy, mySAP.com, which was announced in May 1999.

The Company launched mySAP.com in October 1999.

In addition to dividing the system into components, SAP has begun development of a series of pre-configured R/3 templates ("AcceleratedSAP") for use within specific industries. By using pre-configured applications known as SAP Accelerated Solutions, SAP offers small to medium sized organizations inter-enterprise solutions. Today there are seven certified partners offering application hosting for the Internet solution "mySAP.com". The accelerated solution verticals are:

1. Automotive
   
   
2. Consumer Products
   
   
3. Enterprise
   
   
4. Financials
   
   
5. High Technology
   
   
6. Human Resources
   
   
7. Public Sector
   
   
8. Retail
   
   
9. Service Providers
   
   
10. Chemicals

On December 14, 1999, SAP announced the addition of procurement functionality. Available through SAP's Business to Business Procurement framework, the "mySAP.com Buying Solution" supports real-time purchasing transactions directly or via the mySAP.com Marketplace. The Marketplace is SAP's on-line trading community supporting a business directory of over 2,500 companies. The procurement tool is based on an open standard and designed to support back office systems - SAP and non-SAP - running in parallel.

With the Buy side covered and a partnership with Requisite Technology to deliver content management and a catalog-finding engine, SAP partnered with INTERSHOP Communications, Inc. to provide Sell Side Solutions.

The mySAP.com Selling Solution and its "Internet Sales component" links buyers and sellers via the "SAP Business Connector". The connector leverages XML to transmit orders, invoices and other documents through personalized workplace portals.

An additional component is the Internet Sales application which complements existing SAP sell side solutions, including the Online Store which extends SAP R/3 to the Internet. Also available is the Internet Pricing and Configurator component that allows companies to sell simple and complex configurable products over the Internet.

In addition to the core ERP capabilities and the buy/sell-marketplace functionality, SAP announced a Supply Chain Management Solution. The solution is designed to cover all major functional areas, including demand and supply planning, distribution and production planning, manufacturing scheduling, materials and inventory management, production control and maintenance, transportation management and warehouse management.

In December, 1999, SAP announced Internet enabled Supply Chain Management applications. The Advanced Planner and Optimizer (SAP APO), Logistics Execution System (SAP LES) and Business Information Warehouse (SAP BW) are designed to integrate information and decisions from the entire supply chain into an automated infrastructure.

The Supply Chain Management applications offer features such as:

• Collaborative Planning, Forecasting and Replenishment (CPFR), which enable buyers and sellers to collaborate on demand and order forecasting and to update their plans based on the dynamic exchange of information over the Internet.
  
  
• Internet-Enabled Vendor-Managed Inventory (VMI) enhances collaboration with suppliers and customers via the Internet to allow a manufacturer to proactively replenish orders.
  
  
• Collaborative Supply Planning enables a manufacturer to use its supply network planning model to derive supply chain production requirements and publish the results to suppliers.
  
  
• Promise to Be Available supports dynamic sourcing and commitment of orders, taking into account information about availability across production plants and distribution centers.
  
  
• Shipment Tendering enables shippers and carriers to exchange detailed information about planned shipments, bids, rates and conditions in order to negotiate an agreement.

SAP is delivering the mySAP.com components through personalized functionally rich portals based on the mySAP.com Workplace. The portals tie together market intelligence, sales execution, groupware, product information, order fulfillment and engineering-to-order information.

The interface is designed to provide users access to the internal and external applications, business content and services required for their jobs. Individuals can customize their interface by choosing news feeds, research, and stock portfolio information. By selecting the content and layout individuals can personalize their "dashboard" to maximize their information-to-time ratio.

To round off the mySAP.com offering, interested prospects can test-drive solutions using the SAP Internet Demonstration and Evaluation Service (IDES). This allows customers to evaluate, implement and operate mySAP.com solutions online. Once a purchase decision has been made, customers can choose to implement their solution in a hosted environment, from SAP or one of its partners. Customers who choose applications hosted with an SAP application service provider also have the option of receiving their SAP solutions and upgrades via satellite.

By the end of 1999, the Company had more than 12,500 customers, and more than 10 million users all over the world. With more than 900 partners that offer complementary software, services and hardware, SAP has established a wide-ranging SAP partner system. The Company's customers include multinational enterprises as well as medium- and smaller-sized businesses, with approximately 60% of SAP customers greater than $200 million in revenue. SAP went public in 1984 (1998 on NYSE) and its shares trade on the New York, Frankfurt, and Stuttgart stock exchanges.

CA Unloads interBiz Collection Into SSA GT's Sanctuary Part 1: Recent Announcement

Seemingly strange and the things once considered unlikely can happen in the enterprise applications market. A vendor that many have long considered 'gone south' seems to be coming to the rescue of its contemporary and long time fierce competitor, which has been abandoned by its powerful and uncaring parent that has been having troubles of its own lately. On April 8, SSA Global Technologies, Inc. (SSA GT), a worldwide enterprise solutions and services provider, announced it had acquired the supply chain management (SCM), financial management and human resource (HR) management product lines of interBiz, the eBusiness applications division of Computer Associates International, Inc. (NYSE: CA). The acquisition will add many proven solutions to SSA GT's also well-recognized offerings to the industrial sector. Financial terms of the agreement were not disclosed.

Through the acquisition, SSA GT believes it is on a path to regain a leading position in its target markets by solving industry-specific business challenges and creating a heterogeneous application environment that works seamlessly with other back-office applications. The combined company will serve more than 9,000 longstanding, market-leading companies in over 90 countries from more than 70 offices worldwide. On the other hand, CA, which is under investigation by the Justice Department and the Securities and Exchange Commission (SEC) for alleged accounting irregularities, said in a statement that it will focus on its core enterprise-management, security, storage, application development, integration, business-intelligence, and portal offerings.
SSA GT has pledged continued support for the interBiz product lines, along with assurance that it will enhance the applications. Furthermore, in some instances where it will make sense, there will be an effort to integrate the products as well as provide a migration plan for products using discontinued technologies, such as the HP 3000 platform. Through the transaction SSA GT hopes to achieve the following:

* Offer customers added support through an expanded global network; additional revenue to spend on research and development and expanded Global Guide Groups to understand customer, industry and market demands

* Provide the critical mass to re-position itself as a leading vendor in specific vertical markets, expanding its global capabilities, resources and customers

* Leverage the company's global service and support functions

* Underscore its business model, and financial viability

* Strengthen organic growth in its key vertical markets - automotive, fast moving consumer goods (including food, beverage and electronics), general manufacturing and pharmaceutical industries;

* Expand its commitment to deliver more opportunities for customers' e-commerce and collaboration initiatives

* Add experienced management and IT professionals in the U.S. and International markets.

Over the past year, SSA GT has been reengineering its company to deliver a solution strategy that involves e-commerce and collaboration with BPCS, its core ERP product. SSA Global Technologies will apply its business model and solution strategy to the newly acquired products. For customers utilizing the interBiz brands, this strategy will give them new opportunities to benefit from e-business and collaboration solutions. Products covered under this transaction include CAS, interBiz Logistics, interBiz Online, interBiz Reports, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics, MK Manufacturing, PRMS and Warehouse BOSS. A fully integrated organizational structure is in place for SSA GT where employees are being integrated, service offerings are being coordinated and cross-selling opportunities pursued.
In a nutshell, the good news is - a foster home has been found for interBiz; but there is the bad news too - the room space might be insufficient to accommodate all of the orphaned products. Nevertheless, SSA GT is, for a number of reasons, possibly the best place where most of interBiz products will continue to be kept on a life support. There are seemingly many synergies that could exist between the two product lines/organizations, including the cited closeness of product codes (considered ancient by many, as they go as far back as COBOL or FORTRAN) at the base level and both camps' heavy reliance on mature IBM iSeries (formerly AS/400) platform. These sorts of blessings in disguise could still allow SSA GT to build on its core ERP transactional capabilities while being able to offer extensions to the core products, something not many other ERP vendors that are relying heavily on the latest 'hot button' technologies (e.g., Java or .NET) would be willing to undertake. Also the companies have similar corporate cultures and have long been competing in the same or similar markets. They both have extensive worldwide coverage, and both companies' staff members have extensive manufacturing and distribution industrial experience.

At a first glance, one can even notice a complementary nature of some products. Some of the interBiz products may indeed still provide a 'kick for a buck' proposition. For instance, PRMS is still a well respected manufacturing ERP offering and a formidable competitor to SSA GT's BPCS, although it is perceived as ancient in the market and has been confined to the IBM iSeries platform. The product supports manufacturing, distribution, financial, and warehousing capabilities for discrete, repetitive, process and co-existent manufacturing and distribution enterprises.

Another manufacturing-related product that might functionally attract new customers would be MK Manufacturing - a versatile Unix and NT-based ERP solution that supports make-to-order (MTO), configure-to-order (CTO), and make-to-stock (MTS) discrete manufacturing requirements. The caveat, however, is that SSA GT remains focused mainly on IBM platforms and web server technologies (iSeries and WebSphere). Moreover, the interBiz ERP products are backed up well with Warehouse BOSS, a rules-based stand-alone warehouse management system (WMS) and interBiz Logistics, an e-fulfillment distribution management package. Warehouse BOSS, as a matter of interest, exhibited functionality several years ago that many leading WHS vendors have only recently incorporated. Furthermore, the MasterPiece financial management and HRMS product might significantly enhance SSA GT's financial and HR modules' functionality, which have not traditionally been BPCS' strongest area (if not a wide functional gap).

While mergers and/or acquisitions in the mid-market in the recent times are no surprise per se, SSA GT's action might have an additional meaning. Although the acquisition of interBiz by SSA GT should have minimal impact on the global market in the short run, it might have an important psychological effect on existing SSA GT's and interBiz' customer bases. On its hand, the erstwhile SSA has suffered, over the past several years, a tremendous loss of market share and customer confidence, while its channel also dwindled during the same period of time.

Revenues for SSA GT, which is now majority (~60%) owned by a $6.5 billion high-tech venture capital firm Cerberus and ~20% by Gores Technology, were $126 million for fiscal 2001 ended on July 31, 2001, with an undisclosed profit. It is still only a fraction of once SSA's over $450 million turnover in the mid 1990s, though. Therefore, SSA GT, having gone through its bankruptcy and rebirth initially under the Gores Technology in 2000, remains within Top 20 ERP vendors, steeply down from once being neck to neck with J.D. Edwards.

The vendor has undergone considerable turmoil even post-purchase, with new management teams' rotations, a new owner and considerable staff departures, and consequently, a loss of some of its customer base to competitors. But that base remains large with 6,500 customers running on BPCS, evenly divided between North America, Europe and Asia-Pacific, although around 3,500 of these are not still currently paying maintenance.

PeopleSoft: Giving Fervent Hope To The Market And Jitters To The Competition Part 1: The News

PeopleSoft is seeking to make bigger strides in the CRM, SCM and B2B software markets with its recent spate of product releases. The rhetoric and hype aside, the fact is that PeopleSoft has become a fearsome enterprise applications provider. PeopleSoft has joined the elite group of vendors that can deliver a majority of the components of a complete e-business framework. If one considers all aspects of a CRM or SCM evaluation, PeopleSoft has earned the license to be evaluated along with market leaders. Possibly more encouraging is PeopleSoft's upbeat prediction for the rest of the year, optimism only a few of its competitors can currently exhibit.

While Wall Street praises the vendor's new product initiatives and its strong first quarter results and optimism for the future, its direct competitors are far from feeling easy.

About this Article: This is a two part note, the first part discusses the news from PeopleSoft about new products and its first Quarter results. Part two discusses the Market Impact of this news and how it affects Users.
Recently, PeopleSoft (NASDAQ: PSFT), one of the largest business applications providers, launched a spate of new product releases with an idea to bolster its foray into customer relationship management (CRM), supply chain management (SCM) and business-to-business (B2B) collaboration areas and to give a pause to respective leading software vendors. PeopleSoft is seeking to make a bigger brand name in these markets where it traditionally had low market recognition.

Customer Relationship Management

On June 4, PeopleSoft 8 CRM, a comprehensive Internet-based solution, made its debut at the PeopleSoft Leadership Summit 2001 in Las Vegas. PeopleSoft cites that its pure Internet architecture, embedded analytics and seamless integration of enterprise data and business processes will change the paradigm of CRM and propel it to the forefront of the industry. PeopleSoft 8 CRM's pure Internet technology should allow for universal access from any Web device, anywhere in the world, at any time, while the embedded business analytics should provide real-time insight into critical business processes. The support for multiple platforms brings a true collaborative spirit to the enterprise, integrating business processes between applications inside and outside enterprise boundaries. Connecting marketing, sales, and customer service to supply chain, financials and human capital management systems, PeopleSoft 8 CRM might be able not only to fulfill customer requests, but to also anticipate customer expectations.

"Today, we have delivered on our promise to bring a complete, pure Internet CRM solution to market," said Craig Conway, PeopleSoft president and CEO. "We completely re-architected our existing CRM applications to create a best-of-breed CRM solution based entirely on pure Internet architecture. No other vendor can offer customers this level of access and collaboration in a CRM solution."

PeopleSoft 8 CRM has long been aggressively announced and eagerly anticipated and, as a result, it already has the following key strategic alliances in place:

* Cap Gemini Ernst & Young is extending its offerings within the PeopleSoft practice to provide business consulting and implementation services for PeopleSoft 8 CRM.

* KPMG Consulting revealed its role in the launch of PeopleSoft 8 CRM for Communications, a billing-integration solution exclusively for the communications market. KPMG will be providing implementation and support services for the software.

* PeopleSoft 8 CRM on it primary IBM DB2 database software is available across all PeopleSoft-supported operating systems. As a result, PeopleSoft 8 CRM on DB2 is available on IBM AIX, zOS, OS/390, Sun Solaris, HP-UX and Windows NT.

* Deloitte Consulting will leverage its CRM business process experience with its PeopleSoft implementation skills and methodologies to help cuustomers maximize the return on their PeopleSoft 8 CRM investment.

Generally available on June 29, the PeopleSoft 8 CRM suite includes Sales, Marketing, Field Service, Help Desk, Interaction Management and Support applications. PeopleSoft currently expects to deliver the following 10 languages within thirty days of general availability: French, French Canadian, German, Spanish, Italian, Dutch, Japanese, Brazilian Portuguese, traditional Chinese (Taiwan) and Swedish. While IBM DB2 is the primary development platform for PeopleSoft 8, it will also support Microsoft SQL Server and Oracle databases on IBM mainframe, UNIX and Windows NT platforms.
On May 30, PeopleSoft announced new functionality for PeopleSoft 8 eProcurement that will automate the entire purchasing process from requisition to payment, giving employees self-service capabilities to purchase goods and services. Business intelligence (analytics) will enable purchasing managers to strategically evaluate every aspect of the procurement cycle, including their spend by category, the value of their suppliers, and the effectiveness of their workflow. Based on information provided by the analytics, organizations should be able to quickly renegotiate deals with key suppliers, driving bottom-line savings. In addition, organizations might be able to modify procurement methods in real-time to improve operational efficiency.

Supplier Relationship Management

The PeopleSoft 8 Supplier Relationship Management (SRM) suite, which should allow business partners to communicate their inventory, design and buying plans over the Web through a roles-based, collaborative portal, was announced generally available on May 29. As a follow up to this product, PeopleSoft plans the release in Q1 2002 of new sourcing application, which should let buyers search for suppliers and buy direct materials online over the Web. Embedded analytics should again help organizations evaluate the strategic value of their suppliers by providing insight into key supplier performance metrics.

With the ability to access critical performance indicators almost instantaneously, companies could continuously monitor their business processes ensuring effective management of supplier relationships across the enterprise. PeopleSoft 8 SRM utilizes PeopleSoft's advanced portal technology, bringing an organization's customers, suppliers, and employees directly into critical day-to-day business processes. Possible benefits of real-time interaction could be: reduced costs in product design; improved time to market; and faster response to changes in customer demand.

CA Unloads interBiz Collection Into SSA GT's Sanctuary Part 2: Market Impact

On April 8, SSA Global Technologies, Inc. (SSA GT), a worldwide enterprise solutions and services provider, announced it had acquired the supply chain management (SCM), financial management and human resource (HR) management product lines of interBiz, the eBusiness applications division of Computer Associates International, Inc. (NYSE: CA). The acquisition will add many proven solutions to SSA GT's also well-recognized offerings to the industrial sector. Financial terms of the agreement were not disclosed.

Through the acquisition, SSA GT believes it is on a path to regain a leading position in its target markets by solving industry-specific business challenges and creating a heterogeneous application environment that works seamlessly with other back-office applications. The combined company will serve more than 9,000 longstanding, market-leading companies in over 90 countries from more than 70 offices worldwide. On the other hand, CA, which is under investigation by the Justice Department and the Securities and Exchange Commission (SEC) for alleged accounting irregularities, said in a statement that it will focus on its core enterprise-management, security, storage, application development, integration, business-intelligence, and portal offerings.
The merger move should ease the anxiety of loyal users of both the SSA GT BPCS products and the interBiz products, to a degree. It appears that SSA GT understands and listens closely (via Global Guide Groups) to the needs of conservative ERP customers that are unwilling to ditch a good functional product even at a cost of its technological antiquity. Further, it has a track record of strong functional development that preserves the customer's current investment. Indeed, BPCS V8 is a scaleable ERP system extended beyond traditional ERP boundaries, with several manufacturing mode flavors such as discrete lean manufacturing, assemble-to-order (ATO) and make-to-order (MTO) operations, and even process manufacturing. BPCS Collaborative Commerce/SCM covers demand chain planning, logistics functionality, supplier management and control, outbound and inbound logistics management, and logistics planning and analysis.

There are also a number of the web-based BPCS eCommerce applications like BPCS eSales (providing remote order entry, customer enquires, quotations, inventory status, product catalogs, etc); BPCS eProcurement (centered on its ezMarket foundation harnessing IBM WebSphere Commerce Suite for digital web-based supply chain interaction); and BPCS eCRM (with Internet-based analytics and eSales, eService, eHelpdesk and eCustomerInsight). Moreover, Process Manager is SSA GT's business process modeling tool set, also designed for use with third party applications. Other useful tools include: SSA GT Workbench, a repository for process modeling and testing; and SSA GT Desktop, a Java- and browser-based interface for remote multi-user access.

Finally, there's BPCS Performance Analytics, business intelligence developed with Cognos, which accesses the entire suite and individual functional modules. Although the vas majority of these components are partner products (like CRM by Applix, BI by Cognos, and collaborative commerce by Logility, see SSA GT Beefs Up BPCS V8 Through Partnerships' Spree), SSA GT's contends that these are delivered in a full OEM fashion, with SSA GT's right to the source code, and these applications can be supported as its own applications if needed. Platforms covered are iSeries, HP Unix/Oracle, and Windows NT/2000 on IBM Netfinity and SQL Server, but SSA GT points out iSeries as the primary platform.
Current SSA GT's management seems to understand its charter, and has already shown that small miracles can happen. SSA GT's recent watchwords for customers are return on investment (ROI), total cost of ownership (TCO), and new product releases and versions included in the maintenance fee. To be fair, SSA GT has mostly achieved its most imminent and important goal of enticing existing BPCS customer base to stay on their maintenance contracts. With a few thousands accounts having signed up for continued support so far, SSA GT has secured a sound revenue base, although that might not sustain it while keeping BPCS and its several recently adopted brethren abreast of the latest technology and functionality scope. Therefore, the above product strategy blueprint is sound given the hiatus the company has been in for some time, provided the new management team continues with an established good track record for on-time delivery of promised functionality.

SSA GT plans to keep previous BPCS versions alive, making new functionality backward compatible and adding enterprise architecture to tie multiple product versions together with a common portal. It might be a compelling story to its target market if the company can execute on these ambitious plans that are pushing the right buttons: customer retention, industry verticals enhancements, and keeping older versions alive. This philosophy should be a music to interBiz' concerned users too, given that their systems might undergo rejuvenation similar to BPCS, instead of being forced to switch to another, more technology advanced system (like is the case of many former EMS' users opting for IFS Applications after the IFS' acquisition of EMS, without the strategy to enhance former EMS' product).

SSA GT seemingly intends to achieve its all-round product portfolio and implementation approach through in-depth strategic partnerships with specialized application providers. The result should be a functionally rich core manufacturing ERP product, with best-of-breed, industry specific add-ons, and systems delivered by professional service teams drawn form its target industry sectors. The above announcement indicates SSA GT's determination to shore up its customer base, as it has been focusing on keeping its large install base content by offering them incremental value proposition extension through its SSA GT Open eRP marketing strategy - surrounding BPCS with a slew of horizontal and vertical industry software, and with SSA GT's lean manufacturing methodologies toolkit. Dealing with a single point of contact for most IT needs could indeed be attractive to some manufacturers at the higher end of the mid-market.

Additionally, SSA GT's and interBiz' established global infrastructure and customer base, strong core-ERP functionality with a sharp industry focus and regulatory compliance, strong multinational product functionality (support for 20 languages), and a relative ease of implementing these are some of the company's bargaining chips in the game of keeping its customers from defecting and of giving other intruding competitors run for their money. Actually, vendors vying to be replacement solutions for, e.g., the BPCS or PRMS ERP systems could be in for a bigger hurdle than expected as the SSA GT strategy might resonate with manufacturers that have been happy with these products and are reticent to replace functioning ERP system deeply embedded in plants worldwide, particularly in these days of reduced budgets.

SSA GT can also claim that the real world does not consist of a single solution, rather it requires a balanced portfolio of applications to satisfy vertical industry requirements, supported by a common application framework. To that end, this year, the number of existing customers paying for support has grown significantly by ~40%. In addition, the company touts 750 new deals over the last year, although only about one-third of these being new customers.

Emptoris 'Procures' Zeborg's Spend Management Expertise Part Three: Challenges and User Recommendations

Emptoris, Inc., a privately-held provider of e-sourcing solutions that support the strategic sourcing needs of global 5000 companies, early in 2003 announced the completion of financing from new and existing investors totaling $20.5 million. Menlo Ventures led the third funding round, with participation from new investor HarbourVest Partners and all existing investors, including NETinvest, from previous two funding rounds. Emptoris then pledged to use the funds to finance further expansion of the company in a number of areas, including sales, marketing, product development and penetration into new global markets.

In September, Emptoris announced the acquisition of Zeborg, one of the world's leading spend analytics firms. As a result of the acquisition, Emptoris, with more than 50 global 5000 customers, and notable sourcing applications and services, believes it is now positioned as the leading strategic sourcing software provider in the procurement and sourcing applications market. In addition to acquiring Zeborg's software and services offerings, Emptoris will inherit the company's sales team as well as global 1000 clients from a wide range of industries, including seven of the world's largest banking and financial services companies. Zeborg's customers include American Express, Cigna, Fleet Boston Financial Corporation, KeySpan, and Owens Corning. Zeborg has reportedly processed over $480 billion in corporate spend data and over 350 million transactions from over 100 data systems. On the other hand, Emptoris customers include Boeing, GlaxoSmithKline, Motorola, and Samsung America.

However, despite a good fit at first glance, the enlarged install base, and improved cross-selling opportunity, some challenges and product gaps are yet to be overcome. One is to conduct possible product rationalization and integration, to orchestrate sales forces, and organize services strategies, given the constituents' different expertise and culture in the past. In addition to the above-mentioned army of direct and indirect competitors, the combined company's possibly biggest challenge remains a still ongoing lack of awareness of the need for sourcing/spend management. While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the SRM vendors as to prove how much leverage their applications can bring to corporate buyers.

The combined company will also need to bolster its design and engineering/PLM functionality either natively or through strategic alliances, and provide flexibility of its product to accommodate the changing business practices, integration and standards. Manufacturing companies that fail to coordinate engineering with strategic sourcing and procurement will likely underachieve the potential benefits, given that only by enlisting suppliers, engineers, manufacturing, and procurement into a concurrent design process of early interactions can the best results be achieved. A good example of realizing the need for letting suppliers provide design improvement ideas rather than a stock-keeping unit (SKU) item is Agile's recent acquisition of sourcing vendor Tradec. To meet more collaborative, diverse, and dynamic relationship capabilities, the future product will have to support a distributed application architecture that enables business process flows based on intricate business logic and roles of participants and their trading organizations. Although the Emptoris product offers distributed application architecture today, some product development rationalization will have to take place to maintain this philosophy as the company moves forward.

The competition is not to be neglected either, given a bevy of competitors is trying to stand out with their value proposition of niche functionality or low-cost pilot deployments. Particularly Frictionless Commerce, which has made a slew of similar announcements recently, including $14 million in third-round funding, a new optimization module called Frictionless Sourcing Optimizer, and most importantly, a number of new large customers.

As mentioned earlier, Emptoris will have many large enterprise suite providers on its heels too, which will at least result with the price reduction pressure, which is likely to hurt smaller pure-play vendors than large diverse enterprise players. To that end, while Oracle, SAP, and PeopleSoft might have been remiss to deliver deeper SRM applications, they have nonetheless been closing the gap with many SRM functions, which may be enough to convince their existing customers to at least postpone decisions and wait for more capability from their principal enterprise applications provider. The fact is that even many SRM vendors have yet to expand far beyond simpler capabilities like spending analysis, RFQ, bidding analysis, negotiation, contract development, category management, cost savings tracking, specification management, and supplier performance management. More intricate capabilities like cost estimation and target costing, knowledge management (KM), market analysis, the make versus buy analysis, value engineering, supplier design collaboration, buyer-supplier joint cost reduction projects, etc. are still mainly provided through complex not-automated, once-off consulting engagements.

The future of e-sourcing involves greater integration between sourcing systems and other important systems, such as financials, PLM/product data management (PDM), and SCM. Thus, we believe that Emptoris, and all its SRM peers alike, must continue to provide flashy and functional portal user interfaces, connectors to other enterprise systems (e.g., portlets, applets, etc.) and Internet exchanges connectivity through partnerships or acquisitions. Further, in the SRM specialists' favor might be the fact that IT-wary resellers will not always be amenable to dealing with heavy-footprint large enterprise systems, and will prefer lighter and more agile albeit deeper point solutions.

Emptoris 'Procures' Zeborg's Spend Management Expertise Part Two: Market Impact

Emptoris, Inc., a privately-held provider of e-sourcing solutions that support the strategic sourcing needs of global 5000 companies, early in 2003 announced the completion of financing from new and existing investors totaling $20.5 million. Menlo Ventures led the third funding round, with participation from new investor HarbourVest Partners and all existing investors, including NETinvest, from the previous two funding rounds. Emptoris then pledged to use the funds to finance further expansion of the company in a number of areas, including sales, marketing, product development, and penetration into new global markets.

Then, in September, Emptoris announced the acquisition of Zeborg, one of the world's leading spend analytics firms. As a result of the acquisition, Emptoris, with more than 50 global 5000 customers and notable sourcing applications and services, believes it is now positioned as the leading strategic sourcing software provider in the procurement and sourcing applications market. In addition to acquiring Zeborg's software and services offerings, Emptoris will inherit the company's sales team as well as global 1000 clients from a wide range of industries, including 7 of the world's largest banking and financial services companies. Zeborg's customers include American Express, Cigna, Fleet Boston Financial Corporation, KeySpan, and Owens Corning. Zeborg has reportedly processed over $480 billion in corporate spend data and over 350 million transactions from over 100 data systems. On the other hand, Emptoris customers include Boeing, GlaxoSmithKline, Motorola, and Samsung America.

It would not be a colossal discovery to realize that difficult economic times with flat and often crippling revenues have particularly forced enterprises to reduce costs in ways other than the "tried-and-true" massive layoffs. Purchasing departments, which have long been regarded as "necessary-evil pen-pushers," have recently come as possibly the first to mind as the bottom line improvement opportunity makers through ensuring sourcing and procurement of all materials (indirect and direct) and services for the organization in a more strategic, streamlined, efficient, and cost-effective way.

Owing to ever increasing deployment of outsourcing, virtual manufacturing, contract manufacturing, vendor managed inventory (VMI) and many other modern manufacturing concepts due to increased global competition and the need for enterprises to focus on their core competencies, enterprises are often spending even over 50 percent of their revenue on procured goods and services. Thus, suppliers' bases have been an ever-increasing factor to every organization's performance. Moreover, suppliers being manufacturers themselves, should be leveraged as a valuable source of expertise instead of being treated as a mere external cost center (if the user companies could even glean that knowledge at all), capable of helping their customers deliver more innovative products faster and at better quality levels, and not necessarily only at lower prices. In other words, the competition has shifted from being between individual companies to being between companies and their value chains.

However, so far the communication between manufacturers and their suppliers has been mainly transactional and at arm's length in nature. As a result, few companies can openly claim to manage their suppliers closely and efficiently, and hence deliberately or not, many continue to put up with being inexplicably overcharged for orders or with accepting late shipments. The situation gets even worse when the enterprises have to discern how much they spend, with whom, on what items, and when.

SRM describes an emerging category of software to manage these evolving relationships between manufacturers and suppliers. Given the relative nascence of the SRM movement, it often means different things to different people. For a detailed discussion of SRM see "The Hidden Gems of the Enterprise Application Space."

The processes that make up SRM depend on a hybrid of technologies and require a significant implementation, data cleansing and migration, and integration effort at most organizations. Still, two underlying results that an effective SRM project should achieve would be 1) the automation of the processes by which a company buys supplies, which can range in sophistication from automated generation of requests for proposals (RFPs) to more holistic order management systems, and 2) to provide the analysis that enables buyers to assess historical supplier data and base subsequent purchasing decisions on the results.

As recap, SRM allows companies to integrate with their most important suppliers to streamline order management, replenishment, and fulfillment, inventory management, and engineering change management (ECM). The key words pervading so far have been sourcing, spend management and contract management. Namely, the core procurement process has become fairly mature and most enterprise application packages provide solid support for the purchasing process.

To provide a more distinct value proposition, vendors are providing value-added functionality that helps with tasks outside the procurement cycle. The most significant one is strategic sourcing, which, through rating and ranking criteria, a purchasing officer chooses the optimal set of suppliers, with which to negotiate a contract. It enables enterprises to evaluate potential mixes of materials and services and determine appropriate suppliers and terms and conditions to balance cost, quality and risk. The applications can capture supplier information and serve as a medium for collaboration between buyer and supplier on the requirements of the purchasing organization. Generally, the term strategic sourcing denotes many steps that precede the signing of a contract, including spend analysis, identifying potential suppliers, RFQ and contract negotiation, and monitoring and improving suppliers (which logically may happen both before and after the contract signing).

As companies continue to strive to reduce the internal costs of their products and services, more pressure is on the procurement group to source from the right supplier that can deliver as needed, at the right price, but also subject to many other measures some of which can be of a non-quantitative nature, such as product availability, specifications, freight expenses, warranty, terms of contract, distribution partners, and what not. The sourcing equation can become even more complex when federal and state government regulations and corporate mandates such as sourcing from minority-owned businesses are brought into play as thresholds that cannot be circumvented.

Spend management comes in the form of software and services. It allows organizations to gain control of the entire purchasing cycle, since the organizations deploying spend management across their e-purchasing operations should have a much better idea of how their money is being spent. Moreover, they must ascertain how much money is spent and where, before they can identify opportunities to improve sourcing via, e.g., negotiations with the supplier to produce a mutually beneficial contract. Spend management also requires rigid principles and governance to enforce compliance, which means establishing methods of monitoring spending against the budget and providing appropriate alerting and escalation processes for dealing with spending that exceeds budget levels.

Contract management is another key component of enterprise spend management, since contracts are the point around which much of a company's dealings with its suppliers' pivots. Buyers and suppliers can spend an inordinate amount of time figuring out details about obligations and remuneration, incentives, and contingencies. However, for companies handling several dozens of contracts, ensuring that suppliers adhere to contract details is often too cumbersome to be executed. Most enterprises do not have formal systems in place to manage contracts, and thus financial or purchasing executives often do not have visibility into contracts because they are kept in multiple different storage systems or even, as hardly accessible hard copies.

Companies need contract management solutions that can reach across those repositories to help managers gain a comprehensive understanding of the trade agreements under which the enterprise operates. The lack of visibility and control will often cause an enterprise to fail to extract full value from the contract and the relationship with the supplier.

As mentioned earlier, Emptoris's legacy and core competence lies within the manufacturing organizations and complex decision support for sourcing large numbers of complex direct line items, and in subsequent deriving of awards and allocation strategies. The Emptoris Sourcing Portfolio is a suite of eleven Web-based modules that support the broad sourcing process, from identifying demand to creating contracts, thereby enabling enterprises to identify and prioritize sourcing savings opportunities, negotiate significant cost savings, and track contract compliance and supplier performance. It is a modular solution, enabling users to select the modules they need, and start where it makes the most sense for them, whether it is to address more spend categories on-line, identify greater savings in each spend category, automate more of the sourcing process, incorporate suppliers into the extended enterprise, or leverage best practice processes and content. The modules and some description of how they work follows:

1. The Item Master module is self-explanatory and it serves the purpose of defining categories and organizing them into an n-tier hierarchy to mirror the taxonomy of goods and services sourced.

2. The Supplier Qualification module is where sourcing typically starts, with assessing suppliers' capabilities. To that end, users can create questionnaires and scorecards within this module to assess and document a supplier's quality rating, financial stability, and domain-specific certifications.

3. The Demand Aggregation module, once users have determined which suppliers they are interested in dealing with, helps them gather and summarize their requirements across departments and divisions. This exercise can be challenging, considering the fact that these groups may source requirements independently because they are on different enterprise systems or located in different geographic regions. The module tackles it by aggregating all the requirements while maintaining links back to the specifics provided by each original requestor. For example, a corporation can source centrally but ask its suppliers to drop ship their products to its various plants, and even though it may bid out the requirements based on aggregated demand, it should know and can communicate to the suppliers how the demand is divided up among the plants.

4. The Request for Quote (RFQ) module allows users to expose their requirements to the suppliers and solicit bids, by supporting a number of different types of negotiation processes, including sealed bids, reverse auctions, and supplier qualification. The module also provides the capability to create RFP templates, so that users can address certain industry-specific requirements through structured data elements, which can be reused in any other template within the suite through the above-mentioned Smart Data feature. For example, if one wants to create an RFP template for the mining business, he/she can structure it so that suppliers must submit information on shipping costs, tariffs, and lot quality. Once those data elements are in the RFP template, that information will be available as structured data for leverage later in negotiations and analyses.

One of Emptoris's differentiators would be enabling a TCO-based multi-attribute approach, as suppliers are not just bidding on the price, but on many more pertinent criteria. The module also includes a workflow engine to support the organizational hierarchy present in most large companies, as it can specify who is responsible for each category and sub-category, as well as to document who has the right to create, open, close, and approve a negotiation. Once the RFP is populated and it has been decided how to run the event, and all the required sign-offs are obtained, the solution allows suppliers to respond to this information in a possibly unique way, leveraging what Emptoris calls an extended enterprise philosophy, which aims at identifying suppliers' strengths and figuring out how to leverage them. Naamely, instead of treating the requirements as fixed, suppliers are encouraged to recommend changes that might result in lower prices. They might suggest that, for example, the customer moves the due dates, allows multiple shipments (back orders), or buys an additional item from them to get a lower price (volume-based or bundled discounts). Many buyers would like to know about these opportunities, given that suppliers can often lower their costs when they are given some flexibility and wiggle space.

5. The Decision Support module, which leverages scenarios to help users determine the lowest cost of ownership alternative that accomplishes the specified goals. For example, users should hedge their risks by giving one supplier a certain percentage or dollar amount of the business to meet a contractual obligation, or they may want to spread out their orders among several suppliers. They will not consider just price, but will also factor in variables such as quality, suppliers' viability, customer service, and reliability within the scenario. The software, through scientific decision-making optimization, will identify, line-by-line, based on the scenario, the sourcing plan that will result in the lowest cost of ownership. The "what if" scenario simulations are broad, and every time the optimization engine runs again. Each time, the module explains what the contributing factors are for a particular scenario, so that users know what the critical constraints are (e.g., they may get a better price if they relax the due date). The software aim is at helping users understand their trade-offs, which might be a valuable piece of information.

6. The Standard and Advanced Reverse Auction module enables real time online competitive bidding.

7. The Contract Management module is a summation of the terms and conditions that were analyzed in the Decision Support module. The rules engine prompts users to address important issues in their contract, such as compliancy, and there is an editing tool so that users can fine-tune the final document. For example, the contract may call for a quarterly review of the elements it was based upon (e.g., price, on-time delivery, etc.). If any of these has changed, the module can be configured to send an e-mail, trigger a penalty or bonus, or initiate a renegotiation, which can be defined upfront, in the business rules engine.

8. The Supplier Assessment module is a tool to periodically evaluate existing suppliers. It supports lean manufacturing, ISO 9000, and Malcom-Baldridge specifications.

9. The Executive Dashboard module provides information on how much users spend where, by category, user, or by department. It pulls data from the sourcing events that users run, and it contains an on-line analytical processing (OLAP) tool that can report on data from the spend analysis database. While the users can use spend analysis as the first step to identify which categories to tackle, the module is more aiming at measuring contract compliancy.

10. The Project Management module sits on top of all the other modules. It provides the capability to manage categories by project, and a resource for best practices, by category. The module may tell users what they need to do and how to do it for peculiar materials. For example, it might advise users what suppliers they may want to consider and what the nuances of the category are, which creates significant efficiencies within the sourcing organization because it can tell a buyer who has never managed certain categories what to do and what to expect.

11. The Software Development Kit (SDK) module enables organizations to set up data imports and exports to an ERP or other operational system. It provides significant access to all data elements in and out of Emptoris's system through high-level, UDDI and XML-based API calls. The solution does not provide nor does it require real time integration by the nature of transactions.


On the other hand, Zeborg offers the combination of software and consulting expertise in tracking indirect materials spending primarily in the financial sector, and especially for complex indirect goods and services, including temporary labor, advertising, and print. It has been providing sourcing consulting engagements for particular spending categories by using its specialized RFX Sourcing Suite to help its clients negotiate a better deal with their suppliers. It has a few dozen pre-built RFX templates, and its real skill lies in helping companies sift out their above-mentioned indirect procurement spending, and then attain savings in those specific categories. Filling Emptoris' spend management capability gap, Zeborg focuses on the front of the sourcing process by providing turnkey data cleansing, cross-referencing and category classification services, and an advanced analytics engine for detailed spend data management and analysis. Its premier module, ExpenseMap, aims at giving a granular view of spending as a means to uncover better supply opportunities, and the solution has also been used to drive compliance efforts.

Prior to being acquired, Zeborg attempted a foray into sourcing execution to help companies reap the savings that they have identified during spending analysis. To that end, the RFX Sourcing suite also provides certain capabilities for discovering the best prices through an automated bid and analysis process, which leads to long-term contracts. However, given it's a matter for an expert's prowess rather than an enterprise application developer, Zeborg's future in developing a single-trick software was dubious, and it was expected the vendor would seek to embed its expertise (captured into a stack of "Excel spreadsheets on Microsoft Visual Basic steroids"), into an enterprise-level sourcing suite that would appeal to the top executives. This is where Emptoris comes into picture, and Emptoris's expert knowledge will likely be further productized into the ExpenseMap templates, process flows, and pre-configured analysis and award scenarios to expand within the Emptoris sourcing portfolio.

Emptoris 'Procures' Zeborg's Spend Management Expertise Part one: Event Summary

The evolving supplier relationship management (SRM) market and its ever-evolving or emerging constituent parts like e-procurement, strategic sourcing, spend analysis and so on have lately shown great opportunities to the pure-play SRM vendors with genuine value prepositions. These have been seen in increased user awareness and adoption, certain venture capital investments in these days of scarce capital outside the trendy biotechnology sector, which then prompted geographic expansion and sporadic mergers of incumbents with complementary offerings.

Such an example would be Emptoris, Inc., a privately-held provider of e-sourcing solutions that support the strategic sourcing needs of global 5000 companies, which early in 2003 announced the completion of financing from new and existing investors totaling $20.5 million. Menlo Ventures led the third funding round, with participation from new investor HarbourVest Partners and all existing investors, including NETinvest, from previous two funding rounds. Emptoris then pledged to use the funds to finance further expansion of the company in a number of areas, including sales, marketing, product development, and penetration into new global markets.

Since its founding in 1999, Emptoris has quickly become one of the leading e-sourcing software vendors with sound technology that is used by numerous global 5000 companies across a wide range of industries, which include electronics, pharmaceutical, metals and mining, aerospace and defense (A&D), and financial services.

In September, Emptoris announced the acquisition of Zeborg, one of the world's leading spend analytics firms. As a result of the acquisition, Emptoris, with more than 50 global 5000 customers, and notable sourcing applications and services, believes it is now positioned as the leading strategic sourcing software provider in the procurement and sourcing applications market. In addition to acquiring Zeborg's software and services offerings, Emptoris will inherit the company's sales team as well as global 1000 clients from a wide range of industries, including seven of the world's largest banking and financial services companies. Zeborg's customers include American Express, Cigna, Fleet Boston Financial Corporation, KeySpan, and Owens Corning. Zeborg has reportedly processed over $480 billion in corporate spend data and over 350 million transactions from over 100 data systems. On the other hand, Emptoris customers include Boeing, GlaxoSmithKline, Motorola, and Samsung America.

Specifically, Emptoris believes it will benefit from the Zeborg acquisition in the following ways:

* It should position Emptoris as the largest company dedicated to the strategic sourcing software market.

* A broader market opportunity, a larger sales organization, and significant cross-selling opportunities to global 1000 customers means the company is well positioned to achieve over 50 percent revenue growth in 2004.

* The addition of several marquee financial customers makes Emptoris the leading provider of e-sourcing solutions for the financial services industry.

More importantly, Emptoris believes its existing customers will also benefit greatly for the following reasons:

* Tight product integration, expected to be completed over the next few months, will enable Emptoris customers to achieve additional cost savings by providing the ability, through one application, to identify and prioritize sourcing savings opportunities, develop best practice strategies to capture the savings, quickly execute sourcing activities designed to reduce the total cost of ownership (TCO) of goods and services sourced, and track compliancy to ensure savings are captured in accordance with corporate sourcing goals and policies.

* Expanded sourcing domain expertise will enable Emptoris customers to achieve quicker return on investment (ROI) with turnkey sourcing solutions.

* New technologies and an expanded development group will enable the company to maintain a functional leadership position and set new industry benchmarks that will drive incremental customer value.

Prior to its new funding, Emptoris has done an impressive job of delivering sourcing applications in-house. Namely, at the end of 2002 it announced the availability of version 4.0 of Emptoris Sourcing Portfolio (formerly ePASS, which stood for Electronic Procurement Application for Strategic Sourcing), the company's web-based e-sourcing software suite. The Emptoris Sourcing Portfolio has been renowned for its event management, supplier enablement, and optimization-based decision support aimed at providing significantly shorter sourcing cycles and substantial bottom-line savings. Version 4.0 of the Emptoris Sourcing Portfolio, however, provided deeper and more flexible functionality through new software modules, including contract management, project management and supplier assessment.

By providing a solution that helps users manage the interplay between ongoing sourcing activities and contractual relationships, the Emptoris Contract Management module allows enterprises to:

* Easily build complex multi-item, multi-term supply contracts with intuitive forms, menus, and instructional wizards.

* Manage complex pricing arrangements, monitor supplier compliance, and leverage negotiated agreements to identify additional savings.

* Decrease the time spent finding contracts, gain greater visibility into upcoming contract activities, and speed contract renewal and renegotiation.

The Emptoris Project Management module provides value-added task management for multiple parties during multi-stage sourcing by enabling users to define multi-step projects, define teams and assign roles, manage tasks through completion and save project-related information as templates. Key touted benefits of the project management module include:

* Improved process repeatability and knowledge capture

* Better management of the overall sourcing project schedule

* Centralized control of all sourcing programs

* Real-time data visibility

The Emptoris Supplier Assessment Module was designed to help category and supply managers assess the supply base and create performance scorecard data for use throughout the sourcing process. The module helps companies to:

* Conduct better, quicker, and more cost effective supplier assessments

* Assess supplier capabilities to meet ISO 9000 and lean manufacturing standards

* Audit more of the supply base without increasing resource requirements

In addition, version 4.0 introduced the Smart Data Framework, a new technology that provides enhanced control and decision-making accuracy. It is a flexible technology infrastructure for defining all elements in the Sourcing Portfolio. Where other systems "hard-code" data for items or supplier bid forms, the Emptoris Smart Data Framework allows users to create their own definitions and forms "on the fly." Key touted benefits include:

* More flexibility in defining goods and services

* Greater ability to identify and compare supplier cost drivers and capabilities

* Enhanced bid analysis by incorporating item and bid attributes into optimization constraints

In version 4.0 of the Sourcing Portfolio, Emptoris has also made substantial enhancements to existing modules, such as:

* New buyer-side consoles with intelligent data display and alerts put critical real time information in front of buyers when they need it.

* Enhancements to Emptoris' Decision Support Module, the industry's reportedly first bid analysis engine based on true optimization. Users can now leverage the smart data framework and offer advanced formula and reasoning capabilities, which makes it possible for customers to identify and realize even more savings.

Not stopping short at delivering astute sourcing functionality, in March 2003, Emptoris also announced that it has partnered with Cap Gemini Ernst & Young U.S., LLC (CGE&Y), one of the world's largest management and IT consulting firms, to deliver Best Practice Packs that should enable companies to jump start their e-sourcing programs. A collaborative effort between Emptoris and CGE&Y, Emptoris' Best Practice Packs provide process, content and service support for sourcing specific commodity categories. By seamlessly integrating CGE&Y sourcing practice experience and services with Emptoris' best-of-breed sourcing software, the Best Practice Packs should provide the following benefits:

* Increases speed-to-category by reducing setup time and leveraging sourcing expertise across all categories throughout the enterprise

* Enables repeatable and measurable sourcing programs

* Provides a baseline of documents and processes that should speed organization learning and best practices adoption

* Improves an organization's capacity to strategically source more spend

In addition to providing specific content for the Best Practice Packs, CGE&Y provides standard services to customize and configure the packs to customers' specific sourcing program requirements. Standard services also include assistance with deployment planning, e-sourcing strategy and system rollout to speed up the implementation of the Best Practice Packs.