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.
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