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Markets end on a subdued note

2011-02-16T10:11:00.000-08:00

Markets ended the lacklustre session on a soft note on account Eid holiday and investors turning to sidelines after three consecutive days of gains which pushed the market up 4.6%.

Markets opened flat at 5468 on back of weak cues from Asia and United States. The Nifty traded in a narrow 38 points range, touching an high of 5498 and a low of 5460. T he 50-stock S&P CNX Nifty ended at 5482, up 1 point and the Sensex closed at 18,306, up 32 points.

Other markets in Asia ended on a mixed note, exporter shares gained in Japan on weakening Yen and markets in China surged marginally after latest inflation eased concerns of further tightening in Beijing. Japan's Nikkei Stock Average ended up 0.6%, China's Shanghai Composite Index gained 0.9% and Hong Kong's Hang Seng Index was up 1.1%.

Earlier in the day, Prime Minister Manmohan Singh defended himself in an interview with TV Editors that the government was trying to bring justice in India's largest corruption scandal. However markets were unmoved by PM's rare roundtable interview with TV editors.

This year market men do not expect a major pre-budget rally and forsee a populist budget. Vivek Mahajan, Head Research, Aditya Birla Money said, "the relevance of budget is reducing by the year. However, with nearly five states going to the polls post the Budget, we may expect a populist budget." Mahajan expects subsidies to remain high and also expects a possibility of rollback of the economic stimulus package. "The impact of the budget is likely to be neutral to marginally negative," Mahajan added.

Given the current market conditions, Mahajan recommends investors to accumulate stocks with a long-term perspective and restructure the portfolio. "Use volatility to accumulate fundamentally sound stories with good corporate governance," said Mahajan.

From Individual stocks, Tata Steel was the top gainer on Nifty, up 3% after net profit doubled on back of robust demand and pricing power. However surge in raw material costs weighed on the margins.

Cement stocks also ended higher, JP Associates surged 3%, Ambuja Cements zoomed 2.1%.

On the other hand, auto shares were among the top losers, Mahindra and Mahindra fell 2.8%, Tata Motors and Maruti were off over 1% each. Financials also ended in the red, IDFC dipped 4.3% after clocking three days of gains, HDFC declined 3.2% and Kotak Bank was down 2%.

Technology shares were also weak, TCS, Wipro and HCL Technologies were down 0.8%-0.9%.

Hindalco, down 1.7%, Reliance Communication, down 1.6% and DLF, down 1.2% were the top losers on Nifty. Jindal Steel, up 2%, Sun Pharma, up 1.5%, Ranbaxy, up 1.1% and Larsen and Tourbo, up 1.2% were the prominent gainers.

Broader markets outperformed the benchmark, the midcap and smallcap index were up 0.5% and 1% each.

Market breadth was positive, 1683 stocks advanced for 1098 stocks that declined.

Weekly Report: Markets have a wobbly time

2011-02-16T10:10:00.000-08:00

The markets had another shaky week on account of the lingering issues on the macro-economic front, concerns of a slowdown in corporate profit growth and the burden of technical factors. The BSE Sensex swung in a range of 885 points between a high of 18,810 and a low of 19,295 before ending the week at 17,728, down 279 points or 1.5%, and the Nifty ended at 5310, down 86 points. The midcap index ended at 6475, lower by 258 points or 3.8% and the smallcap index shut shop at 7808, down 522 points or 6.2%.

The benchmark indices had started the week on an encouraging note, with the Sensex ending above the psychological 18k mark, post the previous Friday's battering and the gyrations witnessed through the course of the past week. But from thereon, the markets were back to their bearish ways, as has become the norm in this calendar year. The poor IIP data, the inability of the all-party meet to break the imbroglio on the opposition demand for a JPC probe into the 2G scam, and the concomitant, a smooth parliamentary budget session and additional scams tumbling out of the beleaguered government's closet, took the headwinds off the markets midway through the week. It was only the combination of short-covering and value buying that resurrected the markets from the marass on Friday. The weekly closing was not so bad, considering that we were staring down the barrel at one point, with the Nifty hurtling towards the crucial 5000 mark.

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Stock markets in a downhill mode

2011-02-16T10:09:00.000-08:00

The latest downtrend in stock prices is attributed to large selling by the foreign institutional investors. They are flocking back to the developed markets, especially the U.S. given the serious problems of perceptions about India, it is going to take a while before they return.

Why are the stock markets suddenly losing their sheen? Are they in one of the defining moments in which they will fall quite sharply before rallying back, if at all? Sharp swings in share prices are by no means uncommon but the precipitous drops of the type seen last in January 2008 when the market valuations plunged by an amazing two-thirds are, of course, rare and more relevantly difficult to predict.

To answer the questions, one has to look at the peaks and troughs of stock prices over a fairly recent period. The week ended February 4 was especially noteworthy. After recording some marginal gains from the middle of the week, the indices recorded heavy losses on the close of the week. Sensex lost 441 points (about 2.5 per cent) to close just above 18000. Nifty fell below the psychologically significant 5400-mark. To view over a slightly longer period, the markets started rising strongly in August, 2010, to peak at 21005 on November 5. The fall by 3,000 points (14.28 per cent) since then until February 4 is significant. What is worse is that seemed to presage the worse things to come.

The gloomy forecasts seemed to come true sooner than anticipated. Stock prices dropped sharply on Tuesday last. Sensex traded below 18000 and Nifty around 5350 in the forenoon session. The fall in stock prices continued into the following week (February 7 to 11).

A sense of deep pessimism has permeated the markets. All of a sudden, uncertainty seems to have engulfed the markets. Barely two weeks before the presentation of the Union budget, the downward movement of stock prices has acquired a distinct, negative connotation of its own. Will the two major worries of the government — inflation and the burgeoning current account deficit — invite strong fiscal measures in addition to what the Reserve Bank of India has been doing?

There is no doubt at all that inflation and the current account deficit (expected to be around 3.7 per cent of the GDP) are the major concerns. But they have been so for quite some time. The reasons why stock markets latched on to the bad news all of a sudden ignoring the good ones need to be looked at from the totality of circumstances.

India's growth story has by no means derailed. According to the Central Statistical Organisation's advance estimates for 2010-11, the GDP growth will be at a respectable 8.6 per cent. This is below the upper-end of the government's expectations of between 8.5 and 8.75 per cent but slightly above the RBI's 8.5 per cent.

In each of the first two quarters of this year, the economy has grown by 8.9 per cent. Hence, the estimate of 8.6 per cent for the whole year suggests a slowdown in the third and fourth quarters. Besides, when final figures come, a deceleration in manufacturing during the second half of the year will be seen. During the first two quarters, manufacturing grew by 13 per cent and 9.8 per cent, respectively. Such a performance is unlikely to continue during the rest of this year. However, the CSO' estimate of manufacturing growth during the whole year at 8.8 per cent is the same as what was achieved last year.

Inflation and the widening current account deficit are the major macro economic concerns. But India faces even greater problems of perceptions — corruption and in governance especially.

The India story may be substantially on track but the reasons why the stock markets apparently do not think so is to be seen in the actions of global investors, especially the foreign institutional investors (FIIs), who have come to occupy such an important place in the Indian markets. Their large investments are for short-term and often volatile but they are considered necessary to bridge the current account deficit. There is an obvious preference for the more stable FDI (foreign direct investment) but it has been going down this year as reported by the RBI at the time of the last review.

The fall in equities in the past few weeks is mainly attributed to large scale selling of stocks by FIIs. According to official figures, they sold Rs.9,339-crore worth of stocks this year up to February 4. It is likely that they share the concerns of domestic investors, with inflation and the widening current account deficit topping the lists. As pointed out, such concerns have weighed with investors in the past too but in the aggregate they were positive on India. (This was seen by the steady rise in stock prices.)

However, at the present juncture, FIIs are pulling out but do not seem to be coming back soon. Ominously, emerging markets as a class seem to have suddenly fallen out of favour with global investors. There could be many reasons: turmoil in Egypt, rising inflation and specific to India fiscal deficit, co-existing with current account deficit. In just one week (ended February 4), investors took out $7 billion, with the biggest outflows coming from China, India and Indonesia. There have been only two occasions in the past — March 2007 and January 2008 — when the volume of outflows was more than the $7-billion. In March, 2007, the investors returned fairly soon. But the exit in January, 2008, was hardly a retreat. Many emerging markets, including India, took a long time to find the bottom after losing over 60 per cent of their valuations. What is worse is the Indian markets are underperforming when compared with other emerging markets. The developed markets are now attracting investors on the basis of a better than expected performance in the latter part of 2010, especially the U.S.

Indices end mix: Pro-market budget may boost trade

2011-02-16T10:08:00.000-08:00

Indian markets closed on a quiet note despite receiving positive global cues. The 50-share NSE Nifty settled at 5,481.70, up 0.7 points, while the 30-share BSE Sensex closed at 18,300.9, up just 27.10 points. As far as impact of the upcoming budget is concerned, most experts have expressed a neutral opinion.

Mehraboon Irani, Principal and Head-Private Client Group Business, Nirmal Bang Securities, feels that the next few days will be very crucial for the markets. "They may still falter because the headwinds are very much there but pockets of opportunities are also available in the market. Investors need to select stocks very carefully as the markets are still very negative. He continues to be quite confident of seeing a new high in 2011 itself.

Excerpts from Closing Bell on CNBC-TV18 Watch the full show »

According to Jai Bala, Chief Market Technician, cashthechaos.com, the markets are very close to the end of the collective rise and looking at the historical trend, markets have never corrected more than 16% all through the current rise from the lows seen in 2009. In Bala’s opinion, markets are not underpinned by fresh buying interests for people trying to add new stocks to their portfolio.

Talking about the Nifty’s rally, he said, "It is not going to exceed 5,565 as another round of selling is due. My suspicion is that markets have got one more leg of downside. It will be slightly below the lows it made a few days ago."

Will markets be more stable post budget?

As far as budgetary impact is concerned, Bala feels that if the government is able to show some urgency to address the fiscal problem and meet the investor expectations, the markets will be happy. However, he feels the market should not be too affected by the budget.

Ambreesh Baliga of Karvy Stock Broking feels that it is good for the markets if they are consolidating before the next move. "I see Nifty in the 5,500-5,600 band, and over the next couple of days we could touch those levels of closer to 5,600." He quickly added that we cannot rule out the panic in the markets, however, assuming that there is no other adverse news on scam or other front; the markets should be in the range closer to 5,500-5,600, at least before budget.

Reacting on the Prime Minister’s interaction with media, Baliga appreciated PM’s approach of addressing the market issues on a sentimental note. While talking about the budget, he said, "When markets move beyond 5,700-5,800, it is a major resistance for the market overall, so, it clearly depends on how the budget is. Otherwise, assuming that the budget is market neutral or slightly negative, we would be in the range of 5,200 to 5,600."

He also said that the post-budget process of cabinet reshuffle should create a positive impact on the market and the economy.

Sensex sheds gains again

2011-02-16T10:07:00.000-08:00

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The market, which rebounded into positive territory a little past noon, faltered again due to lack of support at higher levels. With no big triggers to warrant strong buying, investors are mostly seen pressing sales at every small rise in prices today.

The reporting season is almost over and investors are most likely to tread cautiously ahead of the budget. Activity is mostly stock specific with the latest quarterly numbers providing some direction for stocks.

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The Sensex, which drifted down into the red a little while ago, is now up 13.78 points or 0.08% at 13,287.58. The Nifty is at 5482.55, up 2.55 points over its previous closing mark.

Realty stocks, which suffered some sharp losses in recent weeks, are among the notable gainers this afternoon. Stocks from this space opened on a rather dull note this morning, but have come back fairly strongly now thanks to buying at lower levels.

Metal stocks remain steady. Select consumer durables, FMCG and capital goods stocks have posted notable gains. Automobile stocks are quite subdued. Power, healthcare, bank and information technology stocks are mostly trading flat.

Jaiprakash Associates remains the top gainer in the Sensex. At Rs 88, the stock is up nearly 4% at present. Jindal Steel is up 3% at Rs 688.50 and Tata Steel is up with a gain of 2.7% at Rs 633.30.

Larsen & Toubro, Bajaj Auto and Hindustan Unilever are up 1.1% - 1.3%. State Bank of India, ITC, Tata Power, Tata Consultancy Services and Reliance Industries are up with modest gains.

HDFC is down by about 2.5%. Mahindra & Mahindra has lost 2%. Hindalco, Tata Motors, HDFC Bank, Reliance Communications, Cipla, ONGC and Maruti Suzuki are also trading weak.

Jubilant Lifescience, Sintex Industries, Lanco Infratech, Container Corporation, Shree Renuka Sugars, Areva, Oriental Bank of Commerce, Indian Overseas Bank, Petronet LNG, RC and Godrej Consumer Products are among the prominent losers in BSE 'A' Group.

All the sectoral indices on BSE in the green

2011-02-16T10:02:00.000-08:00

The key benchmark indices surged in late trade to hit fresh intraday highs tracking firm global stocks on positive China's trade data and easing tensions in Egypt political crisis. Domestic data showing slowing inflation in January 2011 eased worries of further monetary tightening by the central bank also aided rally. Market gained for the second straight day as investors bargain hunt beaten down stocks after the recent sell off. Reliance Infrastructure gained on good Q3 results. Today's rally was broad based with all the 13 sectoral indices on the BSE clinching gains with shares from capital goods, metal, auto and banking in the forefront. The market breadth was strong with the BSE Mid-Cap and Small-Cap indices outperforming the Sensex. The BSE 30-share Sensex was provisionally up 488.86 points or 2.76%. The Sensex regained psychological 18000 mark today.

The market opened on a firm note on positive Asian stocks. It was hovering near the day's high after hitting fresh intraday highs in morning trade. It surged to hit fresh intrday highs in mid-morning trade. It extended gains in early afternoon trade. Market extended gains to strike fresh day's high in afternoon trade. It was hovering near the day's high in mid-afternoon trade. It surged to hit fresh intraday highs in late trade.

The headline inflation eased slightly in January on some moderation in manufactured products. The wholesale price index (WPI), India's main inflation gauge, rose 8.23% in January from a year earlier. The index rose 8.43% in December from a year earlier. Food prices in the WPI index jumped 15.7% in January compared with 13.6% in December. As per provisional figures, foreign funds sold shares worth Rs. 537.71 crore while domestic funds bought shares worth Rs. 519.67 crore on Friday, 11 February 2011.

The government expects headline inflation to ease to 7% by end March, Finance Minister Pranab Mukherjee said on Monday, matching other government forecasts.

The Q3 December 2010 results season is drawing towards a close. The results announced so far showed that the combined net profit of a total of 2,960 companies rose 21.5% to Rs. 85820 crore on 18.9% rise in sales to Rs. 933468 crore in Q3 December 2010 over Q3 December 2009.

There are concerns of slowdown in corporate profit growth going ahead. With the rise in key policy rates by the Reserve Bank of India (RBI) recently, interest cost will only rise in the coming quarters that could hurt earnings going forward. If raw material costs keep rising at a fast clip, companies will feel the heat of slowing sales growth and rising cost of operations that could start eating into profit growth.

European shares rose on Monday to a 29-month high as talk of slower-than-expected Chinese inflation data and strong China trade figures boosted sentiment, with miners the major risers. The key benchmark indices in France, Germany and UK rose by between 0.01% to 0.32%.

Asian stocks rose on Monday as investors greeted news of Egyptian President Hosni Mubarak's resignation with relief. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.88% to 1.89%.

China's Shanghai Composite jumped 2.53% after China's trade surplus fell to its lowest in nine months in January after imports surged, supporting the government's case ahead of a G20 meeting that it is doing enough to spur domestic demand without speeding up currency appreciation. The trade surplus shrank to $6.5 billion from $13.1 billion in December, well short of forecasts for a $10.7 billion gap.

Japan's economy shrank slightly in the final quarter of 2010 but analysts expect a recovery this year as stronger exports to China and other parts of fast-growing Asia offset persistently weak domestic demand. Gross domestic product (GDP) shrank 0.3% in October-December from the previous quarter, slightly less than a 0.5% fall expected by markets but still the first contraction in five quarters.

Mubarak handed power over to the army, bowing to escalating pressure from the military and protesters demanding he goes. His departure was seen partially reviving investors' appetite for risk. Two weeks of anti-government protests in Egypt sparked concerns the unrest could spread across the Middle East, contributing to volatility in markets and commodity prices worldwide.

US index futures pared gains. Trading in US index futures indicated that the Dow could gain 1 points at the opening bell on Monday, 14 February 2011.

U.S. stocks closed out their second straight week of gains on Friday with a rally sparked after Egyptian President Hosni Mubarak resigned, easing tension around the region for now.

As per provisional figures, the BSE 30-share Sensex was up 488.86 points or 2.76% to 18,217.47. The index gained 499.01 points at the day's high of 18227.62 in late trade. The Sensex rose 128.51 points at the day's low of 17857.12 in early trade.

The S&P CNX Nifty gained 152 points or 2.86% to 5,462 as per provisional figures.

The BSE Mid-Cap index rose 3.57% and the BSE Small-Cap index rose 3.99%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was strong. On BSE, 2427 shares advanced while 500 shares declined. A total of 61 shares remained unchanged.

All the 30 members from the Sensex pack 28 stocks logged gains and two fell.

BSE clocked turnover of Rs. 3448 almost same as that of Rs. 3445.18 crore on Friday, 11 February 2011.

Index heavyweight Reliance Industries (RIL) rose 0.48%to Rs. 915 reversing initial losses. The stock had fallen to the day's low of Rs. 895 on reports stock exchange regulator Sebi could levy a record penalty on RIL if it is able to establish that the company was involved in insider trading. The penalty could be worth Rs. 25 crore or three times the amount of profit the company made from insider trading - whichever is higher.

Diversified Jaiprakash Associates surged 6.73% extending Friday's 7.35% gains. The stock had hit 52 week low of Rs. 70.25 on 9 February 2011.

Reliance Infrastructure rose 1.35% to Rs. 624 after company announced buyback of shares at a price of Rs. 725 at a premium over the current ruling price. The consolidated net profit rose 10.16% to Rs. 405.25 crore on 11.2% rise in total income to Rs. 3871.64 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result during market hours today.

India's largest engineering and construction firm by sales Larsen & Toubro jumped 7.21% after company announced during market hours today that it bagged Rs. 1100 crore EPC order from GSECL.

Among other capital goods stocks, Bhel, Usha Martin, ABB, BEML and Thermax rose by between 3.51% to 6.28%.

Inerest rate sensitive auto stocks rose across the board after data showed inflation moderated in the month of January. Car maker Maruti Suzuki India rose 3.18%. The stock had hit a 52-week low of Rs. 1146 on Thursday, 10 February 2011. India's second largest bike maker by sales Bajaj Auto gained 3.22%. India's top bike maker by sales Hero Honda Motors rose 3.84%. The stock had hit a 52-week low of Rs. 1412.20 on Wednesday, 9 February 2011.

Mahindra and Mahindra (M&M) gained 1.51%. The company recently unveiled plans to acquire a 38% stake in BSE-listed EPC Industrie. The acquisition would be through preferential allotment of shares by EPC, following which M&M will make the mandatory open offer to acquire a 20% stake in the Nashik-based micro-irrigation firm.

Tata Motors jumped 5.58% after consolidated net profit jumped 272.9% to Rs. 2424 crore on 22% rise in consolidated revenue to Rs. 31685 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 result at the fag end of the trading session on Friday, 11 February 2011. The stock had jumped 3.79% on Friday.

Interest rate sensitive banking stocks rose after data showed inflation moderated in the month of January. India's largest private sector bank by market capitalisation ICICI Bank was up 2.94%. India's second largest private sector bank by market capitalisation HDFC Bank was up 2.39%. India's largest commercial bank by branch network State Bank of India gained 4.42%. State Bank of India has raised term deposit rates on two maturity buckets — 555 days and 1,000 days — by 25 basis points. Simultaneously, to protect its margins, the bank has marked up its lending rate by 25 basis points. All rate hikes are effective from 14 February 2011.

Among other banks, Federal Bank Yes Bank, Bank of India, Canara Bank, IDBI Bank, Indian Overseas Bank, Axis Bank, Kotak Mahindra Bank, Bank of Baroda, Union Bank of India and Punjab National Bank rose by between 2.19% to 5.43%.

Metal stocks gained across the board after China's trade data showed imports surged in the month of January. China is the World's largest consumer of base metals. Hindalco Industries rose 3.84% after net profit rose 7.78% to Rs. 460.34 crore on 12.53% rise in total income to Rs. 6035.22 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result on Saturday, 12 February 2011.

Steel giant Tata Steel rose 4.26% ahead of Q3 results on Tuesday, 15 February 2011.

Jindal Steel & Power, Hindustan Zinc, JSW Steel, Jindal Saw, Sterlite Industries Steel Authority of India, National Aluminum Company rose by between between 0.01% to 6.59%.

LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.11% on Friday, 11 February 2011.

In macro news, the latest economic data showed industrial output in December 2010 rose a slower-than-expected 1.6% from a year earlier. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 1%, the statistics office said in a statement. Growth in industrial output in November 2010 was revised upwards to 3.62% from earlier 2.7%

The food price index rose 13.07% and the fuel price index climbed 11.61% in the year to 29 January 2011, government data on Thursday 10 February 2011 showed. In the prior week, annual food and fuel inflation stood at 17.05% and 11.61%. The primary articles price index was up 16.24% in the latest week, compared with an annual rise of 18.44% a week earlier.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by the finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations. The Finance Minister may announce a new road map for the Goods & Services Tax (GST). The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

The Centre has reportedly sent the empowered committee of state finance ministers yet another draft constitutional amendment on the proposed goods & services tax (GST) in a last-ditch attempt to reach a consensus before the Budget session of Parliament. The third draft reportedly proposes the creation of a GST Council through an Act of Parliament, instead of presidential order, as proposed in the previous draft.

The government may also announce some populist measures in the Budget given that assembly elections are due in Kerala, Tamil Nadu, West Bengal and Assam. In all these states, the Congress is potentially looking to regain power or to retain it.

Secure Transport of EDI and XML for Trading Exchanges

2011-01-19T01:37:00.000-08:00

IPNet Solutions, Inc. specializes in solving the dirty little secret of e-commerce: having different data formats at different partner sites is a significant barrier to business success. IPNet's software provides a hub through which messages to and from partners and the exchange pass; inside the hub IPNet's products do all the necessary translations and data mappings.

IPNet also supports IBM's MQ Series message based connections. IPNet uses XML as its internal medium of data recording and exchange, and can translate between this internal XML and whatever formats are used by the partners, including other flavors of XML, EDI and legacy systems. IPNet products also support transaction management functions. In addition to licensing its software to market operators IPNet also offers its products on an ASP basis.

IPNet announced that it has released support for the AS2 security standard in version 3.2 of its eBizness Suite. Formally known as "HTTP Transport for Secure EDI," AS2 is a draft internet standard for exchanging structured business data in EDIFACT, X12, XML or other formats using the HTTP transport protocol. AS2 supports authentication and privacy through either of S/MIME or OpenPGP as well as HTTPS/SSL, and extends the previous standard (AS1) by allowing for multipart MIME messages, both synchronous and asynchronous replies, and the inclusion of acknowledgments and additional data within replies.

IPNet's eBizness Suite integrates three separate products:

eBizness Transact: rules-based transaction routing of business objects and documents
eBizness Order: catalog ordering, including availability, pricing, and credit checks
eBizness Collaborate: collaboration across the supply chain

The company also offers professional services and consulting, and claims to be the only one of its kind that works with its client throughout the business cycle, "from collaboration to buying decision to transaction." Its products are used within both supply chains and marketplaces.

Market Impact

Connecting companies into a supply chain or trading exchange is much easier than getting data to flow smoothly. Many companies hope to find a niche within this problem space. IPNet is a leader among independent companies, and implementation of AS2 is useful both for adding value for its customers and for showing that is continues to be a technical leader.

This particular technical advance won't remain a differentiator for too long. As an emerging Internet standard AS2 faces fairly rapid implementation by all companies involved in moving business data over the Net. In fact, there aren't many technical challenges that would prevent other companies from entering into competition, and some sellers of exchange services or of software for building exchanges have decided to solve this problem internally. However, companies taking this approach won't necessarily find it easy to replicate IPNet's consulting expertise.

A bigger threat (or opportunity) to IPNet is probably that of being acquired by one of those market enablers. In the same way that Commerce One recently acquired AppNet for both its expertise and its staff, a number of companies could be interested in getting access to IPNet's technology and consulting. Ariba is one, since that company has undertaken a large agenda of partnerships - each of which requires significant resources for software integrations - and might still be suffering somewhat on the data side from its early decision to take a less-than-open approach to XML. But a smaller company with its eyes on enabling the construction of markets (or supply chains) for mid-range or even small businesses could also see acquiring IPNet as the means to solving the data interchange problem.

We note that IPNet and competitor Cyclone Commerce (See "Cyclone Untangles Digital Partnerships") have most of their strategic partnerships with systems integrators and hardware manufacturers. We're concerned that this means that none of the major software companies whose products they might complement see them as possible partners. If the value of these technologies is mostly to systems integrators who might be doing one-off implementations or tying together incompatible products, we think that IPNet and Cyclone should be looking for a bigger home sooner rather than later.

User Recommendations

As e-commerce becomes pervasive data translation capabilities are vital, and some otherwise excellent vendors may not have the data translation capabilities that particular customers need. A company that is building either a supply chain or a marketplace might look on IPNet as the key to letting them choose a primary vendor with excellent features but a weakness in data integration. There are also companies that have particular needs, outside of any commercial packages like supply chain systems, to integrate data from partners. IPNet is an obvious candidate to consider in these cases. Another application would be to assist with the integration of the parts of a newly merged company.

We recommend that potential users take full advantage of IPNet's consulting, and to obtain a comprehensive pre-sales analysis of the magnitude of the problem and the proposed solution before signing on the bottom line. Since this is in IPNet's best interest we think you'll find it to be a standard offer.

Epicor's Mid-Market Pitch Becomes Higher For (One) Scala Part One: Event Summary

2011-01-19T01:32:00.000-08:00

While the market has for some time been buzzing about the (for many still miraculous) predatory comeback of SSA Global, another true mid-market incumbent vendor, Epicor Software Corporation (NASDAQ: EPIC), should be lauded too for its recent revival. Like SSA Global, and intriguingly in the same time frame, Epicor did not have much upbeat news for several years following on its progenitors' (i.e., erstwhile Platinum Corporation and Dataworks) merger in 1998 and subsequent name change from Platinum to Epicor in 1999. Nevertheless, in the past two years, Epicor has seemingly achieved a turnaround both in terms of its financial performance and of its strategy clarity. It has also for over two years reverted to its, this time possibly more selective, acquisition streak starting with the Clarus e-procurement acquisition at the end of 2002, and former ROI Systems and TDC Solutions acquisitions mid-2003 (for more information, see Epicor Picks Clarus' Bargain At The Software Flea Market and Epicor Conducts Its Own ROI Acquisition Rationale).

As highlighted in the above articles, it appears this time though that Epicor has learned some hard lessons from its cumbersome inception through mergers that had initially resulted in unrelated, diverse products, and all in the face of the overall weakness of the enterprise resource planning (ERP) market during 1999 and 2000. Thus, the Scala merger too seems to have much of a strategic merit as opposed to a knee-jerk, me too' impulse owing to the ongoing consolidation craze in the market. While customers want their enterprise applications providers to oblige them with new products and technologies, vendors in turn feel compelled to increase revenues and market share as to be able to justify funding of new product development.

To that end, Epicor pledges to continue to invest in its products and to grow both organically and through acquisitions, in order to assemble the right mix of back-office, front-office, and collaborative e-business functions, delivered under a single-point accountability (i.e., "one-stop shop" and "one throat to choke") approach that is overwhelmingly desired by its target market. While in the past Epicor would integrate with partner products for best-of-breed solutions to accommodate these requirements, it has lately been expanding the boundaries of traditional ERP by building fully integrated applications that are based on the same technology and toolsets, and possibly delivered all from a single vendor.

This is Part One of a five-part note.

Part Two will detail how Scala complements Epicor.

Part Three will discuss the market impact.

Part Four will present merger synergies and challenges.

Part Five will address more challenges and make user recommendations.

Epicor Acquires Scala

Accordingly, back at the end of 2003, Epicor and Scala Business Solutions (Euronext: A.SCALA), an Amsterdam, the Netherlands-based provider of collaborative enterprise software for mid-size enterprises and subsidiaries of global corporations, jointly announced that the expectation was justified that they would reach agreement on a merger. The proposed merger was effected by a public offer by Epicor for all the outstanding ordinary shares in the capital of Scala at an anticipated aggregate transaction value of approximately $87 million (USD)—the equivalent of Euro3.27 per ordinary share—, as of the closing price on November 13, 2003, consisting of a cash price of $ 41.7 million (USD) subject to adjustment, plus 4.1 million shares of Epicor's common stock. The offer was made up of a cash price of $1.823 (USD) per Scala share plus 0.1795 shares of Epicor's common stock.

The public offer only commenced following the completion of Epicor's due diligence investigation of Scala, the receipt of a fairness opinion by Scala, regulatory approvals, the filing of an S-4 registration with the Security and Exchange Commission (SEC) by Epicor, and other customary conditions including, among others, material adverse changes to Scala and management retention agreements. Initially, Epicor anticipated that it would begin the public offer for all outstanding ordinary shares of Scala and publish an offer memorandum in December 2003, and close the transaction in the first quarter of 2004. The combination was then also expected to be accretive to Epicor's Generally Accepted Accounting Practice (GAAP) earnings in the second quarter of 2004 and for the fiscal year 2004.

One of the requirements for delisting Scala's stock on the Dutch exchange was that at least 95 percent of the ordinary shares of Scala are offered. As said earlier, the anticipated transaction value of approximately $87 million (USD) was to be paid partly in cash and partly in Epicor common stock, with a 20 percent downwards protection for the shareholders of Scala. Any decrease in the value of the common stock of Epicor below a floor of $10.21 (USD) per share was to be compensated in cash by an adjustment in the offer price. The anticipated transaction price of approximately $87 million (USD) represented a premium of approximately 40 percent as of the closing price of Scala's shares on November 13, 2003, and a 59 percent premium on the basis of the 30-day share price average. The closing of the transaction, which was expected to occur in early 2004, was subject to certain conditions including, but not limited to, regulatory clearance and acceptance by Scala shareholders, whereas the Dutch regulator of the financial markets (Netherlands Authority for the Financial Markets) and Euronext had been informed of the intended bid. SG Cowen Securities Corporation was adviser to Epicor and Fortis Bank Corporate & Investment Banking was adviser to Scala, with respect to the transaction.

However, the acquisition closing process was delayed for one major reason, which was the ensued restatement of Scala's US GAAP financial figures by its auditor KPMG, so that it was not until mid-June that Epicor was able to declare its public offer to acquire all issued and outstanding ordinary shares in Scala unconditional. As of the tender closing date, approximately 21.7 million Scala shares have been tendered into the offer, and upon the delivery of these Scala shares, Epicor was to hold approximately 93.2 percent of the issued share capital of Scala. Epicor then conducted a subsequent tender period for holders of Scala shares who had not yet tendered their shares, which expired effective July 5. Following the completion of that subsequent tender period and the tendering of 1,096,048 shares in the period, corresponding with approximately 4.54 percent of all outstanding Scala shares, Epicor now holds a total of approximately 97.98 percent of all outstanding Scala shares. Consequently, Euronext Amsterdam N.V. then confirmed that the listing of the Scala shares on the official market of Euronext Amsterdam N.V. would terminate as of July 13, 2004, whereby July 12, 2004 was the last trading day of the Scala shares on the Euronext exchange.

What the Merger Creates

The merger by all accounts creates the largest independent global mid-market provider of collaborative ERP, customer relationship management (CRM), and supply chain management (SCM) applications based on Microsoft's .NET platform and Web services, with approximately $250 million (USD) annual revenue run rate, nearly 1,500 employees, and with over 20,000 customers. The combined company hopes to expand its global presence with worldwide coverage of sales, consulting, and support for mid-market and large multinationals as well as local enterprises, offering a broad suite of integrated solutions.

Both Epicor and Scala customers should now be served by a global entity with the reach and scale to more effectively support their operations, and will be well positioned for growth with local support in emerging markets, and in key markets where Scala traditionally performs well, such as Scandinavia, Russia, Central and Eastern Europe, and China. Scala's customer base is predominantly European , while Epicor's largest customer base predominantly in North America, Australia, and the UK. The resulting company's revenues will therefore be diversified across regions with approximately 52 percent of its revenue base in North America and 48 percent outside this region.

The combined company plans to further support and develop iScala products, while Scala's management was offered one board seat out of six on Epicor's board of directors. In the long term, the combined company's product offering would be developed using the functional synergies of all products, and the integration advantages of the .NET framework and Web services. Enlarged Epicor pledges to continue the unwavering commitment to developing and bringing to market software and services based on Microsoft technology, given its strong Microsoft partnership—as a globally managed independent software vendor (ISV) and Microsoft Global ERP Ecosystem partners—and has actively participated for many years in numerous Microsoft joint development programs and early adopter technology initiatives.

The merger may also bode well for Epicor's expanded presence in key growing verticals including financial services, consumer packaged goods (CPG), professional services, automotive, industrial machinery, light engineering, electronics, hospitality, pharmaceuticals, and nonprofit. Also, this might increase the vendor's scale and reach to support global multinational corporations with a worldwide infrastructure for sales, consulting, and support, and a strong partner channel—combining over 400 partners worldwide, with possible operating and infrastructure synergies in general and administrative (G&A), research and development (R&D), facilities, and technical support with a solid platform and infrastructure for future strategic and tactical acquisitions in a consolidating market.

Prior to the merger, Epicor had delivered its solutions to over 15,000 customers worldwide, whereby its manufacturing customer community includes over 6,500 customers, implemented in more than thirty-five countries. Epicor's broadening suite of integrated software solutions features CRM, financials, manufacturing, SCM, professional services automation (PSA), and collaborative commerce applications.

On the other hand, Scala's main trump is unrivaled localization capabilities for companies doing business in established or emerging markets, or even in some of the world's most difficult-to-get-to places. Scala has garnered the local know-how and expertise to deliver results for businesses almost anywhere in the world, from over twenty-five years working with international companies and their subsidiaries and divisions in many types of industries. Scala delivers software and services that support local currencies, accounting regulations, and legal requirements in more than thirty languages in over 140 countries.

Epicor Financials

Since the transaction closing, Epicor has reported two quarters of earnings, most recently the October 20 upbeat announcement of financial results for the third quarter ended September 30, 2004. For a protractedly languishing company until not that long ago (see figure 1), reporting facts like that the Q3 2004 revenues grew over 54 percent, year-over-year, whereby Q3 2004 license revenues grew over 64 percent, year-over-year, second quarter GAAP earning per share (EPS) grew over whopping 175 percent, year-over year, while the vendor added over 165 new customers to its base and it released over 50 product upgrades to market across its suite of solutions, and so on, should bear a great importance and vindication to the long-embattled but persistent management.

Figure 1

Total revenues for the quarter were $62.2 million (USD), up over 54 percent compared to $40.3 million (USD) for Q3 2003, whereby it included $17.5 million (USD) in total revenues from Epicor's recently acquired subsidiary Scala Business Solutions N.V., whose revenues have fully contributed for the first time to this quarterly report. Excluding the contribution from Scala, Epicor's total revenues grew 11 percent year-over-year. Software license revenue totaled $15.3 million (USD), a 64 percent increase compared to $9.4 million (USD) a year ago and including $4.7 million (USD) for the contribution from Scala (see figure 2). Excluding the contribution from Scala, Epicor's license revenues grew approximately 13 percent year-over-year.

Figure 2

Consulting and maintenance revenues for the third quarter were $45.9 million (USD) compared with $30.4 million (USD) in the third quarter of 2003, up over 50 percent. Included in consulting and maintenance revenues was $12.6 million (USD) from Scala's contribution. Excluding the contribution from Scala, Epicor's consulting and maintenance revenues grew approximately 10 percent year-over-year. GAAP net income for the third quarter was $6.3 million (USD), which compares with net income of $1.8 million (USD) in the prior year's period. For the quarter, adjusted earnings were $9.6 million (USD) compared with adjusted earnings of $4.7 million (USD) in the same period last year. Adjusted earnings exclude amortization of capitalized software development costs and acquired intangible assets, stock-based compensation expense and restructuring charges, and other.

Further, Epicor ended the quarter with cash and cash equivalents of $46.6 million (USD), up approximately 2 percent from the prior quarter, including significant cash expenditure for transaction costs, Sarbanes-Oxley costs, and severance costs following the reduction in force completed during the quarter as a result of consolidating the Epicor and Scala organizations.

For the fourth quarter 2004, the company raised its previously issued total revenues expectations from the range of $66 to $67 million to $67 million (USD) in total revenues, while for fiscal year 2004, the company raised its previously issued total revenue guidance of $220 million to $221 million (USD). Additionally, the company provided an initial outlook for fiscal year 2005, where it anticipates the revenues to be approximately $273 million (USD) The company has also completed extensive operational reviews of its Scala acquisition and put in place plans toward achieving its cost synergies and accretion goals, which was

Check Point Leads Firewall Marke

2011-01-19T01:31:00.000-08:00

Israeli based Check Point Software Technologies, Ltd., headquartered on the outskirts of Tel Aviv, was founded in 1993. On June 28, 1996, Check Point launched its IPO on NASDAQ under ticker symbol CHKPF. On March 3, 1999, they changed their ticker symbol to CHKP.

Check Point's founder, Chairman, President, and CEO, Gil Shwed developed his security skills while working in the intelligence unit of the Israeli Army. With fellow founders, Marius Nacht, and Shlomo Kramer, he was able to launch the first release of FireWall-1 in 1994. The wholly owned U.S. subsidiary, Check Point Software Technologies, Inc., was formed in 1995 to lead the company's marketing initiatives. Today the United States represents 60% of the company's market.

Vendor Strategy and Trajectory

Check Point is positioning itself to be the worldwide leader in securing the Internet. In line with that, Check Point has done a nice job of securing itself as market leader in firewall products. Though a firewall alone cannot guarantee that your website or network will not be broken into, if configured correctly it can certainly reduce the risk by a large margin. Check Point's FireWall-1 product is undoubtedly their most popular and sought after product. FireWall-1 is a carrier class product, and is used as the basis of a Managed Firewall Service at numerous ISPs, ASP, Telcos, and MSPs.

Figure 1. Check Point soars over leading market indicators.

Check Point has done a nice job of building a wide distribution channel that includes France Telecom, Sprint, and Nokia.

ANALYSIS

Vendor Strengths

Technology Leadership: Check Point invented, patented, and coined the terminology Stateful [Packet] Inspection. Though Proxy firewall architectures were around long before Stateful Inspection, by the late 90s, the firewall market was seeing more demand for Stateful Inspection firewalls than Proxy firewalls. In part the demand for Stateful Inspection firewalls increased as a result of Check Point's successful marketing initiatives to discredit Proxy firewalls.

Among security professionals, the security of Proxy firewalls vs. Stateful Inspection firewalls has been a long-standing religious war. IT decision makers are more likely to get recommendations to go with either one of these architectures most likely based on which product an integrator or VAR is more familiar with. Both architectures are sound and secure if implemented correctly.

To Check Point's advantage, the development cycle for Stateful Inspection firewalls is typically shorter than the development cycle for Proxy firewalls, and initially, some Proxy firewalls could not deliver the same performance throughput as Stateful Inspection firewalls.

Reseller Partnerships: Last October 19th, Check Point and Nokia announced an expanded partnership where they will promote the Nokia IP330, IP440 and IP650 firewall/VPN appliances. If you purchase these appliances through Check Point, they are known as the VPN-1 Appliance 330, 440, and 650. This suite of security appliances marks the first time a firewall or VPN product has debuted with built-in high-availability and load sharing.

Figure 2. The Nokia IP650 uses Check Point Firewall-1 technology.

Nokia IP650

Breadth of Coverage: From its initial firewall product, Check Point has expanded their product offering to Intranet and Extranet VPNs as well as Secure Remote Access VPNs. Secure Remote Access a way for remote and mobile users to connect to their corporate network through a secure encrypted channel.

Open Platform Focus: Check Point has created an Open Platform for Security (OPSEC) guideline for other information security products that is a security certification, as well as a way for Check Point to make sure that other security products interoperate with theirs. Today Check Point has over 200 OPSEC partners. OPSEC partners use published OPSEC APIs, which allows partners to embed Check Point technology into other network devices such as routers and switches. OPSEC also enables customers to choose from best-of-breed content security solutions (i.e., URL filtering, virus-scanning, intrusion detection systems) that are tightly integrated with Check Point solutions.

Network Management Capabilities: The Check Point solution to firewalls, now includes a carrier-class network management console known as Provider-1. Using Provider-1, large organizations, including managed service providers, can manage hundreds of security policies from a single point. For companies that employ the use of hundreds of firewalls, and some do, this advantage lowers the cost of ownership by alleviating the problem of putting a security engineer physically in every location where a firewall lives. Typically, after a firewall is installed and implemented, the most common change of configuration that it will need is a change in its firewall rule set, or information security policy.

Management Architecture: Check Point's conventional management architecture allows customers to manage multiple firewalls that are in different physical locations, from one central location. The difference with Provider-1 is that one can manage multiple customer implementations, each of which represent many, many firewalls/VPN gateways from one location. Each customer or office location has a unique security policy that is administered across multiple enforcement points. One network administrator is then able to manage multiple customers' security policies. This is a product that is in line with what managed VPN service providers need as well as enterprises with large branch offices requiring multiple firewalls/VPN gateways and different security policies for each region.

Vendor Challenges

AXENT's Raptor firewall, is as secure as Check Point's, and has more to offer in the way of Proxy capabilities. As well, the Raptor firewall is easier and faster to implement. A common complaint among expert security professionals is that Check Point's documentation is hard to follow, and is not as straightforward as it could be. Further, engaging Check Point's customer support for product implementations is difficult and expensive.

Another advantage that AXENT has over Check Point is that Raptor interoperates with HP OpenView, a widely used network management station. This means that in Network Operation Centers (NOCs) at service provider locations, if they are using HP-OpenView for an NMS, do not have to run a separate network management station just for the firewall(s).

BOTTOM LINE

Vendor Predictions

Check Point's security products are in high demand in a rapidly increasing market. Their firewall product is the market leader, and will continue to be for the foreseeable future. Warburg Dillon Read forecasts that Check Point Software will earn $2.10 per share for 1999 and $2.76 per share for 2000. On June 30, Check Point announced a two for one stock split that will take affect on July 14. TEC anticipates that Check Point will continue to develop cutting-edge security products and lead the firewall market into 2001.

Figure 3. Check Point Earnings Per Share Summary and Forecast[2]

[1] Earnings Per Share (EPS) is equivalent to profit per share for each outstanding share of common stock. [2] Source: NASDAQ Stock Market, Inc.

Figure 4. Check Point's Net Income from 1995 to 1999 Shows an Impressive Trend.

Vendor Recommendations

In order to gain more market share, Check Point needs to stop discrediting Proxy solutions and embrace them. The firewall market of the future is the hybrid market, which consists of an architecture that includes stateful packet inspection as well as proxy capabilities. Because certain protocols such as the Simple Object Access Protocol (SOAP) can be passed through firewalls, there are some security problems that only Proxies can solve. SOAP is being widely supported by IBM and Microsoft, and likely its utilization will increase in the future.

Another area of concern is the installation and licensing procedures for Check Point security products. Polly Siegal, Director of Engineering at Rainfinity, Inc. a Check Point VAR says, "The installation, licensing and configuration is overly complex, requiring more expertise than should be necessary."

User Recommendations

Because Check Point's customer support process is complex, using a VAR for support that has Check Point Certified Systems Engineers (CCSEs) on staff is recommended instead of going through Check Point directly. The installation and licensing is complex enough that it is well worth hiring a FireWall-1 knowledgeable consultant rather than having your IT team sweat out a gnarly installation process.

With security engineers hard to find, and a competitive job market, it's important to make sure that the CCSEs that a VAR had on staff last month, are still there this month. Ask your Check Point VAR how many CCSE's they have on staff before signing an installation and integration contract.

If high-availability is important to your site, you can't go wrong by purchasing a Nokia/Check Point FireWall-1 firewall appliance - it is without question, the leading firewall appliance on the market today.

Fujitsu Poised to (Inter)Stage Glovia's Comeback Part Three: Market Impact

2011-01-19T01:30:00.002-08:00

Market Impact

In October 2003, a leading provider of extended ERP solutions for engineer-to-order (ETO) and high volume manufacturers, Glovia International, announced it formed a strategic alliance with Fujitsu Software Corporation to provide manufacturers, customers, and suppliers with improved collaboration and integration capabilities. Glovia International is headquartered in El Segundo, California (US), and is a subsidiary of Fujitsu Limited (TSE:6702), a Tokyo, Japan-based leading provider of international IT and communications solutions with consolidated revenues of $38 billion (USD) in fiscal 2003. The strategic alliance should allow Glovia to improve its customers' ability to collaborate with trading partners and reduce supply chain costs while enabling Fujitsu Software Corporation to further penetrate the manufacturing industry. Fujitsu Software Corporation, based in San Jose, California, is also a wholly owned subsidiary of Fujitsu, and delivers one of the world's broadest lines of application infrastructure software products, including the Interstage Suite and NetCOBOL.

Glovia is indisputably past its few restructurings and ownership-change hardships from the past few years, and the vendor now has verifiable and clear manufacturing-oriented, extended-ERP product and service offerings, and strategies to execute. The extended period of transitions and restructurings has done a gross disservice to the seasoned vendor whose astute products have been available to manufacturers for over 30 years, and yet, nowadays only some might be aware its longevity.

This is Part Three of a four-part note.

Part One detailed recent announcements.

Part Two discussed Fujitsu's support of Glovia.

Part Four will cover challenges and make user recommendations.

glovia.com

Glovia has long offered a versatile manufacturing-focused ERP system and was renamed glovia.com to further reflect the idea of globalization, optimization, and visualization. Glovia stands for GLObal Value Integrated Applications in 1999. The addition of the ".com" suffix reflected not only the product's Java-based, thin client interface, but also advancements in its object-oriented component architecture and key e-commerce-oriented functional enhancements. To that end, with the help of the parent company's deep pockets and technology infrastructure products, Glovia can now boast web-based software capabilities and domain expertise in business-to-business (B2B) collaboration, as it now offers a fully web-enabled B2B transaction applications suite with more than seventy fully integrated modules that support nearly every area of manufacturing business functions, such as product management; customer relationship management (CRM); supply chain management (SCM); supplier management; manufacturing; financials; projects; business intelligence (BI); collaboration and integration; tools; and, technology.

Moving forward, Glovia will also be able to offer the above functions as individual components, owing to Java wrappers around all of the main business process components it currently supports, such as "design", "sell"' "plan", "source", "make", "fulfill", "service", "finance", and "manage projects". Although the glovia.com suite covers nearly every area of extended ERP and nearly all the processes within the entire product's life cycle, and although it is flexible enough to serve the gamut of manufacturing modes from made-to-order to high-volume manufacturers with one solution, the vendor is not trying to be all things to all manufacturers. It still targets mixed-mode manufacturers (i.e. a medley of engineer-to-order [ETO]/project and contract handling, via make-to-order [MTO], and assemble-to-order [ATO], to high-volume/repetitive/make-to-stock [MTS] practices within the same organization) in electronic components, consumer electronics, and automotive sectors.

The product is also scaleable, with more than 1,000 mid- and large-sized manufacturers in over 5,600 sites worldwide. After Japan, the US is the second strongest market for Glovia with over 300 customers. The product is also global being available in twenty languages and with support for multiple currencies, it is implemented in over one hundred countries. To that end, Glovia has approximately 650 employees worldwide, dedicated customer support centers, and professional services teams in North America, Europe, Japan and Asia.

During these days of an ongoing consolidation in the market, Glovia is blessed with an indisputable viability of its financial backer. Furthermore, Fujitsu provides Glovia with a huge internal selling opportunity. Namely, in addition to over 30 Fujitsu's factories already running on glovia.com, Fujitsu has committed to implementing Glovia inside many more of its over 400 subsidiaries worldwide, which is a vast backlog opportunity every vendor wishes to have in case of a protracted sluggish market. In addition, Fujitsu's hardware and IT services groups have longstanding relationships with Japanese multinational corporations that have often led to greatly reduced (if not automatic) sales cycles in the past. The future could therefore bode well for Glovia given backing from the Fujitsu's blue chip customers like Caterpillar, Dell Computer, Dunlop, Canon, Pioneer, Panasonic, Bosch, Mitsubishi, Eaton Semiconductor, Xerox, Yamaha and Ericsson; its functionally strong and scaleable extended-ERP system; and, its new push with e-business collaboration enabling products. Fujitsu has been a household name in Japan, and has lately also benefited as its domestic customers have pulled it into their subsidiaries in China, Taiwan, and Hong Kong.

With over seventy extended-ERP modules, glovia.com still has much to offer manufacturing and service environments. Although it originated in the US market, it has enjoyed its greatest success with Japanese companies because of Fujitsu's involvement starting in the 1990s. Support for serial effectivity, the "kanban" and the "Seiban" lean/JIT manufacturing approaches enable manufacturers to handle configured items even in batches of one. ("Kaban" loosely translated, means card, billboard, or sign. The term is often used synonymously for the specific just-in-time [JIT] scheduling system developed by the Toyota Corporation in Japan. Seiban is a number or label attached to all parts, materials, purchase and manufacturing orders identifying a particular customer, job, product or product line resulting in separate MRPs in the overall materials requirement planning [MRP] process.) All these functions, aimed at inventory optimization and waste management, streamlined planning and control for specific products, models, and sequenced production, are offered by Glovia, and are functions that Glovia's many competitors have yet to emulate.

Also, Glovia's virtual manufacturing capabilities still give it a functional edge over many other products for the mid-market. In addition to the above JIT practices amenable to Japanese manufacturers, Glovia has lately been involved in delivering a set of "new business models" for the idiosyncratic domestic market. An example would be helping Japanese companies to source outside the "keiretsu" (a Japanese term describing a loose conglomeration of companies organized around a single bank for their mutual benefit) for better pricing and other terms of trade.

Moreover, remote inventory tracking (e.g., parts stored on service trucks) and tracking inventory by projects make Glovia a strong fit for project-based and service industries. At the core of its projects functionality is a service item feature that allows the system to define and manage service products, which are often activities rather than physical stock items, such as engineering, education, installation, and consulting. Similar to the way bills of material (BOMs) aid production planning for standard physical products, the service item aids scheduling and capacity planning for services. Also, the suite supports "progressive engineering", which is the ability to handle items that are part of the project but still undefined, that can nevertheless be included in the project work breakdown structure (WBS). The application will plan around those items without losing the integrity of the structure.

Other highlights of Glovia's projects functionality include project costing, which is kept separate from the ERP system's general ledger, and a project definition feature for defining and managing complex projects. Thus, through program cost accounting, project accounting, project definition, and project resource planning sub-modules, Glovia takes a holistic approach to the needs of project-driven manufacturers, since it can address the entire process life cycle, beginning with the bid and estimating processes, all the way to installation and service management. It can thereby connect project status tracking with back-office processes. The system also can interface to project management tools such as Microsoft Project through the project management interface sub-module.

However, glovia.com has not traditionally been strong in the distribution and transportation modules (i.e., the "ship/deliver" business process), plant maintenance or enterprise asset management (EAM), or in so-called "white-collar" corporate functionality, such as global financial consolidation or human resources (HR). Recently though, Glovia has added much-needed functionality in its financials module, specifically in the areas of general ledger, cash management, budgeting, financial reporting and consolidation (through the alliance with Cognos). This will help increase its win rate within enterprises with complex organization, and help move it beyond the stronghold of the four walls of a single plant and collaborate with its sister plants and trading partners.

As of glovia.com 6, the vendor espoused a demand-focused offering aimed at manufacturers wanting to use the internet to collaborate with suppliers, customers, and other trading partners, and thus re-engineer their supply chains. One of its key new modules is intelligent order management, which takes projected inventory from the system's APS (advanced planning and scheduling) system or a third-party APS system and allows users to plan accordingly by visualizing the best possible shipment date for any order, whether a standard or configured product, from any of its facilities. It further includes advice on product substitutions and alternative configurations, with accompanying costs and delivery information, costs per plant, system prompts and recommendations for the best solution. Global planning, collaboration and integration capabilities in the version 7 should also give customers visibility into demand. Planned future enhancements (possible as early as version 8) will supposedly enable real-time demand planning. Instead of manufacturers aggregating demand and optimizing the long-term plan, they should be able to optimize the execution of the plan and test the capacity, and the profitability of the supply chain in real-time, as the demand occurs.

Other notable available enhancements are the Advanced Capacity Planning module re-written in Java and the Shop-Floor Data Collection (SFDC) module with bar code scanning support for high-volume manufacturing and complex industry requirements. In particular, the latter now features manufacturing execution monitoring through a browser interface. Glovia may also make great play of its web-based configuration tool, which allows users to configure BOMs and routings in a visual graphical environment, and of its CRM functionality specifically designed for its target industries with its sales force automation (SFA) and field service capabilities. In addition to the above-mentioned Configurator, the suite also has parts of product life cycle management (PLM) functionality in its engineering module, including a centralized repository for all product-related data including engineering change management (ECM).

Technology Advantage

A wide range of platforms cover UNIX, Linux, and Microsoft Windows 9x/2000/NT; however, there is currently only support for the Oracle database, which is a potential downside. Owing to its newly found flexibility through Java and XML enablement, glovia.com may now function well as either a corporate backbone system, or as a solution that executes operations and planning at the plant or unit level. As a result of the co-existence with other systems in the latter case, the vendor has lately begun to offer integration adapters to link with other enterprise or legacy systems.

Possibly the most beneficial edge for Glovia is the availability of underlying technologies from infrastructure and up such as system management; storage management; application development suite; application server; portal server; content management server; business process manager; integration manager/server; XML search engine; XBRL (eXtensible Business Reporting Language) tool; integration navigators; traffic integrator; and, security integrator, which are all provided by Fujitsu.

Interstage Suite

Fujitsu Software has been making a concerted effort to (re)launch its Interstage suite, comprising of the above pieces of process automation, integration, and application servers. The focus has also been on distribution partners, OEM agreements (like the recent ones with Sybase and SSA Global), and expanding existing client relationships. Fujitsu has already had some success in parts of Europe and Asia but has failed to make a broader global impact because of poor channel and ISVs' (independent software vendors) support. Its flagship Interstage component, Business Process Manager (formerly iFlow), has often generated positive feedback from clients, but Fujitsu has struggled to convert this goodwill into broader sales opportunities, with only about one hundred customers. Time will tell whether its recent enhancements, in terms of linking parts of business process are carried out

The product also features a new rules engine, based on Ilog's JRules technology, which enables user companies to institute a plethora of highly complex rules, such as giving different customers different discounts. Also new are process agents that route or escalate problematic transactions to the assigned problem solvers within an organization, which could also come in handy because of Glovia's real-time global order fulfillment aspirations. The product also offers analytics for business activity monitoring (BAM) purposes, which can be used to set key performance indicators (KPIs) like agreed service levels, and thereby perform simulations and "what if" planning scenarios for senior business managers. Thus, Fujitsu has been making strides to tackle the process automation, performance measurement and visibility aspects of the emerging business process management (BPM) market. The analytics can be driven out of the Microsoft Analyses offering, but will also work with Cognos and Hyperion BI products and on-line analytic planning (OLAP) cubes.

Fujitsu/Glovia's Vision

Despite the digital marketplaces' limited takeoff so far, the Fujitsu/Glovia's vision still remains to become the leader in B2B e-commerce for the global enterprises, responding first pragmatically to business globalization with the current multi-national capabilities of the former glovia.hub product. Even while it is now being rolled into the glovia.com umbrella, the collaborative product is still a work-in-progress, since its first incarnation is very much aimed at globally managed sales order processing and materials procurement, and it should reportedly go a great deal further to become a completly integrated technology solution for instituting operational performance management. For now, it is about helping multi-site, multi-national manufacturers to co-ordinate their sales and procurement via portals without building out and integrating custom infrastructure and applications. Next step will supposedly be to enable business visualization or executive "dashboards" that provide meaningful and user-tailored visual representations of what is going on with the overall department business health. The final step is business optimization which is the ability of a manager to know and understand where the cheapest location to build a product is, given, such as inventory on hand, available capacity to build and logistics network information.

As companies increase their global exposure, particularly through on-line channels, language is an obvious and important barrier to overcome. Therefore, adding a real-time, multi-lingual translation capability, such as enabling customers to enter orders on a web-site in their native tongue, has a tremendous yet straightforward benefit. Despite this, it has not been offered by many at this stage. Glovia's Global Order Management System, which allows companies to manage pricing, ordering, scheduling, and delivery with multi-language, multi-currency, and multi-location, as well as tax and tariff regulation, may offer lots of bang for a buck and give competitors a run for their money. Many increasingly realize that conducting meaningful B2B e-commerce involves far more than just posting a product catalog and taking orders from domestic customers. Other benefits include the ability to aggregate sales and demand within a single organization, to merge products and services as one offering, and to generate quotations that reflect multi-plant collaboration. To that end, glovia.com processes information (e.g., a placed order) in real-time rather than in batch mode, thereby propagating changes almost instantly throughout the value chain.

This concludes Part Three of a four-part note.

Part One detailed recent announcements.

Part Two discussed Fujitsu's support of Glovia.

Part Four will cover challenges and make user recommendations.

Microsoft Kills a Flock of Birds with One Stone

2011-01-19T01:30:00.001-08:00

October 2nd, 2000 - Corel Corporation and Microsoft Corporation announced that they have formed a strategic alliance that will see the two companies expand their relationship to encompass projects related to Microsoft's new .NET initiative.

As part of this expanded relationship, Microsoft (MS) has purchased 24 million non-voting convertible preferred shares at a purchase price of U.S.$5.625 per share or a total purchase price of U.S. $135 million. The companies will also work together to support the development, testing and marketing of new products related to the .NET platform. Joint-marketing initiatives will include participation in product launches and trade show events and representation on mutual Web sites. In addition, both companies have agreed to settle certain legal issues between Corel and Microsoft.

"We are pleased to announce this latest development in our relationship with Microsoft, and what we believe to be an important step forward in our strategy for long-term growth," said Corel's interim President and CEO Derek J. Burney.

While neither Microsoft nor any of its affiliates are entitled to convert the preferred shares, they will be saleable to, and convertible by other parties, into an aggregate of 24 million common shares of Corel. Based on the number of shares currently outstanding, the common shares issuable upon conversion of the preferred shares would represent approximately 24.6 per cent of the outstanding Corel common shares after the conversion. The preferred shares do not carry any preferential dividends over the common shares.

Market Impact

This has a number of implications - both speculative and actual:

Ends the legal battle between MS and Corel

We don't imagine the full $135 Million went toward settling the legal stuff, but it's yet another step in Microsoft's attempt to eliminate all their legal woes. We do imagine that Microsoft would love to settle the DOJ case for as little as $135 Million.
Provides MS (after a fashion) with a Linux offering

There is persistent speculation that MS is looking into Linux. Gaining access to Corel Linux (although not mentioned as a driver for the deal) offers the following possibilities:
- It's the latest in the "embrace/extend/extinguish" (E3) practice about which MS-bashers have complained.
- It gives Microsoft a foothold in the Linux desktop space. Although Linux only has single-digit market penetration on the desktop, Corel's is considered to be the easiest to install. Having this product in their "stable" would conceivably allow MS to ramp up Linux more easily.
Gain support/infrastructure for the .NET initiative.

Every little bit helps. This also could conceivably lead to an E3 strategy for .NET having a Linux component. If Corel Linux becomes a standard - or MS pushes it as the "de facto" standard - Microsoft's battle to control yet another part of the Internet may be half-won.
Keeps Corel afloat, implying that MS still has competition in the office suite area.

Conspiracy theory time. During their anti-trust trial, MS used the AOL/Time-Warner merger as an argument that competition in the OS/software space is alive. By helping to keep Corel from Chapter 11 (or whatever they call it in Canada), the fig leaf of OS and office suite "competition" is maintained. Actually, we think there is some credibility to this belief.

Great Plains Reports Financial Results for the Second Quarter

2011-01-19T01:29:00.000-08:00

On December 16, Great Plains Software, Inc., a leading provider of fully integrated front office/back office e-business solutions for the mid-market, announced financial results for the fiscal quarter ended November 30, 1999. Great Plains reported record second quarter revenues of $47.4 million, a 49% increase over the same period last fiscal year. Revenues from the Great Plains platform products, Dynamics and eEnterprise, grew 54% to $45.8 million in the quarter. Operating income, excluding the effect of amortization of intangibles, was $6.1 million, up 43% over the second quarter of fiscal 1999. Net income and diluted earnings per share for the second quarter, excluding the effect of amortization of intangibles, were $4.6 million and 28 cents per share, up 52% and 35%, respectively, over the same period last fiscal year. Including the effect of amortization of intangibles, operating income for the second quarter was $5.8 million, up 42% over the same period last fiscal year. Net income and diluted earnings per share were $4.4 million and 27 cents per share, representing increases of 52% and 36%, respectively, over the comparable period last fiscal year.

"Business was solid for our eleventh consecutive quarter as a public company," said Doug Burgum, chairman and CEO of Great Plains. "Our continued strong performance, coupled with the recognition we received this quarter, confirms our mid-market leadership in delivering value to our customers and partners through innovative, comprehensive solutions for front office, back office and e-business."

Market Impact

Great Plains' stellar financial performance (See Fig.1) calls into question other vendors' attempts to justify their dismal results in 1999 by attributing it solely to the market downturn due to the Y2K date resolution. We believe that the following are the factors of the company's success formula: very strong branding and penetration within the Small-to-Medium Enterprises (SME) segment of the ERP market; a uniquely developed, extensive partner channel within the industry (over 1,600 knowledgeable and experienced partners); exclusive focus on Microsoft platforms; attractive financial and e-Commerce functionality for smaller enterprises; and competitiveness in speed of implementation, feasibility of customization, total cost of ownership (TCO), and price/performance ratio. However, Great Plains is also facing resolution of the following challenges: a very low brand awareness outside of the North American market due to weak multi-national product functionality (e.g. currently available only in 9 languages); the late incorporation of discrete manufacturing and human resources modules within its product portfolio; and only a single-site capability.

User Recommendations

Great Plains should be included on any package selection short list within the Small-to-Medium Enterprises (SME) market where electronic business and financial modules are the main pillars of an enterprise application. However, any organization evaluating Great Plains should consider existing functionality only, and, in the case of final selection, should negotiate incorporation of new applications components now at negotiated license fees, in expectation of Great Plains' increase in new product introductions.

PeopleSoft Gathers Manufacturing and SCM Wherewithal Part Two: Market Impact

2011-01-19T01:27:00.002-08:00

This article analyzes whether the array of recent PeopleSoft, Inc. (NASDAQ: PSFT), moves will finally and lastingly establish it as a serious contender in the manufacturing enterprise resource planning (ERP) and supply chain management (SCM) space. These moves are discussed in detail in Part One of this note. In a nutshell, we have been looking positively at PeopleSoft's mega acquisition of J.D. Edwards since its announcement in June albeit not overly enthusiastically due to its inevitable challenges down the track. True, the PeopleSoft-J.D. Edwards merger was in great part about retaining the big five (or big four, or big three) seat and about the need to be bigger within shrinking market opportunities.

It was no big secret that PeopleSoft had long been looking to expand its reach through acquisitions (see PeopleSoft's Buying Momentum Goes On. Pageant Participants, Line Up Please!), but many expected a smaller scale acquisition, such as its most recent: JCIT. Following the quite involved and disputably successful acquisitions of Red Pepper and Vantive (see PeopleSoft Buys CRM specialist Vantive for $433 Million), PeopleSoft had subsequently acquired a slew of smaller niche vendors such as Calico Commerce, a product configurator provider; Annuncio Software, a marketing automation provider (see PeopleSoft Annuncio-es Continuation Of Its Shopping Spree); SkillsVilage, a service procurement vendor; and, Cohera, a catalog-management and contact-integration product. Thus it would seem logical to expect a smaller manufacturing ERP or SCM vendor to be the next prey. Indeed, PeopleSoft could have achieved most of its objectives by acquiring,,for example, Baan, QAD, Epicor, IFS, Intentia, or i2 Technologies for only a fraction of J.D. Edwards' price tag (provided, of course, these vendors' shareholders were keen on a prospective sale). Why then this significant and quite pricey acquisition that possibly prompted Oracle to join the slugfest?

In addition to the joy of finally vaulting over its formidable foes, Siebel Systems and Oracle, there were many cultural similarities between PeopleSoft, J.D Edwards and their respective CEO's. Their financial disciplines and ways of turning their respective companies around at about the same time in post-2000, prior to the merger are two such examples. Additionally, PeopleSoft did not want to inherit any excessive baggage with the acquisition of a non-profitable vendor. It reportedly appears that even the vendors' founders, David Duffield and Edward McVaney, who shared a similar touchy-feely approach with customers while actively running their respective companies, were friendly and long toyed with the idea of a merger during the 1990s. However, both were repeatedly distracted by extraneous events like the Y2K bug frenzy, the outset of difficult economic times, and their respective poor performances in some stages.

With Craig Conway at the helm, however, PeopleSoft aptly managed to avoid the early stages of the high-tech downturn, with its shares peaking above fifty dollars in early 2001. However, PeopleSoft might have become the victim of its own success during 2002 (see Figures 2 and 3), since 2001 was an exceptional year for its financial performance. This included a record total revenue, record profit, and more than $500 million (USD) of generated cash Its nineteen percent growth was far better than the estimated dismal growth in the 2001 applications market. During 2001, PeopleSoft was perceived to have the purest internet-based product architecture. With improved international market penetration and brand recognition (nearly forty percent of revenues coming from outside the US), one could conclude that 2001 was the year PeopleSoft promoted itself into a formidable applications competitor. Its growth was matched only by SAP, Siebel Systems, Oracle, and i2 Technologies during their happiest years in the big league. PeopleSoft certainly bucked the trend afflicting most of the enterprise IT sector at the time.

Figures 2

Figures 3

However, it was an apparently tall order for the company to repeat the feat in 2002 and 2003, given its position and size of approximately 5,200 customers. PeopleSoft, while number one in the human resource applications market (with an estimated sixty percent of the market share) ranked third behind SAP and Oracle for general enterprise applications. With its customers representing more than sixty percent of Fortune 1000 companies, it had been in a neck-and-neck contest against Oracle for second place in the financials application markets after the first place holder SAP. Although in dispute with SAP for second place (behind Siebel) in the customer relationship management (CRM) market, PeopleSoft possibly remains the only vendor among several dozens ERP vendors able to seriously sell beyond its base in stand-alone CRM applications.

PeopleSoft had even developed around thirty individual applications within the realm of SCM and manufacturing, and the supply chain product modules can be combined in several ways for different sectors and their requirements. For example, a manufacturing suite with configurable product and process design suitable for repetitive and assemble-to-order (ATO) discrete manufacturing was developed (however, it had no functionality for complex discrete and process manufacturing, which is J.D. Edwards' forte), and a supply chain planning (SCP) suite (from Red Pepper acquisition, at the level of operational supply chain demand, inventory planning, and enterprise production) were developed. Furthermore, recently PeopleSoft has concentrated its supply chain offerings more on the supplier relationship management (SRM) and service procurement side, rather than on true strategic and complex SCM bits and pieces, such as network planning or execution.

Given that PeopleSoft had been able to weather the storm for so long, where did the abrupt slump in 2002/2003 revenues came from (see Figures 2 and 3) and why was its stock so punitively thrashed afterwards? The overall continued slowdown in IT spending, which did not happen overnight, certainly contributed. It came as no surprise that users had been, for some time, penny-pinching their IT budgets to implement or upgrade software they already own. In addition to promoting its collaboration-centric architecture, PeopleSoft was also successful in up-selling new modules to its customer base that, on average bought three additional modules when upgrading to PeopleSoft 8 (many customers also used the upgrade as an opportunity to add new ERP modules and extended-ERP applications, most frequently implementing portals, e-procurement, CRM, and employee self-service [ESS]). Therefore, it was possible that PeopleSoft had exhausted all the early adopters of its product in its customer base, and it was not able to develop another product line compelling enough to keep producing sales as the economy slump stubbornly persisted (see PeopleSoft Building Muscles To Overcome The Rough Patch).

This is Part Two of a four-part note.

Part One detailed recent announcements.

Part Three will cover the manufacturing Industry.

Part Four will present challenges and make user recommendations.

Assimilating J.D. Edwards

On J.D. Edwards' side, the appointment of the new pre-PeopleSoft merger chair and CEO Bob Dutkowsky (see J.D. Edwards' CEO Retires Again; This Time For Good?) resembled a feat by current PeopleSoft's CEO, Craig Conway. Bringing an outsider even one who has the pedigree of a formidable foe or closest partner (Oracle in Conway's case and IBM in Dutkowsky's case) to the helm of a company which had jealously guarded that position and hired only from its dynasty's rank helped bring a new prospective on how to further satisfy the customers, thus allaying sluggishness and the not-invented-here mentality that typically comes from ruling a too familiar territory for far too long.

Although J.D. Edwards did not stampeded like a raging bull in the bad economy, the new management team at least attained many positive changes, including creating a winning attitude. It leveraged a proven product and a congenial (albeit often ineffective and anemic) organization in last few years, by fathoming how to deliver pragmatic value to a born-again-loyal installed base and to the prospective, fertile mid-range to mid-cap target market, consisting of enterprises loathing any radical changes to their business practices, instead being more inclined to improving their businesses incrementally by adding additional functions around their core ERP investment.

Like Conway at PeopleSoft, Dutkowsky's initial focus at J.D. Edwards was on the company's improved financial performance, sales execution and continuation of products portfolio integration. He will have address the following two important issues: 1) the common perception of the troubled company, and 2) the difficulty of regaining confidence. To that end, important operational areas, like pipeline management, cash flow increase, collections and days of sales outstanding (DSO), reduction, margin improvements, etc. were improved. Increased sales to the installed base, expanded business services business, and the company's enhanced market visibility also occurred (see J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation).

While, like PeopleSoft, J.D. Edwards had two disappointing quarters prior to the merger (see Figures 4 and 5), it had remained a strong and financially healthy company that was generating cash, increasing its research and design investment, and improving its sales and service operations significantly. Still, both companies were finding it increasingly hard to compete globally and domestically against bigger and up-and-coming competitors in such a depressed technology economy. In addition to sharp decline in license revenue for both companies, PeopleSoft saw its stock tumble more than fifty percent in value and it even warned of much lower revenue than 2002 in 2003. The combined vendors should now a have solid foothold against SAP and Oracle, particularly given that a better-performing side could cover up for the underachieving one, if necessary.

Figures 4

Figures 5

Although the new PeopleSoft has shown a growth in its last quarter, it is still less than the combined vendors' revenues of a year ago (as indicated in Part 1). While it is up to the market to discern whether this was attributed to the acquisition or to an organic growth or decline, at least the acquisition seemed to result in the synergy and calculus to prove that the sum may be bigger than its parts, especially in other areas like manufacturing and SCM capability. Namely, the acquisition has expanded PeopleSoft's geographic reach particularly in Europe, Asia-Pacific, and many other overseas markets like Latin America and Africa. Prior to the acquisition, neither company had enough staff and infrastructure to be effective in many of these global offices, whereas now they will have twice as many people and have gained a lot of credibility in the regions.

Complementary Strengths

First, the acquisition unites J.D. Edwards' recognition in the upper mid-market with PeopleSoft's strong position in the large enterprise space. Second, the new company combines PeopleSoft's strength in the services industries and government, with J.D. Edwards' strength in manufacturing and distribution, asset-intensive, and project-oriented industries. Thus, conversely, PeopleSoft gains an entry into the challenging area of manufacturing, and is now able claim several thousands of manufacturing customers rather than the measly few hundred it has on its own. The combination should give PeopleSoft a boost particularly in Europe and Asia-Pacific, where it has had a problem convincing doubting prospects it was anything but a human resource company. Not having a viable manufacturing product and recognition has hurt PeopleSoft a lot in the past, but J.D. Edwards has had a strong presence within these markets in addition to notable manufacturing products, giving PeopleSoft the credibility it needed badly at long last.

Thus, PeopleSoft and J.D. Edwards complement each other in industry sectors, product functions, and enhanced geographic presence. J.D. Edwards had long been ranked an industry leader in manufacturing and distribution. This is highlighted by its integrated advanced planning and supply chain execution (SCE) software. In addition, J.D. Edwards' solutions in real estate, construction, and enterprise asset management are products PeopleSoft had hardly ever offered before the merger.

On the other hand, in addition to the non-manufacturing and SCM areas like enterprise service automation (ESA), human capital management (HCM), financial management, and enterprise performance management (EPM)/business intelligence (BI), the PeopleSoft product that will fill certain J.D. Edwards' gaps the most are PeopleSoft Supplier Relationship Management (SRM) and e-business (i.e., PeopleSoft Portal, eProcurement, eStore, and Marketplace). PeopleSoft eProcurement solutions feature auctions, reverse auctions, supplier analysis, purchase order management, purchase requests, requests for quote (RFQs), etc., while PeopleSoft SRM covers the areas from design collaboration to strategic sourcing. To be more precise, in PeopleSoft's lingo, SRM refers to the entire "Source to Settle" business process including design collaboration, sourcing, e-procurement, purchasing, services procurement, settlement, supplier enablement, and analytics.

Recently, the vendor announced upgrades to the SRM portfolio, with analytics and improvements across purchasing, e-procurement and collaborative sourcing. For example, PeopleSoft EPM now features analytics for SRM with links to quality management, customer profitability, workforce analytics, supply chain analytics, and balanced scorecard, to name some. Prior to the merger, J.D. Edwards had to partner with MicroStrategy for business analytics and with Hyperion for consolidations and budgeting, while its SRM offering had been mainly at the visionary stage.

For its part, J.D. Edwards has contributed with manufacturing oriented J.D. Edwards ERP 9.0 (formerly OneWorld) and supply chain planning and execution (SCP&E) suite (coming mostly from former Numetrix). The focus on industry solutions such as for high-tech and electronics, industrial fabrication and assembly (IFA), automotive, life sciences, and architectural and construction, should continue as well. The former J.D. Edwards 5 product family featured solutions for ERP, CRM, SCM, and web-based collaboration, as well as an architecture that is evolving to embrace web services. Prior to the merger, the vendor delivered more than 400 new products and product enhancements for the J.D. Edwards 5 suite, which went almost unnoticed and overshadowed by the Oracle/PeopleSoft controversy during its Quest Global user conference on June 9-12. The vendor even claimed that it had surpassed the 24-month R&D goal in just 12 months with more than 400 enhancements, many of them being a result of the vendor's work with the special interest groups (SIGs) for its industries of focus.

While 2002's enhancements across ERP, SCM, CRM, BI and so on have catered more to service industries, this year manufacturing and distribution industries benefitted with enhancements like pricing and promotions, demand forecasting, engineering project management (EPM), work breakdown structure (WBS), cross-docking, dual unit of measure (UOM), configuration management, product variants, to name only some.

By providing the noteworthy spate of SCM functionality pieces such as advanced planning adapter and agent technologies, demand collaboration and planning, order promising, production and distribution planning and scheduling (in both discrete and process manufacturing flavors), web planning, demand consensus forecasting for engineer-to-order (ETO) industries (where the pure statistical forecasting based on historical data does not suffice), multi-site pegging, and supply chain event management (SCEM), J.D. Edwards had joined the elite of SCM leaders. Supply chain execution (SCE) suite, on its hand, exhibits the portal system, advanced pricing module, advanced stock valuation, agreement management, bulk stock management, forecasting management, inventory management, management accounting, and product costing.

By going well beyond core ERP, the former flagship J.D. Edwards' OneWorld product also covers aspects of quality management, requirements planning, sales order management, shop-floor and work order management, and transportation management and warehouse management. Former J.D Edwards had also made significant forays with its enterprise asset management (EAM) solution, which had been re-architected as a stand-alone product in addition to a native integration with its ERP system and solid functionality including predictive maintenance analysis based on the application of analytics to historical maintenance records, criticality analysis, and warranty management, with service agreement management slated for a future release. PeopleSoft had to deliver these through partnerships with MRO Software and Indus International.

This concludes Part Two of a four-part note.

Part One detailed recent announcements.

Part Three will cover the manufacturing industry.

Part Four will present challenges and make user recommendations.

Security Information Market Heading for Growth

2011-01-19T01:27:00.001-08:00

It is estimated that the security information market will grow to a $1.5 billion by 2003.[1] With a dearth of security professionals available, viewing online security articles offers companies the opportunity to gain information, and improve system security knowledge at low overhead and a fast pace. Via the web, IT organizations can find out about security bugs, patches, and exploits; read reviews on security products and vendors; and learn about security architecture and project management. Though security hardcopy magazines still exist, their content is not always at your fingertips when you sometimes need it most.

[1] Source: IDC

Market Impact

Right now, the online security information market does not seem to be a predatory or prey market. In fact, many security information sites work together to share links in order to expand the content of their own sites. Some sites are supported by advertising, click-throughs, and publishing vendor contact information which can be included in a favorable product review; while others maintain the independence and objectivity of the information provided and the product reviews. Further, being a content aggregator helps mitigate many legal risks associated with original security content publishing.

As well, many of the security information sites are used to draw readers and potential customers who may decide to look at security consulting services. Some sites publish product reviews and then list vendors and their logos in a vendor database for readers to peruse. Revenue is gained from publishing digital logos, and for an additional cost, click-throughs embedded in the logos. Some sites that offer objective analysis and recommendations use subscription paradigms, however often times product and vendor analysis is free.

IBM Tries to Take More Market Share from Oracle, BMC, and CA

2011-01-19T01:26:00.002-08:00

IBM has announced a four-year, $200 million investment to make it more cost effective and easier for companies to manage data on IBM S/390 enterprise servers. They will attempt to compete more effectively with Computer Associates (which acquired Platinum Technology and Sterling Software), BMC, and Oracle in the lucrative database tools market. These types of tools are indispensable to database administrators and system administrators to ensure that performance and uptime are maximized.

According to the vendor, IBM's database toolset, "available at half the price of competitive offerings in most cases, provides customers with maintenance capabilities that improve the functionality of e-business applications."

Janet Perna, general manager, IBM Data Management Solutions, said "The industry as a whole is facing escalating costs in systems deployment and a shortage of skills. IBM's data management tools address this concern by helping database administrators improve productivity and enhance system performance and resource utilization."

IBM has stated that it will deliver more than 35 tools for DB2 and Information Management Systems for OS/390 environments to help customers manage large volumes of data inherent to any e-business. The four areas of focus include:

Database Administration

Performance Management

Recovery and replication management (the ability to provide 24x7 support)

Application management (the ability to craft application connections to the database)

Market Impact

Given that Computer Associates has purchased Platinum Technology and Sterling Software, and has therefore "collapsed" the market for database tools, leaving only BMC and Compuware as major competitors in the space, this area should be ripe for IBM. They have the necessary research and development muscle, especially when it is concentrated on its own mainframe platforms.

We believe that IBM will be successful in this initiative, considering their extensive customer base, huge sales force, and their ability to cut deals on pricing with their larger customers. However, a four-year timeline will make it difficult for them to execute with a proper time-to-market. Most of the products they are competing with have been in use for many years, so dislodging the other vendor's products from the current customers will take a lot of effort.

User Recommendations

Most firms with S/390 systems most likely already have database and systems management software in place already. Customers should evaluate carefully whether IBM is bringing any new distinctive competency to the table, even if pricing is favorable. It should be remembered that the database and system administrators of the mainframe will have to be retrained on the new software, existing purchase and maintenance agreements may have to be abandoned at the customer's cost, and many features may not be available until much later in the four-year timeline outlined by IBM. If chosen, the contract should be carefully crafted to ensure that required features are supplied in the necessary timeline for the company.

Financial Fusion ~ E-Finance Wireless Leader?

2011-01-19T01:26:00.001-08:00

WESTPORT, Conn., /PRNewswire/ -- Confirming its commitment to lead the e-finance marketplace into the rapidly emerging wireless marketplace, Financial Fusion, Inc. announced the formation of its new Web and Wireless Division along with the launch of its patent-pending Total Wireless product family - available for immediate implementation.

Financial Fusion's focus on wireless technology will allow financial institutions to provide consumers and small businesses with seamless access to important financial information. Consumers can conduct time-sensitive financial transactions such as funds transfer, bill payment, and stock trading on a wide range of popular wireless devices including Palm Pilots and other web-enabled PDAs, cell phones, and pagers. In addition, Total Wireless delivers personalized stock portfolios, one-to-one messages, news, weather, and e-commerce features. (Source: Financial Fusion)

Market Impact

Financial Fusion has formed a wireless branch of their operation to provide financial organizations, such as Old Kent, with full wireless connectivity for their clients. While Old Kent and Financial Fusion are not the first to offer wireless e-finance, the venture represents yet another step forward to the wireless age.

Financial Fusion offers a pre-packaged wireless solution aimed directly at e-finance. The package will allow a financial institution's clients access to day to day banking transactions, as well as to stock trading, quotes, sports, news and weather. The advent of wireless in the e-finance arena gives the client control. From this point forward a client can bank anytime, anywhere, without limitation. (Of course your cell phone will not suddenly start spurting out cash.)

The wireless offering will utilize existing physical wireless technology from Palm Pilot (Palm VII PDA), Nokia, Motorola, Qualcomm, and Ericsonn Wireless Access Phones (WAP). Financial organizations such as Fidelity Investments have also offered wireless access via a two-way Research In Motion Pager and the Palm VII PDA, so what makes Financial Fusion's offering unique? Simply because Financial Fusion's Stage III Architecture is based on java objects, eliminating the need to re-code HTML pages for wireless devices.

In addition, Financial Fusion's product is entirely removed from the user interface, regardless of whether the user has a PDA or a WAP, code can be written once and used across all devices without modification. Due to Financial Fusion's Java technology, the Stage III Architecture auto-detects the type of wireless device a client is using and serves multiple wireless interfaces concurrently. Wireless Interfaces include the Wireless Access Protocol (WAP), Palm Query Applications (PQA), Short Messaging Standard (SMS) and Dynamic Hyper Text Markup Language (DHTML) with Wireless Markup Language (WML) emerging presently.

User Recommendations

Financial Fusion offers complete wireless functionality with rapid deployment due to the ubiquity of the Stage III Architecture. Of course, with any wireless venture, speed of implementation is important, but stability during rollout is even more so. The worst thing any company could do is to rush blindly into a wireless venture, simply because users are clamoring for it. Our advice is to take your time in selection, talk to AT&T and IBM Global Services in addition to Financial Fusion, not only to gauge pricing, but also to gauge functionality, speed, and security. Financial organizations should be concerned with not only the product offerings from emerging wireless vendors, but also the corporate strategy and financial viability of these companies.

IBM Tries to Take More Market Share from Oracle, BMC, and CA

2011-01-19T01:25:00.000-08:00

Epicor Software Corporation (NASDAQ: EPIC) and Scala Business Solutions (formerly Euronext: A.SCALA), an Amsterdam, the Netherlands-based provider of collaborative enterprise software for mid-size enterprises and subsidiaries of global corporations, have completed a merger that began in late 2003. The merger creates the largest independent global mid-market provider of collaborative ERP, customer relationship management (CRM), and supply chain management (SCM) applications based on Microsoft's .NET platform and Web services, with approximately $250 million (USD) annual revenues, nearly 1,500 employees, and with over 20,000 customers. The combined company hopes to expand its global presence with worldwide coverage of sales, consulting, and support for mid-market and large multinationals as well as local enterprises, offering a broad suite of integrated solutions.

The situation may become even more complex in Epicor's Manufacturing Solutions Group, which contains 6,500 of Epicor's 20,000 customer base, and which, as mentioned earlier on, features Vantage (for new business opportunities), Manage 2000, and Avant as its major mid-market ERP products and Vista for smaller discrete manufacturers. As for specialization, Vantage remains the preferred system for MTO, job shop enterprises, while Avant, which has not been actively marketed in the U.S. since 1999, leans towards complex manufacturing and project work environments as well as towards repetitive manufacturing with one of its product variants; Vista, on its hand, is the low-end product for much smaller discrete manufacturing enterprises.

However, even with this simplified product set, Epicor still has a substantial rationalization and abridging job to do. For example, the vendor has to utilize open database technology to provide flexible, yet integrated enterprise business applications. Namely, Vantage and Vista, developed on a single framework, are designed for Progress Software Corporation's Progress RDBMS, but they are also available on the Microsoft SQL Server .NET Enterprise Server platform, while the Avant product leverages UniData (a.k.a. U2) open database technology from IBM Corporation.

Thus, the above-described product roadmap strategy within Vantage 8.0 calls for a common platform that has a single layer of business logic and multiple UIs that sit on top, letting manufacturers migrate from their current installations at their comfortable pace. Epicor first delivered on the new roadmap with the early 2003 announcements that its Vista 6.0 and Vantage 6.0 enterprise systems now share that common platform, with UIs and workflows tailored to the markets they serve (see Epicor Reaches Better Vista From This Vantage Point). At the same time, Epicor rolled out the product strategy and roadmap to all of its manufacturing customers, thereby sharing the vision of how all products (Avant, DataFlo, Manage 2000, and ManFact) would fit into the future constellation, including plans to continue development on those solutions releasing new upgrades every 12 to 18 months based on customer feedback. Logically, Vantage and Vista have taken the front seat as the solutions for new business, owing to their sexier technological foundation.

While the long awaited porting of Epicor's flagship products onto Microsoft SQL Server and Progress as well as continued focus on .NET framework should significantly relieve the company's R&D burden (the vendor spends 12 percent of its revenues on R&D, and has over a quarter of its total headcount in R&D), create incremental revenues opportunity in coming years and improve its general competitiveness, the remaining work of delivering single .NET compliant application framework remains major. At best, 80 percent of current install base will be covered by the first release of Vantage 8.0—namely, the earlier users of Vantage and Vista, whose migration (or mere "cherry picking" of new Web service-based enhancement) should be reasonably painless.

Eventual Migration

Still, the remaining 20 percent of 6,500 manufacturing customers, might sooner or later want to migrate from current non-.NET applications, although Epicor is committed to supporting these customers indefinitely (these customers are currently provided with new upgrades every 12 to 18 months based on the input the vendor gets from customers with regard to the enhancements they would like to see), which will in turn draw on its multiplied R&D and support resources. One should imagine the magnitude of the effort when the Avant and Manage 2000 (Epicor acquired ROI Systems in mid-2003, bringing this midsize discrete manufacturer and hybrid manufacturing and distribution environment enterprise solution to the fold) instances, some with extensive customer bases on non-Microsoft technologies, should follow the path. Epicor indicates that these customers will be offered a migration to Progress or IBM DB2 database from U2 (only in the second generation of Vantage/Sonoma), but acknowledges that the migration will virtually be another full-fledged implementation, which might mean some customers' defections.

As for Scala, room for functional enhancements beyond ERP and product delivery work in progress remains too. Namely, despite the elaborately thought out transition between the products (the upgrade path from Scala 5.1 to iScala 2.2 is reportedly no more complex than that between service releases of Scala 5.1), Scala does not intend to immediately withdraw Scala 5.1, as there are still existing customers who are in the middle of a roll out of the product and as not all languages have been implemented in the initial releases of iScala.

Further, the company has to build the hospitality and pharmaceutical functionality into a forthcoming new release of iScala 2.2. The partnership with Microsoft for CRM might also be dubious in the long run, given the temptation to utilize the home' product Clientele, particularly for some larger enterprises where Microsoft CRM scalability is yet to be tried and true.

This is Part Five of a five-part note.

Part One detailed the event.

Part Two discussed how Scala complements Epicor.

Part Three presented the market impact.

Part Four covered merger synergies and challenges.

Competition

Incidentally, the competition is also flying from many directions since the parent company now competes in many diverse markets, and it now has a number of competitors that vary in size, target markets, and overall product scope. The primary competition comes from ISVs in three distinct groups, including

1) The above-mentioned large, multinational tier one ERP vendors that are increasingly targeting midsize businesses as their traditional market becomes saturated (see PeopleSoft Revamps World for Its Mid-Market "Express" Conquest and SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan).

2) Midrange ERP vendors, including Lawson Software, SSA Global, IFS, Intentia, and MBS.

3) Established best-of-breed or point solution providers that compete with only one portion of Epicor's overall ERP suite, including Sage/Best Software, Systems Union, Unit 4 Agresso, or Geac for financial accounting; HighJump Software, Prophet21, RedPrairie, or Manhattan Associates for distribution and WMS; QAD, MAPICS, SYSPRO, Lilly Software, Encompix, Adonix, or Made2Manage for manufacturing; and Onyx, Siebel Systems, Pivotal, FrontRange, Salesforce.com, or SalesLogix (owned by Best Software) for sales force automation (SFA), customer service, and support. The list of the competitors in the above markets is by no means exhaustive.

Also, a leaner company with a large customer base and a palatable market capitalization remains an attractive acquisition target in this seismically consolidating market, with possibly unwanted attention of predatory competitors. At least, the Scala acquisition with its organizational and products' merger might also deter the acquisition-spotting vultures for the time being, in addition to an existing rights plan for a heftily higher price per share than the current one.

User Recommendations

Epicor's financial stability and its ability to enhance its products (both in-house and via acquisitions) and its determination on executing product and technology strategies deserve commendation. Current users are advised to follow Epicor's new product introductions and keep an eye on its future product strategy. The positive sign is the company's more manageable and narrower focus, as demonstrated by its most recent results. Mid-market companies with up to $1 billion (USD) in revenues that are within the parent Epicor's industries of focus (i.e., Epicor Vantage for capital equipment, fabricated metals, electronics, instruments and controls, and consumer packaged goods [CPG], and Epicor Enterprise for enterprise services, financial services, non-profit, hospitality, and entertainment) and companies with a need for a single-source functionality beyond core ERP scope, should benefit from including Epicor in the short list of potential candidates for the enterprise applications selection.

Enterprises should nevertheless monitor the consistency between the announced strategy and the company's actions in continuing to support all of the former products strategically. While Epicor has continued to support all products from Dataworks since 1998, and pledges to continue to support all its products, existing users of Epicor products that face stabilizatio or discontinuation may benefit from querying the company's future product migration path, service and support, and scalability strategy. As for the newly added or anticipated functionality, users are advised to ask for firm assurances on the availability and future upgrades timeframes, and more detailed scope of enhanced product functionality. They should also inquire about any possible impact (or benefits) of migrating towards more advanced offering. Taking stock of current resources' Progress, VBA, and C++ skill sets and assessing the effort to train these into VB.NET and C# is highly recommended at this stage.

Although the path to Vantage 8.0 (Sonoma) is an evolutionary path, the first release will offer functionality that is equivalent to, or a superset of, the functionality in the current releases of the Vista and Vantage products. This first release also meets the requirements of most Manage 2000 and DataFlo customers. By the second release and higher, Sonoma' will be equal to, or a superset of, anything customers have in place, including Avant and ManFact, which would be only some time after 2005.

Scala's target market, general multisite and multinational enterprises with up to $1 billion (USD) in revenues and their divisions with up to 200 concurrent users per site, should consider the company's value proposition, and we generally recommend including Epicor Scala in the long list of vendors considered for an enterprise application selection by the upper-end of mid-market companies that are a mixture of regional business, divisions and semi-autonomous operations, each with its own autonomous requirements and business processes. These companies generally are rapidly growing and agile, but have a limited regional IT budget or staff, and less intricate discrete or batch process manufacturing, CRM, and e-commerce collaboration requirements.

The product is also the system of choice for many lower midrange companies where the primary language requirement is not English, and where there might be a need for integration to SAP in the corporate office. Technologically, the product may be the most suitable as a solution for global midsize enterprises, worldwide dispersed, with strong requirements on distributed infrastructure, security and with private trade exchange (PTX) or collaborative role-based portal solutions strategy and delivery. The industries that would most likely benefit from using its products are those from Scala's proven core target sectors—including telecommunications, hospitality, pharmaceutical, and food and beverage.

Large global corporations with a centralized management philosophy looking for strong global corporate financial and HR modules, for a highly scalable cross-platforms solution, and for much broader functionality beyond traditional ERP boundaries (e.g., more intricate CRM, PLM, or complex project and ETO functionality) from a single vendor may benefit from evaluating other products at this stage, bearing in mind what might come from Epicor's side in the future. For more on the pros and cons of unified corporate-wide enterprise solution deployment, see Standardizing on One ERP System in a Multi-division Enterprise.

Scala users should meet the new owners and talk with the new management to make certain they know existing customers' expectations and plans. Measure the vendor's commitment to support your technology for a specified time. Keep a close eye on its actions, given that product enhancement and service and support strategy can sometimes change after an acquisition, although Epicor seems committed to actively selling and enhancing the product at this stage. Also try to understand the product strategy and look for opportunities in the new prospective product portfolio.

On a more general note, existing and prospective enterprise software users need to understand every vendor's strategy toward them. While you should talk to sales people and vendor executives, also look for more than mere words. Ask about why certain items you think you need are not available as standard offering. Ask about headcount changes, product release schedules, release contents, partnership programs, the future of exiting OEM third-party products, etc.

Finally, very detailed information about Epicor Scala, Epicor Vantage and Epicor Enterprise products is contained in the ERP Evaluation Center www.erpevaluation.com.

Software Giants Make Courting A Small Guy Their "Business One" Priority Part Four: Challenges and User Recommendations | Software Giants Make Courting A Small Guy Their "Business One" Priority Part Three: Market Impact Continued | Software Giants Make Courting A Small Guy Their "Business One" Priority Part Two: Market Impact | Software Giants Make Courting A Small Guy Their "Business One" Priority | A User Centric WorkWise Customer Conference | What You Should Know Before Selecting a WMS | Selecting PLM Software Solutions Part 5 - User Recommendations | Selecting PLM Software Solutions Part 4 - Comparing 3 Vendors | Selecting PLM Software Solutions Vendors Part 3 - A Timesaving Solution | Selecting PLM Software Solutions Part 2 - Problem Overview | Selecting PLM Software Solutions | Tier 3 And Tier 4 ... Where Do You Go If You Don't Know, What You Don't Know. | Invensys Production Solutions - Can Historic Strengths And The 'Protean Boost' Overcome Its Liabilities? Part Two: Liabilities, Strategy, and User Recommendations | Invensys Production Solutions - Can Historic Strengths And The 'Protean Boost' Overcome Its Liabilities? | What Does Vendor Consolidation Mean To The End User? | [Try more searches related to this white paper !]

Epicor's Mid-Market Pitch Becomes Higher For (One) Scala Part Three: Market Impact

2011-01-19T01:24:00.000-08:00

Epicor Software Corporation (NASDAQ: EPIC) and Scala Business Solutions (formerly Euronext: A.SCALA), an Amsterdam, the Netherlands-based provider of collaborative enterprise software for mid-size enterprises and subsidiaries of global corporations, have completed a merger that began in late 2003. The merger creates the largest independent global mid-market provider of collaborative ERP, customer relationship management (CRM) and supply chain management (SCM) applications based on Microsoft's .NET platform and Web services, with approximately $250 million (USD) annual revenues, nearly 1,500 employees, and with over 20,000 customers. The combined company hopes to expand its global presence with worldwide coverage of sales, consulting, and support for mid-market and large multinationals as well as local enterprises, offering a broad suite of integrated solutions.

Thus, Scala, with main direct office coverage in Europe and the Far East, and through its network of partners and dealers in most remote, esoteric, and still low-penetrated markets, perfectly fits the description of an ideal Epicor supplement. Another factor that may bode well for its future as Epicor's subsidiary is its vast international coverage, and a broad geographic revenue mix (over 4,500 customers with over 7,500 sites worldwide), which not many (if any) peer vendors can tout. Scala has offices in over thirty countries, with local distributors increasingly helping out the direct sales force, whereas the vendor has continued to offer its products and services through the reseller channel and value added resellers (VAR), which has also expanded lately, with 54 percent license revenue growth in 2002 and with a 34 percent growth in number of partners amounting to over 140 partners worldwide.

The above facts have long promoted Scala into a serious challenger in the mid-market, especially in emerging markets like Central and Eastern Europe, Middle East, and China (possibly the local market leader therein following up on the early entry in the 1980s). The former flagship Scala 5.1, a mature but less technically apt ERP product suite, has traditionally covered the full spread of core ERP modules, including logistics, manufacturing, financials, project management, and service management, with the indication of high levels of customer satisfaction. Like SYSPRO, its parent-to-be Epicor, Intuitive Manufacturing Systems, and Exact Software, Scala's functionality is equitably solid in accounting, manufacturing, and material management areas. This is an advantage compared to competitive products that are either mainly strong in accounting (e.g., Microsoft Business Solutions [MBS], Sage/Best/ACCPAC, Coda, Systems Union/SunSystems, Unit 4 Agresso, etc.) or in manufacturing or distribution (e.g., Lilly Software, SoftBrands, Made2Manage, or QAD).

This is Part Three of a six-part note.

Part One detailed the event.

Part Two discussed how Scala complements Epicor.

Part Four will present merger synergies and challenges.

Part Five will address more challenges and make user recommendations.

Scala Market Strategy

At the beginning of 2000, Scala began redesigning its ERP software and building a new platform specifically for on-line collaboration. It has meanwhile packaged together the functionality required in one standard software system, which means a business can begin collaboration with its subsidiaries, customers, partners, and suppliers. To that end, iScala 2.1 was the successor product to Scala 5.1, since it contained all of the basic ERP functionality that was available in Scala 5.1 in addition to the collaborative capabilities inherent to the new XML Web services-based design. Scala 5.1 was withdrawn from new business sales in December 2002, although existing customers will continue to receive support well into the future.

Like its predecessor, iScala 2.2 also comes in two flavors to satisfy needs of both local medium business and of smaller global corporations (and their subsidiaries, divisions, and suppliers). The iScala Business Server is an entry-level product—a collaborative ERP package for the medium-size stand-alone business needing core ERP functionality without a need for high scalability and advanced security, and as a first step towards automating business processes across applications and with customers or suppliers systems. iScala Enterprise Server, on the other hand, is designed as a more complete collaborative ERP package for medium-size multinational companies or for the subsidiaries and divisions of larger enterprises. It has all the functionality of the iScala Business Server but adds scalability, business centralization capabilities, and support for working across and supporting multiple sites and subsidiaries.

Thus, Scala prefers not to be simply perceived as a mid-market vendor per se, as it rather targets two somewhat distinct mid-market segments:

1) mid-size units,divisions, or subsidiaries of large corporations, and

2) independent mid-sized enterprises, where Epicor's sweet spot has also primarily been so far. There are slight variations in the needs of these two mid-market types, since the corporate divisions typically have urgent connectivity needs such as processing multinational invoices, using integrated warehouse systems, or triggering automatic purchase and sales orders.

Unique Multilingual Capabilities

Accordingly, Scala has long featured possibly the unique multilingual capabilities of its Collaborative ERP software. Scala maintains a single set of application code for all its languages—more than thirty—compared to other vendors who commonly support different software versions for different languages. Scala's product architecture, which enables a single version of the software to support multiple languages, means global companies can keep their maintenance costs down by, for example, running a single service center to support several countries. It also gives them flexibility to manage their global business more easily in a multilingual and multicultural environment, since Scala also provides telephone support in over fifteen different languages to support local users worldwide.

To ensure that every new product is multilingual from the start of its life cycle, translation into different languages is done in the software development process on a phrase-by-phrase basis to give accurate meaning in multiple languages. The multilingual capabilities are enhanced by the new Unicode technology that is used starting with iScala 2.1, allowing the combination of any languages with different characters in a single installation. True multilingual technology like Unicode also allows a wide range of languages such as Chinese, Russian, or Arabic, to be stored, displayed, and printed on the same page or even in the same field. The technology also gives Scala a significant technical advantage in that new developments and maintenance updates to Scala software only have to be developed in a single version, whereas Scala's competitors typically have to maintain multiple versions, one for each language.

Consequently, having long focused on the upper end of the ERP mid-market, Scala has apparently demonstrated an understanding of this market's dynamics and its pragmatic requirements of robust multinational corporate functionality and intra-enterprise visibility within a fairly inexpensive product, fast and simple implementations, and reliable service and support. The company has struck the value proposition of balancing business processes standardization with flexibility and autonomy of remote subsidiaries, which should come in handy for Epicor's like forays.

Global companies should appreciate iScala's features such as simultaneous support for multiple accounting standards, enhanced security and usability features, and remote administration tools to manage distributed or local installation, which can often match or exceed the tier one vendors' capabilities. Many other peer vendors conversely require their customers to operate in a single language at each location because their applications are based on the technology unable to hold more than one language in the same system.

With recently increased business functionality, comprehensive integration, and connectivity capabilities coupled with a brand new flashy UI, iScala 2.2 might be an attractive choice for companies who are considering upgrading or buying a new ERP system. There might be no similar product that provides companies with consistent information, a global view of the business, one view of customers or suppliers, and reasonably rapid system deployment at the same time.

While tier one enterprise systems can cope with the complex needs of centralized functions and a large number of users, they are often not well-suited to handling the less complex needs or localization requirements of a branch or sales office in remote countries. Hence, Scala (and now Epicor too) wants to cohabit with these global players by providing systems for subsidiaries and regional offices of global enterprises. Scala's argument would be that it is simply too expensive and time consuming to keep changing a rigid tier one product to suit a changing market, even if it could be deployed in a location where often the poor telecommunications infrastructure capability would prevent a web-deployed system from being used.

Vertical Specialization

Scala's endeavor at some vertical specialization, operating with a wide range of specialist channel partners around the world, many of whom target specific application areas, such as the pharmaceuticals business (over 500 sites) and the hospitality industry (over 300 customers), is also commendable, although these are perceived and marketed as stand-alone solutions, separate from iScala. Thus, these solutions will have to inevitably migrate to the new iScala platform in a foreseeable future. Also, a number of Scala customers work in discrete engineer-to-order (ETO) and make-to-order (MTO) manufacturing, and require full project based accounting capabilities. Because one of the main businesses of these global companies is to manufacture in lower cost geographic locations, the vendor has made attempts to ensure that iScala's capabilities at least match the demands of the medium to small manufacturing subsidiary, whether it be for to stock' or to order' manufacturing environment.

Still, independent Scala had yet to build or acquire many aspects of the extended-ERP functionality, especially supply chain planning and execution (SCP&E) and product lifecycle management (PLM) functional enhancements to round out a complete collaborative extended-ERP suite, readily available by many of its peers let alone the tier one likes of SAP, SSA Global, PeopleSoft, Oracle, Intentia, and IFS. Not to mention the need to bolster strategic supplier relationship management (SRM) and sourcing, manufacturing operational capabilities, and shop floor execution, well beyond a mere order management. Some of iScala's clever features, like Global ID (a unique identifier to be assigned in all of client's enterprises worldwide) and available-to-promise inventory (ATPI) order line check, still could not have been sufficient to comprise a holistic SCM strategy.

Scala Connectivity Solutions, which are already deployed in over 100 sites in over thirty countries, provide interconnectivity to any best-of-breed products (e.g., CRM, SCM, e-commerce site integration, warehouse management system [WMS], bar code for distribution, SAP, or personal digital assistant [PDA]-based module solutions) would likely not have sufficed for the target market's one-stop-shop requirements. Therefore, iScala presents an opportunity for third party specialists or VARs to create add-on modules providing functionality geared to a targeted market and meet the specific needs of a group of users. Not to mention that many ready-made solutions from the Epicor's arsenal (e.g., SRM, PLM, WMS, storefront commerce, etc.) could come in handy for potential up-sell and cross-sell purposes.

Hence, in addition to a number of potential functional extensions, Scala finds a more visible big brother' with a global infrastructure (i.e., Epicor generated nearly $150 million (USD) in revenue in fiscal 2003, which should still rank it amongst the dozen or so largest enterprise applications vendors in the world) and a solid management team, more certain R&D budgets, while both companies should jointly garner increased visibility and clout. Both user communities should benefit from Epicor's enlarged size (a substantial installed base of over 20,000 customers), and recently restored financial stability and likely mutual products' enhancements (e.g., Epicor could leverage Scala's HR and payroll modules or localization capabilities, rather than typically licensing them in an original equipment manufacturer [OEM] fashion).

This concludes Part Three of a six-part note.

Part One detailed the event.

Part Two discussed how Scala complements Epicor.

Part Four will present merger synergies and challenges.

Part Five will address more challenges and make user recommendation

Digital Business Service Providers Series: Market Overview

2011-01-19T01:22:00.002-08:00

The Digital Services Industry began when traditional management consultants with accounting practices discovered that computers could relieve them of the vast tedium of processing numbers and let them focus on their client's business concerns, usually by applying the new technology to create new business value. The world hasn't been the same since. Today, any business of reasonable size is integrated with its support technologies, whether the business is aware of it or not. With the rise of the World Wide Web, the breadth of technologies and associated business services has exploded, and will continue to do so without much in sight - short of an economic collapse - to stop it. Forward thinking service providers provide measurable value to their clients - and have indeed helped create whole new business models and opportunities.

We have called these innovative service providers Digital Business Service Providers or DBSPs. Often these service providers are defined in terms of e-business alone, but we take a broader view:

"A DBSP is a company providing management, technology, and creative consulting practices that strategically assist or significantly enhance the capability of a client to deliver services, information and/or goods through the use of an electronic networked environment, generally including the use of IP related technologies."

Under this definition DBSPs range in their abilities and offerings from the esoteric worlds of advertising and branding to the technologies and infrastructures that make a business work in a networked environment. The range of interrelated needs of their clients means that these companies must be equally broad in their skill sets and vision, even while occupying niche spots. New niche providers arise on a continual basis, and often move rapidly, by one business strategy or another, to expand services so that they can provide 'end-to-end' services. However, one of the significant features of this marketplace is that new niche players are already finding it impossible to compete or expand against entrenched legacy providers. As a result we're seeing partnerships between the two begin to blossom. This is a sign of the market maturing in at least some segments. We shall identify these segments, and some chief players among them, below.

In this part of the series, we examine the rise and nature of the different service providers that inhabit this space. In subsequent pieces, we shall examine service provider market and technology trends.

The Evolution of Service Providers

The Digital Business Service Provider space has only been in existence a short while, and yet it can claim a long history. Service providers arose from a variety of backgrounds as the opportunity and demand to provide new services increased. These new opportunities result from the coalescing of communications technologies with computers, related developments in the telecommunications infrastructure, and the deregulation of many national and international networks. The major outcome of this coalescence has of course been the creation of the Internet.

Chronologically, we'll break the history the into seven time periods starting with the beginnings of commercial applications of computers. These rough time frames span the epoch during which technology begins as a way of making efficiency gains and ends as an integral component of a company's strategic survival and business methodology.

Late 1950's to mid 1970's

Service Providers are dominated by former and current accounting and management consulting firms. We see a new breed of systems architecture and programming consultants such as CSC (Computer Sciences Corporation), mostly geared for large-scale applications. Later in this period systems integrators such as EDS appear. These are today's legacy (or traditional) consultants. Verticals such as air travel booking systems (SABRE), manufacturing and automation, and decision support/rudimentary business intelligence tools appear.

The first networks, including use of satellites, and first electronic mail systems appear. Awareness of EDP (Electronic Data Processing) rises in corporate hierarchies as a business asset, making it easier for service providers to sell major projects and develop new capabilities. Many companies operate with separate MIS departments in individual business units, leading to a plethora of incompatible systems.

Mid 1970's to early 1980's

This era is still dominated by large-scale computing projects. Networks are spreading to more customers as networking costs drop and new telecommunications infrastructures come into effect. Systems integrators find their niche, particularly since multiple 'packaged' solutions are becoming available. This enables service providers to extend their expertise into customizing and integrating the new packaged solutions, increasing the market they can service. Implementation projects cost as high as $300,000 and software packages are about $50,000.

Early 1980's to late 1980's

The PC changed everything. When IBM introduced the PC in 1981, and the first killer application in the form of a low cost spreadsheet, IT costs per user dropped quickly. Ethernet and token ring standards became established, terminal emulation programs for PC's appeared providing connectivity to mainframes as intelligent terminals. Connectivity became an important issue. Suddenly everything could be distributive and connected. Service Providers quickly tooled up in network technologies, adding the management of these systems to their sales bag. The enormous backlog of systems integration was not complete, and now had to be readapted to network and distributed processing environments.

The growing PC market was now penetrating into SMEs (small-to-medium sized enterprises), and even homes had PC's. France experimented with a nationwide electronic network. Management consulting involving IT strategies begin to affect how organizations executed their business. Extensive MRP and DSS systems extended the range of consulting services, particularly for risk management and accounting based financial service consultants such as Deloitte and Touche, KPMG, and PriceWaterhouse. Companies like EDS and CSC become the systems integrators. SMEs were shut out of these developments to a large extent, but took advantage of lowered software costs to automate their businesses; small-scale service providers and some of the larger consultancies such as Deloitte paid attention to this market, but it was not their focus.

Meanwhile, broadband services such as cable, fiber-optic and microwave, and many communication standards were proposed or rolled out in the burgeoning telecommunications industry. ARPANET expanded to over 10,000 nodes by 1987, and the Internet began to take shape.

Late 1980's to early 1990's

With the rush of network technology, packaged and open architecture solutions and new technologies, lowered integration costs per user. Smaller organizations were able to introduce new solutions in the crusade to improve business efficiency. Larger organizations followed suit, using service providers to compensate for inefficiencies or lack of expertise in their MIS departments; this often pushed aside MIS management and led organizations to be more dependent on their service provider.

As systems became more complex, more companies came to engage with service providers. The depth, breadth, and strategic consulting demands on service providers were, as a result of these trends, greatly expanded. Deeper involvement in the affairs of clients led to questions about the independence of the legacy consultants who sometimes provided auditing and technology consulting to the same companies, thereby often auditing their own work.

Further, the discrepancy in pay and investment return was quite different for technology and management consulting as compared to audit and accounting services. The latter were left feeling like the poor cousins. The situation continues to this day, but the management consulting arms of the major players are divesting their technological fingers rapidly, yet at the same time attempting to capitalize on the market. The problem is still undergoing review by the Securities and Exchange Commission in the US.

Two events in this period led to dramatic changes in service provider life. On November 1, 1988 the first Internet worm was released, disabling approximately 6,000 of the 60,000 Internet hosts. Even though the Internet (then still really ARPANET) lashed together educational institutes, there were direct ties to commercial networks and free public access ramps. The release of the worm sent shivers around the net, and the Internet security industry was born.

In 1990, ARPANET was suddenly released from its Cold War cage, to form the backbone of the new Internet. In 1991, Tim Berners-Lee, working at CERN in Switzerland Launched the first prototype of the World Wide Web. Marc Andreesen and a group of student programmers at the University of Illinois developed MOSAIC, the first graphical browser and the forerunner for Netscape.

Early to mid-1990's

Although the Web excited many, established businesses were relatively slow to pick up on the possibilities. One that was farsighted was MCI (now WorldCom). It teamed with service provider PROXICOM to create the first online mall -- marketplaceMCI - a failure by any standards, but a brave attempt. PROXICOM exemplified a new breed of service provider: one dedicated to web business. Such new niche web players quickly grew in reputation, and business was beginning to awaken to the possibilities of the Internet. Suddenly, there were people on the web, and where there were people there was a market. Tapping into it was another problem. PROXICOM was joined by the likes of RAZORFISH and USWeb (now marchFirst)and many others.

The legacy consultancies were aware of this new form of enterprise, but their money was being made through Y2K - related activities, and their core customers were not at the forefront of spending on new technologies. And, truth be told, many were ill equipped for the creative challenge posed by the Internet. Many Internet projects were also small scale and not of interest to them, so the field was left to the new service provider innovators. Some advertising agencies, such as DDB Needham, were also curious about this new medium, and online advertising was born.

B2C oriented service providers dominated this early phase, although many have since changed their focus to B2B. Razorfish appears to have made this transition. Organic.com, founded in 1993, and Agency.com (founded 1995), are still recognized as B2C companies, but are increasingly involved in back-office and legacy systems integration work. Robert Shaw, former CEO of USWEB, recognized the ambiguity in B2C when, during USWEB's 1999 fourth quarter results telecast, he stated " the blurring of B2C and B2B is happening; you can't really do the whole thing without understanding the whole scenario."

Mid 1990's to 1998

Though established business was waking up to the possibilities of the Internet, the Y2K issue consumed most of their resources and energies. Rightly or wrongly, the web became the haunt of the newcomer, and 'dot-com' companies arose as online sales opportunities seemed to explode with each passing day. With a roaring stock market, a huge potential and the online market growing at an unprecedented rate, even very unclear business models seemed to offer instant success.

Prior to 1998, the Internet looked still very experimental, but a few apparent success stories stood out: AOL by 1998 was a multibillion-dollar business, and was beginning to move from its private network to the Internet, a move that gave the web as a whole great legitimacy. Other early successes included service providers such as Razorfish, Proxicom, SCIENT (founded in 1997), and Appnet (founded in 1998). Interactive agencies - branches of traditional ad agencies that brought branding and image creation together with Internet technologies - were also founded.

During this period, dot-com's started to arise as a powerful force on the service provider marketplace, their numbers largely driven by the unreasonable market caps achievable on the stock market through IPOs. This had several effects that echo to this day. First, many service providers began to offer services for creating businesses, not simply adding value to existing businesses. In some cases some service providers were started and structured on the premise of creating new businesses in the web environment. One such company is SCIENT. SCIENT has since built its reputation and its capabilities to deliver services to create businesses from a few Power Point slides. Others, such as LANTE (founded 1984), have undergone transformations from network integrators to e-Marketplace specialists, or at least tried the transition with a good degree of success. Many such integrators have failed in this attempt.

New trends became important: globalization, localization, personalization, privacy, security, Internet taxation, and even politicization. Suddenly the web involved new skill sets and impacts that had as much to do with traditional global issues as with modern technology. Technology companies planning to make money on the web began to turn to traditional consultants who were ill prepared for the new medium.

Additionally, new Internet technologies such as Java and Active-X were bringing out the collaborative and interactive advantages of the web. These new technologies began to fit neatly into the new service provider skill sets.

1998 to Present (November 2000)

Although the growth of dot-com companies is largely associated with the United States it was and is a worldwide phenomenon, with some 10% of IPOs originating from offshore based organizations (see figure 1 which gives the distribution of IPO's outside the US on US exchanges up until January 2000). Unsustainable market caps derived from wildly inflated revenue predictions by (often) inexperienced entrepreneurs moved a whirlpool of money into these stocks.

Service providers also jumped in on the act, and up to a year ago some were earning as much as 50% of their revenues from dot-com business ventures. Many service providers streamlined their processes, (thereby increasing business failure risk), and developed incubators, accelerators, business production 'Supercenters' (a term from service provider Xcelerate), test laboratories for broadband, scalability, wireless, and whatever else the focus had to be, in order to attract dot-com's to their houses.

Figure 1. IPOs from Offshore sources on US exchanges prior to January 2000

The new service providers on the block were good at this, and their shares soared with those of their clients. However, the party came to a reasonably abrupt end when reality set in, and all the hype of the new business paradigm collapsed back to one basic measure - profitability. The impact on service providers was dramatic, and within a quarter, many reported that they had shifted gears and were focusing on more stable lines of business. Luckily, with Y2K out of the way, established brick and mortar companies were now turning their attention to the Web. Even slightly before the dramatic drop in valuations that occurred in March and April 2000, brick and mortar companies were looking for ways to improve supply chain and procurement processes. Early reports of substantial ROI in e-procurement, and extended supply chain management using Internet based technologies were proving attractive draws.

The odd situation of dot-coms dying and brick and mortars turning to click-to-order, as well as the growing importance of B2B, has created a brave new world of partnering between the legacy consultants and the new upstarts. For example, according to Walker Interactive some 80% of data on the web is sitting on S/390 systems. Legacy consultants have the traditional skill sets to deal with these legacy systems, while the new service providers have skill sets focused on the newer technologies, including their creative and strategy components. Though this does not mean that service providers cannot offer a complete set of services for any engagement, it does mean that there are likely to be higher risks when companies choose a single service vendor for a broad based solution. Mitigating these risks has led to partnering relationships among many service providers.

Finally, as this market matures the problems of capitalizing on the advantages of a ubiquitous network have opened a Pandora's box. The complexity of integrating creaking legacy systems with new high speed and scalable Internet technologies, and linking suppliers and customers into single demand-side supply chains, presents an enormous challenge. One thing to expect is that it will spur the development of new technical capabilities within the service providers. Already, many specialist service providers and second tier services are appearing; these range from online brokerage and automated taxation services to wireless, broadband and Bluetooth product support. The wealth of services that existed in the physical realm will to a large extent be transformed to online businesses. The partnering approach will play a heavy part in tomorrow's service provider world, and partnerships should be taken into account when selecting the service provider.

Digital Business Service Providers - A Current Taxonomy

Based on the discussion above, the current set of digital business service providers divides roughly into the following groups:

IT Management Consulting organizations that have re-packaged, re-branded or created consulting practices around the e-business label. To add creative design and web architecture elements to their portfolios, they have invested in smaller entities. Deloitte Consulting is an example of this process with its venture capital program to obtain technologies and talent; others are Andersen, PWC, and KPMG.
Systems Integrators who have migrated from systems integration into B2B. Often these are reasonably successful but small (less than a thousand employees) firms that realize that the main business focus has shifted from integration to providing full services. Larger companies such as CSC and EDS are also among legacy systems integrators who have made (or are making) the transition. Smaller organizations such as OSPREY can also be placed in this category.
Traditional Marketing and Advertising Agencies who are driven to provide Internet services for clients. This group of companies is often ill suited for the role of technologist, so unlike their roots in marketing and creative solutions. However, relying on their marketing strengths may provide a lower cost alternative than some using holistic SP's trying to cover every base. Successful companies in this space are DDB Needham's integrated communications and digital group (called Beyond Needham. JWT is another legacy advertising organization that has embraced the web. There are also newly created digital branding companies such as Four Points (absorbed by Whittman-Hart which merged with USWEB/CKS in March, 2000), begun by ex-executives of traditional advertising agencies but now focused in the digital marketplace, and Digitas which rose from within Bronner, Shlosberh, Humphrey to engulf its parent.
Website Builders And Web Creative Organizations. These are generally new companies created within the past five years that started as creative boutique website builders in the mid 1990's and have grown their capabilities organically or by mergers and acquisitions. USWEB/CKS, Razorfish and XCelerate are examples of these growing companies.
Vertical Market-Product Oriented Corporations that drive into the e-business service provider space by providing opportunistic consulting arms to sell and repackage existing products to e-business clients. These might be labeled "product-centric service companies." IBM Global Services (vertical: Computer products and services), Informatica (vertical: data warehouses) and possibly such giants as AT&T and WorldCom (vertical: Telecommunications) are examples of this breed of service provider. Generally they are legacy organizations that see real growth opportunity, sense the need to re-invent themselves to survive, or are merely remarketing themselves with current jargon without any basic change in what they provide.

It should be pointed out that the situation is highly fluid. For example, Andersen Consulting has undergone a rapid change within a period of 80 days from November 1999 to January 2000. Released from its chains to Arthur Andersen, it is expanding rapidly into new regimes, including forging a diverse set of partnerships. In the extended world of the Internet one may wonder what any company truly "is."

User Recommendations

Given the history and nature of the changing service provider world, it is clear that a Digital Business Service Provider must have an extensive network of capabilities. Users must consider all their requirements in light of the interlocking partnerships and capabilities that may be called upon during the course of a project.

Technology trends are more closely tied to business opportunities today than at any other time in history. You want to work with a service provider that understands your strategy and direction and shows the ability to grow its skills to meet your future needs. This is probably more important than low price or even basic capability. Today, with the more complex environment of the Internet, a new company may need to spend as much as $10M for a first run to compete with online brick and mortar organizations. Barriers to entry are much higher, and competition is likely to get stiffer. Opportunities will most likely arise with new technology, and the service provider you work with should be capable of riding ahead of the wave

On the other hand, issues such as cost place a heavy demand on the user to manage projects, and ensure the goal of the project is clear and within bounds. If you are uncertain of the business vision, it is better to postpone the project to a later date than to spend money without a clear goal. You must work closely with the service provider, have a management structure that deals with issues effectively, and ensure that the service provider also has appropriate management and structure on its side.

Service Provider Recommendations

It is essential to form partnerships and alliances to build the skill sets that will continue to add value to your clients, regardless of your current size or aspirations. We believe that small companies are likely to find it impossible to provide the full extent of service required; we believe that even companies in the SME market will have this problem.

Larger service providers must have critical mass, market niche or distinctive direction to be successful in fending off challenges. We suspect that in time various 'camps' of service providers will be created, much like a set of suppliers and buyers tend to loosely affiliate around products and services. For you, new business creation may well become a task of picking the elements in a supply chain of services and products, and of being able to bring these to the customer in a rapid sequence. Perhaps the future contains a digital marketplace for DBSP services.

Palm IPO: 3Com’s morning after, or “Do you know the way to San Jose?”

2011-01-19T01:22:00.001-08:00

he stock soared from its IPO price of $38 to open at $150 and trade as high as $165 on Nasdaq. The stock ended up 57-1/16 at 95-1/16, making it the third-biggest percentage gainer and the fourth most active issue on the Nasdaq.

Late Wednesday, 3Com, which makes products and software for data networking, sold 23 million shares, or 4 percent, of its Palm unit at $38 each - well above the expected range of $30 to $32. Initially, the stock was expected to be priced at $14 to $16 a share.

At the stock's closing price, Palm had a market capitalization that was larger than that of its parent company, 3Com.

Market Impact

3Com's most recent SEC filing says it all. From Q2 1999 to Q2 2000:

Sales of network systems products (switches, hubs, routers, etc.) decreased 12%
Sales personal connectivity products (NICs, modems, etc.) decreased 14%
Sales of handheld computing products (Palm) increased 77%

Clearly, Palm has been pumping up 3Com revenues.

3Com is more than aware of the trends - its stated plans are to focus on the following growth markets as it completes its Palm spin-off: voice over IP (VoIP), LAN telephony, broadband access, wireless access, and home networking.

3Com's largest rivals are not standing still. Lucent Technologies (NYSE:LU) has also announced plans to spin-off its' own, more mature PBX and LAN networking businesses. Lucent will concentrate on high growth areas, including optical networking, Internet infrastructure, wireless, semiconductors, and consulting services, according to Lucent Technologies Chairman and CEO Richard McGinn.

Canadian telecom giant Nortel Networks (NYSE:NT) is moving in similar directions. Nortel recently announced plans to spend $260 million and add 3,400 people to its burgeoning fiber optic networking business. Nortel is also active in CRM (Customer Relation Management) and call center software, with its plan to acquire San Jose-based front office software maker Clarify Inc. (NASDAQ:CLFY).

Finally Cisco Systems, Inc. (NASDAQ:CSCO) dominates the market for network hardware such as routers and switches. It's also moving aggressively toward the LAN hub and switch (hello, 3Com!) market, and home users. Furthermore, Cisco has over US$10B cash to help finance any potential acquisitions.

3Com, with a market cap of "only" US$28B is dwarfed by the market capitalizations of Lucent (US$229B), Cisco (US$454B), and Nortel (US$161B). It can't afford to buy any of them at present. As 3Com heads for newer markets, it's going to find two extremely deep pockets - Lucent and Nortel - headed there as well. At the same time, Lucent is clearly eschewing 3Com's traditional networking market, while Cisco is targeting LAN's and homes.

3Com's stock will churn as the market digests its distribution of its 94% share of Palm stock. Obviously, it will add greatly to its own US$950M cash reserves, but 3Com's rivals dwarf even Palm's US$54B market cap. Hmm. Well, Cisco's San Jose headquarters are only about five miles away from Santa Clara. And Cisco has the reputation for being extremely good at mergers.

We expect a 70% likelihood that 3Com and Cisco enter into merger or acquisition discussions during the next twelve months, and at least a 40% likelihood that they establish a joint venture, minority purchase, or merger.

User Recommendations

Users planning hub and switch purchases during 2000 need not regard a 3Com purchase decision as automatic. At a minimum, the increased market pressures can be leveraged for more favorable purchase terms. 3Com's technology, distribution, price points, and name recognition remain undiluted. However, 3Com customers should not be averse to looking at competing vendors such as those documented above.

Rapidly Consolidating Enterprise Applications Market: The Worlds of 'Organic Growers' and 'Aggressive Consolidators'

2011-01-19T01:21:00.000-08:00

Anyone remotely following the enterprise applications market, unless he/she has been on a lengthy leave of absence on a deserted island (or maybe participating in the Survivor reality TV show, followed by the Amazing Race), has likely been worn out by the news that the maturing market has been rapidly consolidating.

The competition for the still underserved small and mid-market segments continues to heat up as different breeds of aspirants try and occupy the landscape of vendors vying for market share in this space. But prospective mid-market customers seeking new solutions still hold the trump card in this tussle that should force vendors to better serve their needs. History has demonstrated that these companies exhibit certain buying characteristics that must be understood and effectively addressed in order for software companies to be successful, regardless of their size (see Cookie-cutter Solutions Won't Cut It with the Mid-Market).

One can rightfully wonder what types of vendors' approaches to the mid-market have emerged from the waves of mergers and consolidations, and what characteristics will ultimately distinguish the contenders from the pretenders. Making the headlines in the new ERP landscape are the vendors who are either those vendors that try to be "all things to all people" and those who focus on more narrow and credible niches (see What's Ahead for Users on the Enterprise Infrastructure Battlefront?).

Major Vendor Consolidations

Indeed, a formerly prominent enterprise resource planning (ERP) player J.D. Edwards was acquired by PeopleSoft in mid 2003, and PeopleSoft was subsequently gobbled up by Oracle early in 2005 (see While Oracle and PeopleSoft Are to Fuse, Competitors Ruse—Leaving Customers (Somewhat) Bemused). Once also the "who's who" in ERP, customer relationship management (CRM), and supply chain management (SCM) vendors Baan, Infinium, EXE Technologies, Marcam Corporation, Computer Associates' (CA) interBiz and most recently Epiphany have lost their identities (albeit not necessarily their functional characteristics) under SSA Global (see SSA GT to EXE-cute [Yet] Another Acquisition and The Name and Ownership Change Roulette Wheel for Marcam Stops at SSA Global), while the same happened to JBA International and Comshare that are now part of Geac Computer Corporation (see Geac Gets Its Commonsense Share Of Consolidation, With Revolving Door CEOs No Less). Further, Frontstep (formerly Symix Systems) and Pivotpoint became part of MAPICS (see Analyzing MAPICS' Further Steps After Frontstep), who was then recently purchased by Infor Global Solutions. And , lo and behold, Infor had been busy on the acquisition front, previously acquiring Lilly Software, BRAIN, Future Three, and SCT Process, among dozen others (see Examples Of How Some Mid-Market Vendors Might Remain Within The Future Three (Dozen)?).

Mid-market vendors like ROI Systems and Scala now belong to Epicor Software (see Epicor's Mid-Market Pitch Becomes Higher For (One) Scala and Epicor Conducts Its Own ROI Acquisition Rationale). The same is the case with former Solomon Software, Great Plains Software, and Navision Software, which are now a part of Microsoft Business Solutions (see Microsoft 'The Great' Poised To Conquer Mid-Market, Once and Again). Softline and other former divisions of Computer Associates, ACCPAC, became part of Best Software, and both are now marketed under the umbrella Sage brand, to be globally aligned with the parent Sage Group (see Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions?). Similarly, Macola and Kewill mid-market ERP providers, are both now part of Exact Software (see Exact SoftwareWorking Diligently Towards the "One Exact" Synergy).

On the other hand, Ross Systems, Pivotal, International-Matematik International (IMI) Corporation, PowerCerv, CIMPRO, Fourth Shift, and Made2Manage Systems, while not necessarily disappearing from the applications scene, have permanently gone from the stock market (at least under their independent stock ticker). Some of them are now on a strong comeback under either new management or with wealthy financial backers (see Made2Manage Systems "'One Year After": Reenergized and Growing, chinadotcom in the "'Process" of Acquiring Ross Systems, CDC Software Wins at the Pivotal's Auction. Now What? and Fourth Shift's evolution Within SoftBrands' DemandStream). The market tumult seems to continue, since at the time of writing this research note, the breaking news was the impending merger between seemingly unlikely parties, Lawson Software and Intentia.

Over-evolved Mega-suite Vendors

The tier one vendors, which are market-leading, "over-evolved mega-suite" vendors like SAP and Oracle, have humongous cash, research, and development (R&D), sales, and marketing resources. They also have global coverage and strong corporate-level financial consolidation and human resource (HR) management modules. But their implementations—due to the complexity of overblown, spaghetti-like code owing to their attempt to address dozens of industries—often come with a certainty of risk and without quick and clear benefits (see What's Wrong With Application Software? Businesses Really Are Unique - One Size Can Never Fit All).

Aggressive Consolidator Vendors

Another way to be all things to all people is to acquire a number of fading, marginalized, or distressed vendors and then, at least in the short term, largely milk the service and maintenance fees associated with the plethora of systems, some of which have long been past their prime. These aggressive consolidator vendors have built a business model of acquiring various software vendors and solutions and placing their packages into a portfolio of offerings from which customers and prospects can select. Some refer to these companies as "the rollups." They include such as SSA Global, Infor, Geac, Epicor, and even Oracle in part due to the Retek, ProfitLogic, i-Flex and PeopleSoft/J.D. Edwards's acquisitions. While this might currently look like a strategy that works in terms of profitability and market share, it leaves many questions unanswered, such as how these amalgamated vendors will move their multiple solutions forward.

Namely, while these vendors appear to have assembled an impressive collection of software that should, in theory, be able to meet the needs of many organizations, each of these vendors and their new software properties face a nightmarish integration process that could take years before a cohesive product strategy is presented to their customers—let alone the development of an integrated and collaborative collection of software applications. The big question is whether any of these mergers have made these companies better able to compete with various best-of-breed vendors by offering a truly complete suite of ERP and SCM solutions.

Moreover, there is a subgroup of rollup vendors that are either "regional" or "multinational" enterprise vendors, with a strong presence in one or another distinct geographic location. Examples of multinational enterprise vendors are Microsoft Business Solutions (MBS), Exact Software, and Sage Group/Best Software. These vendors often have rather loose relationships with their affiliates in other parts of the world, and disparate regions often work on diverse code bases, which will present a real hurdle as globalization continues. The opposite likes of Made2Manage Systems, Encompix, SSI-World, EMR Innovations, ESS Finesse, Trackware, Workwise or Relevant Business Systems are be examples of solid regional solutions.

Focused Organic Grower Vendors

These developments leave a limited group of focused "organic grower" vendors with a single-code (or that is close to being single-code), flexible product, and a decent geographic coverage. These vendors have taken the opposite approach, growing their companies with few acquisitions, if any, but staying close to their roots with a single platform focus. QAD, IFS, Lawson, and Intentia (before their recent mega-merger), International Business Systems (IBS), Glovia, SYSPRO, Ross Systems, Cincom Manufacturing Systems or Intuitive Manufacturing Systems belong in this category. Despite their focused growth, some of these vendors might have shown dubious or subdued new revenue streams, stressed financial situations, or support for a limited number of platforms.

Combined Third-Way Approach

But, in addition to the aggressive consolidators and to the organic growers, there are others that are thriving , such as Adonix Group, CODA, Unit 4 Agresso or Deltek Systems. These vendors have quietly built successful businesses with a different approach, one that may further re-shape the ERP mid-market landscape in the coming years. Containing aspects of both the consolidators and organic growers, this "third way" approach is aligned towards the needs of mid-market buyers, where the likes of SAP and Oracle have had limited success, staving off, at least for some time to come, the reality (if not the perception) that the entire enterprise applications market is coming down to a two-horse race only

Process ERP Market Loses PRISM and Protean

2011-01-19T01:19:00.000-08:00

In early October Wonderware, a division of Invensys, announced to employees and customers that it was significantly cutting the headcount and discontinuing marketing and sales efforts for the PRISM and Protean product lines. These products, part of the acquisition of Marcam Corporation in 1999, address the ERP needs of process companies with the majority of the install base being in the food or chemical business.

From approximately 400 people, Wonderware will cut headcount to fewer than 100 people over the next six to twelve months. Most of the remaining people will be in product support for the PRISM product, which will remain in a maintenance only mode. Wonderware committed to deliver the next scheduled release of Protean (Release 3.2) with a planned delivery of March 2001. However, customers were told that they should not expect further releases of Protean beyond release 3.2. Wonderware has put in place an impressive retention program to insure the required people will remain in place to deliver on the committed 3.2 release of Protean.

Concurrent with internal and customer announcements, Wonderware told the prospective buyers in several active Protean sales cycles that they were withdrawing Protean from further consideration in the marketplace.

Wonderware has told employees and others that they will begin to transition Protean functionality to the Baan product line. Wonderware/Baan has stated that this product, to be called Baan Process, is targeted for 2002. Baan Process is planned to interface with Baan's complementary products such as Baan Supply Chain, Baan Front Office, Baan E-Enterprise, Baan Business Intelligence, Baan Finance, and Baan Procurement. Baan has stated that they will provide a set of tools to help customers migrate from Protean to Baan Process, upon release.

The Baan tool set and discrete manufacturing models were part of the Invensys acquisition of Baan in the spring of 2000.

Market Impact

With the withdrawal of these products from consideration, the market for Process ERP products from vendors dedicated exclusively to that market has shrunk to very few options. This move, combined with the recent financial problems at Ross Systems, means that only SCT of Malvern, PA is left as a healthy Process-only vendor. Several non-process vendors do offer versions of their products that are aimed at the needs of process companies; these include J.D. Edwards, QAD, and SAP.

While the PRISM and Protean products had not been selling well in the marketplace, the large installed base means that vendors with systems that address the needs of the process market will have increased opportunities over the next one to two years.

User Recommendations

Process companies who are currently using the PRISM or Protean products from Wonderware should assume that support will continue on a somewhat reduced level for the near term. PRISM users should question Wonderware on the value of on-going maintenance payments. PRISM has proven to be a stable product over recent years, therefore, PRISM users should assume they would not be forced into changing ERP systems. Prudent PRISM users will expand their search for a replacement product beyond that are proposed by Wonderware.

Protean users should assume that their medium to long-term situation is tenuous and should actively evaluate replacement products in the near term. The transition from Protean to Baan Process is an option that should be evaluated as well as alternative products.

Although Wonderware has indicated that they will transition Protean to Baan Process to address the process market, we are reminded that Baan attempted to enter the process market with the same add-on strategy but abandoned the effort for undisclosed reasons. Customers have been told that Wonderware will offer PRISM or Protean customers financial incentives to move to the Baan Process replacement product.

Assuming this product is brought to market on the current schedule of 2002, will it provide an adequate transition path for the existing users? Will the Baan tools, developed in the early 90's provide the technology required today and in tomorrow's environment? Will the approach of adding process functionality to the Baan discrete manufacturing modules prove to be competitive with solutions from process-only vendors or attractive to current PRISM and Protean customers? Users should question Wonderware on their future options and investigate alternative solutions now to fully understand their situation and options.

Process companies considering a new ERP system should be wary of the Wonderware/Baan offerings. They are urged to evaluate from both the process-only (SCT, Ross) and non-process (including J.D. Edwards, QAD, and SAP) ERP providers to determine if these systems fit their specific needs. Special attention is required in looking at both the process and the non-process vendors to ascertain the fit of the product to the unique supply chain and production management needs of the specific process industry and company (see What Makes Process Process).

TIBCO Announces Results That Are 'Better Than Worse Than Expected'

2011-01-19T01:18:00.002-08:00

TIBCO Software (NASDAQ: TIBX) is the latest software vendor to report that they are following a new trend in the stock market: reporting results that exceed lowered analyst expectations. Analysts had expected TIBCO to earn 3 cents per share, down from the 8 cents per share that they originally projected. TIBCO had only recently revised its guidance, on March 7. In the end, TIBCO reported pro forma results of 6 cents per share, up from 1 cent per share for the first fiscal quarter of 2000.

TIBCO had pro forma operating income for the first fiscal quarter of $3.5 million, up from $153,000 for the first fiscal quarter of 2000. TIBCO had pro forma net income of $12.4 million, up from $1.3 million for the first quarter of the prior year. According to Vivek Ranadiv, chairman and CEO of TIBCO Software "TIBCO's fundamental business remains strong. Our customers and partners are leaders in their industries, our technology is essential to the success of our customers' business, and our balance sheet is solid. Despite the slowing economy, we nearly doubled our revenue over the same quarter last year. We remain critical for our customers' success by providing infrastructure software that enables them to improve operating efficiencies, reduce costs and capitalize on new revenue opportunities."

During the quarter, TIBCO added 111 new direct customers and announced new or expanded business with companies including FedEx Corporation, Chevron, Procter & Gamble, and Delta Air Lines. In addition, the vendor released 17 new products or versions of products in the first quarter, including XML Canon/ Developer, TIB/IntegrationManager 2.0 and a number of new adapters to leading packaged applications.

Market Impact

This announcement by TIBCO follows closely on the heels on a similar announcement by Oracle on March 15. Many other vendors have also met the same fate. It is becoming impossible for them to predict what confidence level should be assigned to their sales pipeline since the economy is so skittish. Perhaps the current environment for software vendors was best described by Oracle CFO Jeffrey O. Henley, who stated "The U.S. economic downturn over the past several months clearly affected our revenue and profit growth more than we anticipated, due to a sharp downturn in completed transactions in the last few days of the quarter, and the current economic uncertainty continues to limit our visibility going forward."

System Software Suppliers Slip Seriously

2011-01-19T01:18:00.001-08:00

Shares of Computer Associates, BMC Software, Compuware Corporation, and others have suffered serious setbacks on the stock market in recent days due to shortfalls in revenue. Most vendors blame it on a failure to close large deals near the end of the quarter. Once again, the dreaded Wall Street "whisper number" has not been made, and the stock market has reacted harshly. Sales of mainframe software have softened, causing much of the shortfall.

As examples, shares in Computer Associates (NYSE:CA) dropped as much as 42 percent at one point, even though their revenue has increased to approximately $1.25 billion, compared to $1.22 billion in the same quarter last year. BMC Software (NASDAQ: BMCS) dropped 31 percent after it announced an approximate 50 percent drop in revenue compared to the same quarter in the prior year.

Market Impact

Many of the vendors are blaming the delays in contract closings on customers who are delaying purchases until the release of IBM's new G7 IBM mainframe hardware, and general softness in the mainframe business.

Computer Associates held its annual analyst conference in conjunction with CAWorld in New Orleans in June, and gave no indication that there would be problems with forecasted revenue, particularly in the EMEA (Europe, Middle East, and Africa) market. According to a recent statement from Sanjay Kumar, president and COO of CA, "We intend to work aggressively to address the performance issues in our European business."

Beth Chappell, Executive Vice President of Corporate Communications and Investor Relations for Compuware (NASDAQ: CPWR) stated, "We are very disappointed with our software sales results. In spite of our best efforts to work closely with the investment community to set reasonable and attainable expectations for the quarter, the softness of the market had a significant impact on our results. Once again, we had several large deals that did not come in at the end of the quarter."

Merant Goes South on the Stock Market

2011-01-19T01:15:00.000-08:00

Shares of Merant, the provider of PVCS, a major software configuration management product (acquired from Intersolv), in addition to other software, have dropped more than 24 percent after the company released preliminary financial estimates for its first fiscal quarter recently-ended, showing revenues likely will be about 17 percent less than the previous year due to a decline in COBOL license fees.

Revenues for the first fiscal quarter are preliminarily estimated to be in the range of $72 million to $73 million, compared to $87.6 million for the same period last year, Merant officials said in a teleconference call and statement. Pre-tax losses for the quarter ended July 31 are estimated to be in the range of $8.5 million to $9.5 million excluding goodwill amortization. The above pre-tax loss range also is estimated before a goodwill charge of roughly $3.3 million.

"COBOL license fees worldwide have declined significantly below expectations and our forecast," said Merant President and Chief Executive Officer Gary Greenfield. He also stated that Merant had originally expected double-digit growth.

Nevertheless, Greenfield said "Egility e-business revenue continues to grow, but didn't accelerate as much as originally anticipated. But operating costs in the first quarter of this fiscal year have declined by more than $10 million as planned, compared with the fourth quarter ended April 30", he added.

Merant officials said they weren't sure of the reasons for the missed projections, though Greenfield said COBOL fees fell "definitely beyond the teens" percentage-wise. He further said another cause might be related to the company's recent reorganization of its sales force. "We intend to continue to thoroughly evaluate the cause for this revenue shortfall while accelerating our e-business transition, and take action to improve execution and return to profitability," he added. Greenfield emphasized that the company is not suffering a cash problem.

Market Impact

Once again, another vendor has stated that growth and license revenues in the mainframe arena are softer than expected (see "System Suppliers Slip Seriously", August 8, 2000 for further details on other vendors in the same boat.)

It is not surprising that COBOL revenues have begun to decline, given the end of the "Y2K" crisis. PVCS has long been a strong candidate for software developers in need of version management and software build control. It will continue to be strong in this space, irrespective of its current stock market woes, although it may become a takeover candidate for a larger firm (i.e., Computer Associates), and should be examined closely at the financial level.

User Recommendations

Companies looking at Software Configuration Management tools should include Merant PVCS on a long list of candidates. It is also capable of tracking changes in Oracle's ERP suite, and assesses dependencies and impacts of change, as well as integrating with Tivoli. In addition, PVCS products integrate issue and change management into SCC-compliant IDEs, which allow information interchange between different SCM products, such as Visual Studio and Powerbuilder.

The products in this suite have long been leaders in their field, and should be evaluated by the customer's programmers to determine their fit within the particular environment(s) being considered. The additional consideration should be a financial one, given Merant's current weakness in the stock market. This weakness could potentially be exploited by customers to improve pricing on the products, especially near the end of a quarter or fiscal year.