Secure Transport of EDI and XML for Trading Exchanges

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

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

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

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

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:

1. 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.
   
   
2. 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.
   
   
3. 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.
   
   
4. 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

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

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

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

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?

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

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.



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