On July 9, Epicor Software Corporation (NASDAQ: EPIC), announced that it has completed the acquisition of ROI Systems, a privately held competing ERP provider of manufacturing software solutions for approximately $20.7 million in an all cash transaction. And, on July 15, in a fashion similar to its fierce competitors, Microsoft Business Solutions and Best Software, Epicor announced the acquisition of a strategic suite of warehouse management solutions (WMS) from TDC Solutions, a long-time, successful independent software vendor (ISV) partner of Epicor focused on the wholesale distribution industry
It remains dubious how this acquisition can, at least in a short term, mitigate the fact that MANAGE 2000 exhibits inferior product technology and multi-national capabilities, and that it supports only English. Moreover, some MANAGE 2000 modules do not offer distinguishing intrinsic functionality (although there have been a number of readily available interfaces to third-party specialist products such as Agile Software, RSS, Demand Solutions, or Frango) even within the "native" discrete manufacturing areas (e.g., complex project management & accounting, multi-national financial consolidation, quality management, forecasting, warehouse management, sales & purchase contracts, and contact management & marketing campaigns).
In particular, the financial management modules are best suited for North American rather than multinational enterprises due to very few localization capabilities. This situation might hold also for the native HR and payroll modules. While Epicor might gladly fill many of these gaps with its arsenal of products, it will not happen overnight, plus, some ROI customers will not that gladly opt for replacing e.g., OEM-ed Frango multi-currency module that has been working well, just for some equivalent solution suggested by Epicor.
Further, MANAGE 2000 is not technologically the most exciting product either. Its original user interface has been less than compelling, and ROI had to create its proprietary software called Personal Workstation Software (PWS) to enable MANAGE 2000 to run on a rich Windows client. The vendor was recently developing a Microsoft ASP.NET thin client presentation layer for almost the entire suite, while a number of new portals are slated for the upcoming 7.1 release at the end of 2003. Another technological pitfall has been that standard application programming interfaces (APIs) were mainly limited to manufacturing functions, thereby requiring ROI and users to, in the past, hard-code the integration with other third-party applications such as financial applications or warehousing. ROI has long provided Object Linking and Embedding (OLE) and Dynamic Data Exchange (DDE) integration at the desktop thereby enabling links to computer-aided design and PDM applications. In the new release, however, Universal XML is used throughout the product.
Avant, on its hand, has its own idiosyncrasies and proprietary development tools. Thus, while the long awaited porting of Epicor's flagship products onto Microsoft SQL Server as well as continued focus on .NET framework should significantly relieve the company's R&D burden and improve its general competitiveness, the remaining work of delivering single .NET compliant application framework remains colossal. The existing 6,500 manufacturing customers, will sooner or later have to migrate from the current non-.NET application, although Epicor is committed to supporting these customers indefinitely, which will draw on its duplicated R&D and support resources. One should imagine the magnitude of the effort when the Avant and MANAGE 2000 instances, some with extensive customer bases on non-Microsoft technologies, should follow the path. Executing these initiatives without significantly increasing its top line will be a notable challenge.
Despite notable functional and technological initiatives, the challenge for Epicor and its affiliate channel also remains the management of multiple ERP product lines. Also, while the products may have their separate niches, they will in many more instances be similar enough to confuse former separate Epicor and ROI Systems' direct sales reps and value-added resellers (VARs) in selling the combined portfolio. Although ROI's nascent channel has performed really well lately, Epicor will still have to demonstrate substantial progress in developing an indirect channel to supplement ROI's direct sales and product implementation force, since, without it, its growth and international expansion will be hampered.
This is Part Three of a three-part note.
Part One detailed the event.
Part Two discussed the Market Impact.
Management Challenges
The management team will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. It is still likely that the sales channel will face some conflict in terms of market overlaps, as well as traditional association with a certain product line regardless whether it is the best fit for a certain opportunity. The positive news is also that using the applications such as portals as Web Services (e.g., the pricing, inventory, supplier performance, order management, and catalog components within SRM) on top of all ERP products' foundations via a Web Services interface layer should result in synergies, despite the downside that it cannot be done within the core ERP products owing to a notable gap between the products' technologies and functional capabilities.
Moreover, limited financial resources to adequately fund multiple key strategic initiatives including multiple products' assimilation, brand marketing, undeveloped global channel and brand recognition, and formidable competition within the market of Epicor are the challenges the company has yet to overcome. Indeed, Epicor might still be burdened by its past baggage and lingering issues, and the job of gaining traction will by no means be easy for the vendor still being long in a conundrum of down-spiraling revenues.
Epicor, as well as its divisions, have had a rough history that it now must get beyond to gain traction in the market. First DCD, then DataWorks and then Epicor's Manufacturing Solutions Group, the reborn manufacturing division must remind its customers and the marketplace of its historic success and forget about so many years of financial pressures which have nearly sunken it into oblivion. Since the late-90's this business has been less visible to the market, and customers and the marketplace may have forgotten who Epicor Manufacturing is and what it stands for.
Also, given its other two relatively unrelated divisions (i.e., CRM and service-oriented divisions), Epicor may mean different things to different people, which does not really help mind share creation in particular segments of interest. The manufacturing division must communicate its successes and strategy to the marketplace, and must aggressively invest in customer satisfaction, marketing and sales. Epicor must convince customers and prospects that it is here to stay; while the functionally rich and technologically rejuvenated products are great advantages, many other considerations make some customers and prospects perceive these solutions a risk. Until the market perceives that Epicor is completely regained its financial health, its products might be overlooked, despite their appeal.
Also, despite cultural similarity between ROI Systems and Epicor Manufacturing division, there might be cultural difference with the parent company. Namely, while ROI Systems has always been focused on profits, without layoffs and less on technology, until recently, it has been all but opposite on the Epicor side. If nothing else, Epicor has embraced .NET even more zealously than its creator Microsoft, often leaving Microsoft staffers in their development labs with their dropped jaws (see Epicor Claims The Forefront Of CRM.NET-ification). Additionally, the remaining wealth of product names and a still somewhat unwieldy slew of products, presents sales and marketing confusion for the company, both internally and externally across the globe. Therefore, as Epicor has a myriad of products in its portfolio that could benefit from integration with, e.g., Clarus, Clientele CRM.NET, or with any third-party application, it must clearly articulate its plans and the timeline for integration for each of its products. Otherwise or it may face confusion and/or anxiety amongst both its current and potential customers as well as within its VARs. That would be the music to its direct competitors' ears, some of which have better viability and revenue momentum at this stage.
Incidentally, the competition remains fierce. In addition to an army of solid mid-market vendors with sharp focus on particular industries, like PeopleSoft/J.D. Edwards, MAPICS, QAD, IFS, Made2Manage, SYSPRO, Lilly Software, Intuitive Manufacturing Systems, to name only some, one should not discount the Oracle's recent aggressive online offerings for small business either, with PeopleSoft and SAP crafting similar offerings down the track (see Software Giants Make Courting A Small Guy Their 'Business One' Priority).
Moreover, the competition is also flying from many directions since the parent company now competes in many diverse markets. Also, the leaner company with a large customer base and a palatable market capitalization of slightly over $250 million remains an attractive acquisition target in this seismically consolidating market. Thus, in addition to helping figure out the roadmap for once seemingly sidelined Avant product, the ROI acquisition for cash and an impending products' merger might also deter the acquisition spotting vultures for the time being.
SOURCE :http://www.technologyevaluation.com/research/articles/epicor-conducts-its-own-roi-acquisition-rationale-part-three-challenges-and-user-recommendations-17042/
It remains dubious how this acquisition can, at least in a short term, mitigate the fact that MANAGE 2000 exhibits inferior product technology and multi-national capabilities, and that it supports only English. Moreover, some MANAGE 2000 modules do not offer distinguishing intrinsic functionality (although there have been a number of readily available interfaces to third-party specialist products such as Agile Software, RSS, Demand Solutions, or Frango) even within the "native" discrete manufacturing areas (e.g., complex project management & accounting, multi-national financial consolidation, quality management, forecasting, warehouse management, sales & purchase contracts, and contact management & marketing campaigns).
In particular, the financial management modules are best suited for North American rather than multinational enterprises due to very few localization capabilities. This situation might hold also for the native HR and payroll modules. While Epicor might gladly fill many of these gaps with its arsenal of products, it will not happen overnight, plus, some ROI customers will not that gladly opt for replacing e.g., OEM-ed Frango multi-currency module that has been working well, just for some equivalent solution suggested by Epicor.
Further, MANAGE 2000 is not technologically the most exciting product either. Its original user interface has been less than compelling, and ROI had to create its proprietary software called Personal Workstation Software (PWS) to enable MANAGE 2000 to run on a rich Windows client. The vendor was recently developing a Microsoft ASP.NET thin client presentation layer for almost the entire suite, while a number of new portals are slated for the upcoming 7.1 release at the end of 2003. Another technological pitfall has been that standard application programming interfaces (APIs) were mainly limited to manufacturing functions, thereby requiring ROI and users to, in the past, hard-code the integration with other third-party applications such as financial applications or warehousing. ROI has long provided Object Linking and Embedding (OLE) and Dynamic Data Exchange (DDE) integration at the desktop thereby enabling links to computer-aided design and PDM applications. In the new release, however, Universal XML is used throughout the product.
Avant, on its hand, has its own idiosyncrasies and proprietary development tools. Thus, while the long awaited porting of Epicor's flagship products onto Microsoft SQL Server as well as continued focus on .NET framework should significantly relieve the company's R&D burden and improve its general competitiveness, the remaining work of delivering single .NET compliant application framework remains colossal. The existing 6,500 manufacturing customers, will sooner or later have to migrate from the current non-.NET application, although Epicor is committed to supporting these customers indefinitely, which will draw on its duplicated R&D and support resources. One should imagine the magnitude of the effort when the Avant and MANAGE 2000 instances, some with extensive customer bases on non-Microsoft technologies, should follow the path. Executing these initiatives without significantly increasing its top line will be a notable challenge.
Despite notable functional and technological initiatives, the challenge for Epicor and its affiliate channel also remains the management of multiple ERP product lines. Also, while the products may have their separate niches, they will in many more instances be similar enough to confuse former separate Epicor and ROI Systems' direct sales reps and value-added resellers (VARs) in selling the combined portfolio. Although ROI's nascent channel has performed really well lately, Epicor will still have to demonstrate substantial progress in developing an indirect channel to supplement ROI's direct sales and product implementation force, since, without it, its growth and international expansion will be hampered.
This is Part Three of a three-part note.
Part One detailed the event.
Part Two discussed the Market Impact.
Management Challenges
The management team will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. It is still likely that the sales channel will face some conflict in terms of market overlaps, as well as traditional association with a certain product line regardless whether it is the best fit for a certain opportunity. The positive news is also that using the applications such as portals as Web Services (e.g., the pricing, inventory, supplier performance, order management, and catalog components within SRM) on top of all ERP products' foundations via a Web Services interface layer should result in synergies, despite the downside that it cannot be done within the core ERP products owing to a notable gap between the products' technologies and functional capabilities.
Moreover, limited financial resources to adequately fund multiple key strategic initiatives including multiple products' assimilation, brand marketing, undeveloped global channel and brand recognition, and formidable competition within the market of Epicor are the challenges the company has yet to overcome. Indeed, Epicor might still be burdened by its past baggage and lingering issues, and the job of gaining traction will by no means be easy for the vendor still being long in a conundrum of down-spiraling revenues.
Epicor, as well as its divisions, have had a rough history that it now must get beyond to gain traction in the market. First DCD, then DataWorks and then Epicor's Manufacturing Solutions Group, the reborn manufacturing division must remind its customers and the marketplace of its historic success and forget about so many years of financial pressures which have nearly sunken it into oblivion. Since the late-90's this business has been less visible to the market, and customers and the marketplace may have forgotten who Epicor Manufacturing is and what it stands for.
Also, given its other two relatively unrelated divisions (i.e., CRM and service-oriented divisions), Epicor may mean different things to different people, which does not really help mind share creation in particular segments of interest. The manufacturing division must communicate its successes and strategy to the marketplace, and must aggressively invest in customer satisfaction, marketing and sales. Epicor must convince customers and prospects that it is here to stay; while the functionally rich and technologically rejuvenated products are great advantages, many other considerations make some customers and prospects perceive these solutions a risk. Until the market perceives that Epicor is completely regained its financial health, its products might be overlooked, despite their appeal.
Also, despite cultural similarity between ROI Systems and Epicor Manufacturing division, there might be cultural difference with the parent company. Namely, while ROI Systems has always been focused on profits, without layoffs and less on technology, until recently, it has been all but opposite on the Epicor side. If nothing else, Epicor has embraced .NET even more zealously than its creator Microsoft, often leaving Microsoft staffers in their development labs with their dropped jaws (see Epicor Claims The Forefront Of CRM.NET-ification). Additionally, the remaining wealth of product names and a still somewhat unwieldy slew of products, presents sales and marketing confusion for the company, both internally and externally across the globe. Therefore, as Epicor has a myriad of products in its portfolio that could benefit from integration with, e.g., Clarus, Clientele CRM.NET, or with any third-party application, it must clearly articulate its plans and the timeline for integration for each of its products. Otherwise or it may face confusion and/or anxiety amongst both its current and potential customers as well as within its VARs. That would be the music to its direct competitors' ears, some of which have better viability and revenue momentum at this stage.
Incidentally, the competition remains fierce. In addition to an army of solid mid-market vendors with sharp focus on particular industries, like PeopleSoft/J.D. Edwards, MAPICS, QAD, IFS, Made2Manage, SYSPRO, Lilly Software, Intuitive Manufacturing Systems, to name only some, one should not discount the Oracle's recent aggressive online offerings for small business either, with PeopleSoft and SAP crafting similar offerings down the track (see Software Giants Make Courting A Small Guy Their 'Business One' Priority).
Moreover, the competition is also flying from many directions since the parent company now competes in many diverse markets. Also, the leaner company with a large customer base and a palatable market capitalization of slightly over $250 million remains an attractive acquisition target in this seismically consolidating market. Thus, in addition to helping figure out the roadmap for once seemingly sidelined Avant product, the ROI acquisition for cash and an impending products' merger might also deter the acquisition spotting vultures for the time being.
SOURCE :http://www.technologyevaluation.com/research/articles/epicor-conducts-its-own-roi-acquisition-rationale-part-three-challenges-and-user-recommendations-17042/
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