Wednesday, September 9, 2009

Acta Technology Helps Add Business Intelligence Capabilities to Major ERP Vendors

"Montreal, Quebec--December 14, 1999 - Sand Technology Systems International Inc. (NASDAQ: SNDT), a leading provider of business intelligence (BI) solutions, announced today that it is partnering with Acta Technology, Inc. (Acta�) to provide guaranteed and cost-effective BI results for users of SAP R/3. Acta is a leading provider of data warehousing solutions for both internal decision support and business-to-business eCommerce. SAP R/3 is the widely implemented ERP (enterprise resource planning) system from SAP (NYSE: SAP). Both Sand and Acta will be featuring the Nucleus RapidMarts as preferred solutions for the increasing numbers of customers seeking effective ways to handle BI applications with SAP. Using the power of Sand Technology's Nucleus Exploration�, Acta's RapidMarts�,a suite of packaged data marts for analysis in specific business areas, can be quickly implemented without ABAP programmers and without the extensive expertise and hardware typically required for SAP BI implementations. Using Nucleus, RapidMarts also allow for the full integration of decision support applications involving both SAP and non-SAP data. The Nucleus-powered RapidMarts are available for a broad range of SAP applications, including Cost Analysis, Sales Analysis, Human Resources, Inventory Management, and Account Analysis. RapidMarts are powered by ActaWorks�, Acta's award-winning extraction, transformation, and loading (ETL) platform (DBMS Magazine: Editor's Choice)."
As customers increasingly realize how difficult it is to extract value from the data in their ERP systems, the need for products that can move this information into integrated, enterprise-wide data warehouses and tighter-focus data marts has become increasingly evident. Acta has specialized in the Extract/Transform/Load (ETL) of data from ERP databases for 5 years, and has active alliances with SAP and PeopleSoft. Acta's SAP BW (Business Information Warehouse) interface has also been certified by SAP. Sand Technology's vertical focus should allow a tight integration between the products.
Customers considering data warehouses or data marts with a tight vertical focus on enterprise resource planning should definitely consider Acta and Sand's technology collaboration on a short list of vendor offerings. The stated lack of need for ABAP (SAP's proprietary fourth-generation language) programmers is also a major positive. Before any decision is made, both vendors should be closely questioned on the level of integration between the products, and how tightly their code bases are aligned. Sand and Acta have stated that they will provide "guaranteed and cost-effective BI results for users of SAP R/3", and should be asked to give this guarantee in writing.

Business Objects Launches WebIntelligence Extranet

"SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 19, 2000--Business Objects (NASDAQ: BOBJ), the world's leading provider of e-business intelligence (e-BI) solutions, today announced WebIntelligence� Extranet Edition, an advanced version of the company's leading query, reporting, and analysis solution for the internet. WebIntelligence Extranet Edition has been built to take advantage of the tremendous market opportunity with customers building extranets to link suppliers, customers, and partners. Business Objects has just reached the 100 customer extranet milestone and is delivering WebIntelligence Extranet Edition to further develop this business opportunity.

Business to business extranets are estimated to reach a $1.3 trillion dollar market by 2002, and we are extremely well positioned to address this market," said Tony Jewitt, director of extranet business development at Business Objects. "We are extremely excited to have reached the 100 customer extranet mark. Based on our pioneering work with these WebIntelligence customers, we are now able to deliver a special product to address this market opportunity even more strongly ."

The vendor went on to explain that its interface is customizable based on Microsoft Active Server Pages (ASP's), in order to allow the customer to change the look and feel of the interface. In addition, auditing features allow the product to help customers bill suppliers for information about the final customer by line, time connected, or report accessed. The product also contains "more detailed documentation" for implementation in multiple firewall situations.

It is not surprising to see another vendor go after the large e-business intelligence market. It remains to be seen how strong their offering will be and whether their sales force understands how to sell the product. Business Objects has always had a strong product offering in the business intelligence arena, and should be positioned to sell into their existing customer base. According to the vendor, they currently have more than 1,442,000 licenses in 9,100 organizations.

Customers evaluating e-business solutions should definitely include Business Objects on a long list of vendors to be considered. One of the hardest issues involved in extranet technology is making the data available outside the firewall without compromising security, so the vendor should be strongly questioned as to how they propose to make this possible, and whether real-time or near real-time data access from back-end systems has been designed into the product .

Sybase Tag-Teams with Informatica

"Sybase, Inc. (NASDAQ: SYBS) and Informatica Corporation (NASDAQ: INFA) announced a worldwide OEM agreement in which Sybase will resell Informatica PowerMart� data-integration software with Sybase Industry Warehouse Studio�, an integrated set of analytic applications, data models and tools for building and managing enterprise business intelligence solutions, and Adaptive Server IQ� with Multiplex, a high-performance database for business intelligence.

As part of the agreement, Sybase also gains the right to globally resell other products from Informatica's family of data-integration software products. The agreement is designed to provide Sybase customers with a comprehensive analytic solution to meet their enterprise business intelligence needs.

Sybase Industry Warehouse Studio is a comprehensive business intelligence solution composed of industry-leading architectural products in five areas: data modeling, administration, management, integration, and visualization/analysis. Sybase will embed Informatica PowerMart as the data-integration component of its Industry Warehouse Studio solutions. Sybase will also resell Informatica PowerMart as the preferred data-integration solution for Adaptive Server IQ with Multiplex.

"Sybase has chosen to OEM Informatica's data-integration technology because of its proven ability to consolidate data from across the enterprise, including sources such as the Web, ERP systems, RDBMS and mainframes. Informatica's proven scalability and rapid time to implementation were also key factors in our selection," said Eric Miles, vice president and general manager, Sybase Business Intelligence Division. "By making Informatica available as part of Sybase Business Intelligence solutions, our customers can benefit from even stronger, more robust solutions for achieving business intelligence."

"By bringing together the leading technology providers and system integrators to create a comprehensive business intelligence offering, Sybase is helping large organizations take a major step toward transforming themselves into intelligent enterprises," said Diaz Nesamoney, president of Informatica. "We're pleased to enter into this alliance with Sybase, which is an important validation of Informatica's technology and the proven success of our customer base."

Informatica PowerMart is an integrated software suite for deploying and managing line-of-business data marts. PowerMart delivers an open, scalable solution that is able to source large volumes of fast-changing data from multiple platforms, handle complex transformations, and support high-speed data loads. The integrated Sybase and Informatica products will be available from Sybase in the second quarter of 2000."

Sybase is continuing its quest to improve its market position by imbedding PowerMart into its application solutions. In recent years, Sybase has failed to regain its previously strong position in the database server market, so it has attempted to reposition itself in vertical applications. Informatica has a strong presence in data integration, and should provide Sybase with an improved market positioning, however, the integration between the two products will have to be seamless, or this will result in nothing more than a marketing alliance.

Customers evaluating business intelligence solutions should include Sybase/Informatica on a long list of candidates. If Sybase is successful in completely integrating the five product areas they discuss, comprised of data modeling, data administration, data management, data integration, and visualization & analysis of that data, this product suite could provide close to an end-to-end solution.

One additional component that should be discussed with Sybase is integrated data cleansing, which would help to round out the solution.

Another issue that is not discussed in the vendor's press release is the level of metadata integration, which needs to be extremely tight in order to allow for bi-directional replication. Informatica's MX2 application programming interface (API) strategy, which provides "plug-in" capabilities to other products, will likely be used to satisfy this part of the solution.

Brio Technology Expands Support for WML and XML

HANOVER, Germany, Feb. 28 /PRNewswire/ -- Brio Technology (Nasdaq: BRYO) a leading provider of business intelligence solutions for the e-enterprise, announced it is adopting Wireless Markup Language (WML) and strengthening its use of Extensible Markup Language (XML) as the underlying language for its entire suite of products.

Brio will initially incorporate these technologies in Brio.Report, the company's enterprise reporting solution, delivering XML and WML output capabilities that extend the power of enterprise reports beyond web-based environments to the new generation of smart cell phones and handheld client devices. The changing nature of today's workforce requires that companies embrace technology that encompasses a far broader audience of local, remote and mobile end users.

"The introduction of first XML and now WML into the Brio product line provides Brio with an opportunity to help define how companies communicate and leverage shared information throughout the virtual enterprise," stated John Schroeder, executive vice president, products and services at Brio Technology. "We expect our efforts to be well received by both our customer and partner base as they look to tap into the millions of PDA devices and cell phones."

Exhibiting this technology at the CeBit 2000 conference in Hanover, Germany, Brio showcased its use of XML and WML through Brio.Report 6.0, which is currently in beta. Brio.Report 6.0 will leverage Brio's innovative patent-pending Direct Data Objects (DDO) technology to provide multi-platform access to any enterprise data source, including relational, multidimensional or object-based data, as well as SAP R/3 BAPIs.

"With its comprehensive support for both input and output of XML data, Brio.Report 6.0 delivers a unique solution to enterprises seeking to implement business-to-business strategies," stated Ian Robinson, vice president, enterprise reporting products at Brio Technology. "Brio.Report leads the industry in its support of open Internet standards such as XML, in the same way that it first pioneered the use of DHTML, CSS and Java in its enterprise reporting products a few years ago."

Brio Technology is attempting to establish a clear lead among business intelligence vendors in support for open Internet standards, and already supports XML (the extensible markup language), DHTML (dynamic hypertext markup language), CSS (cascading style sheets), and Java.

The addition of WML (wireless markup language) improves their position against vendors such as Business Objects, MicroStrategy, and Cognos. Providing support for open standards is becoming extremely important in the data warehousing and business intelligence markets in order to allow products from different vendors can interoperate successfully. This support will continue to be an important market differentiator.

Customers evaluating enterprise reporting tools with strong support for remote and mobile users should definitely include Brio Technology on a list of potential vendors. However, it should be noted that Brio.Report 6.0 is still in beta, and the feature/function set should be agreed to in writing by the vendor before an agreement is signed.

Sagent Technology Teams for Telco e-Business

Sagent Technology Inc. (Nasdaq: SGNT), a provider of Real-time e-Business Intelligence solutions, announced a strategic partnership with DSET (Nasdaq: DSET), a provider of business-to-business e-commerce connectivity solutions for the global telecommunications marketplace, to enable telecommunications companies to quickly and efficiently determine a customer's qualification for digital subscriber line (DSL) service (a customer must be less than 15,500 feet from the switch to qualify for DSL).

Through the partnership, Sagent's eServices solution will be integrated into DSET's ezDSL Leads Qualification System, allowing telecommunications companies to facilitate the real-time pre-qualification of customers for DSL service based on a customer's geographic information. Sagent maximizes the accuracy and value of telecommunication companies' customers and prospects information by seamlessly verifying across multiple platforms, including the Internet, correct address information, adding widely available third-party demographic data, and performing spatial analysis from the service point to the customer's destination. By doing so, the telecommunications customers' proximity to the local exchange service is determined, enabling more precise and timely deployments of DSL service.

"We chose to partner with Sagent because its proven spatial analysis tools and real-time geographical data are the most accurate available," said Vikas Trehan, senior product manager, DSET. "Together, we are able to offer telecommunications customers a single, comprehensive solution for ordering DSL through one vendor. By automating the entire pre-sales process for DSL ordering, we are able to offer a higher level of customer service which DSET customers expect."

Sagent has moved into the e-business space, and has chosen to start with Telco applications. Spatial analysis is an important part of e-business, where web sites provide the closest dealer or access point based on address or zip code. An example of this is the J.I. Case web site, which uses spatial analysis to give the customer the closest agricultural equipment dealer to their location, an increasingly popular method of gaining new customers. Another example, 2wire.com, is already in the Telco space, and does similar DSL lookups.

In addition, Sagent recently purchased Qualitative Marketing Software and their Centrus Product Suite to provide analytic applications. Centrus Real-Time� claims to enable companies to better understand and predict customer needs and behavior, compare existing information with current market trends, and allocate resources to retain the most valuable customers and acquire new ones.

Customers should include Sagent Technology's e-business solutions on a long list of infrastructure products. In a conversation with TEC, John Zicker, Chief Technology Officer and co-founder of the company, referred to the technology as a way to provide an "infomediary" to content providers via the Qualitative software and Sagent solutions. Companies that should most strongly investigate this solution are expected to initially be in the vertical industries of Telco, Insurance, and Dot-Com companies.

Microstrategy Moves Up with e-Business

"M2 PRESSWIRE-5 October 1999-ORLANDO, Florida -- NCR Corporation (NYSE: NCR) and MicroStrategy Incorporated (NASDAQ: MSTR) today announced that the two companies have signed a comprehensive, multi-year $52.5 million licensing and technology agreement. The agreement includes an investment by both companies in technology infrastructure, integration, and marketing - spanning e-business, business intelligence, and customer-centric data warehouse applications". Under the agreement NCR will re-market MicroStrategy's entire suite of Intelligent E-Business� products and services. MicroStrategy will purchase NCR's TeraCube OLAP business for $14 Million in MicroStrategy stock, and purchase an NCR Teradata Warehouse worth $11 Million to power their Strategy.com network. Under the terms of the agreement, MicroStrategy will provide the development effort for TeraCube 2.0, and optimize it for the NCR Teradata database.

The agreement between MicroStrategy and NCR signals another overlap in the data warehousing arena. Once again, a business intelligence vendor and a data warehouse vendor have joined forces to provide an integrated solution for data warehousing. MicroStrategy will be able to leverage NCR's customer base and provide additional marketing muscle for the Teradata database. NCR will be able to provide improved OLAP solutions, since under the terms of the agreement, MicroStrategy will license new technology it develops back to NCR.

The release of MicroStrategy 6 indicates the vendor's strong commitment to e-business, customer relationship management, and web-based strategies, and is designed to "turn customer interactions into relationships". The product also includes publish/subscribe ("push") technology, and a new, XML based Web interface that acts as a subscription server. This focus should give MicroStrategy a distinctive marketing message that will set them apart from many of the other OLAP vendors.

The stock market has reacted favorably to MicroStrategy's market strategy, as their stock price has tripled over the last two months, and made very strong moves in the last two weeks.

Fig. 1

Companies engaging in technology selection for OLAP tools should investigate MicroStrategy's offerings. Microstrategy has placed a strong emphasis on E-Business offerings, and MicroStrategy 6 is designed to be a "platform that empowers organizations to understand the interactions surrounding their customers, suppliers, and business". The MicroStrategy 6 offering should appeal to customers designing e-commerce applications, and be especially appropriate if the data warehouse underlying the application will grow to be extremely large, as the NCR Teradata database is designed for multi-terabyte implementations and supports massively parallel processing.


JBA: Will it Remain "@ctive Enterprise"?

JBA International is a global supplier of integrated enterprise management software for midsize companies involved in the manufacture, supply and service of industrial and household goods. Founded in 1981, with headquarters in Birmingham, UK, JBA International is the sixth largest ERP vendor with $480 million in revenue in 1998 (approx. 3% of the global ERP market). The Company has a history of continuous growth since its inception, but fiscal 1998 was the first non-profitable year in the Company's history. JBA's initial success was based on Business 400, an integrated suite of manufacturing, distribution and financial software for the AS/400, which was complemented by vertical industry solutions Drinks 400 and Style 400. In 1995, JBA delivered System 21 as an evolutionary successor to Business 400, in tandem with JBA's business intelligence package, Advanced Information Management System (AIMS). Since then, JBA has expanded into several more markets. In 1998, JBA launched System 21 Version 4, which is component-based, cross-platform, and Internet enabled. In 1999, JBA launched its @ctive Enterprise Series product line, which allows customers to dynamically model and continuously update their business processes, by using the following components: JBA @ctive Modeler (drag-and-drop graphical business process design tool), JBA @ctive Processes (a family of predefined business process templates based on the Supply-Chain Operations Reference "SCOR" model), JBA @ctive Business Intelligence, JBA @ctive Supply Chain Management, and JBA @ctive e-commerce. More than a half of the Company's revenue comes from service and support. JBA distributes, implements and supports its products worldwide through a partner network consisting of subsidiaries and dedicated partners in more than 53 countries around the world, and derives 25% of its revenue from the non-European market. By the end of 1998, the Company had more than 4,400 customers and over 2,900 employees. JBA International went public in 1994 and it trades on the London Stock Exchange. The Company is currently in the process of being acquired by GEAC Computer Corporation Ltd., a large Canadian software company.

  • Large customer base in the mid-market, coupled with a sharp industry focus (JBA System 21 is regarded as one of the best ERP systems for Food & Beverage, Apparel & Footwear, Automotive Components, and Office Supply & Electronics industries), and strong implementation and service & support skillsets.

  • JBA was one of the first mid-market ERP vendors to embrace concepts of component technology, Internet and e-Commerce, and integration with other vendors' components (Active Partner Integration). Furthermore, JBA System 21 runs on a broad set of the most popular platforms and databases.

  • JBA System 21 can be rapidly implemented and easy (re)configured, which are critical differentiators in the Small-to-Medium Enterprises (SME) market segment. Moreover, the strong workflow management and process performance indicators within the @ctive Enterprise Series suite, allows JBA's ERP System 21 to monitor company's processes, detect potential problems, and alert the appropriate people, instead of being a traditional passive transactional system.

  • JBA System 21 can be rapidly implemented and easy (re)configured, which are critical differentiators in the Small-to-Medium Enterprises (SME) market segment. Moreover, the strong workflow management and process performance indicators within the @ctive Enterprise Series suite, allows JBA's ERP System 21 to monitor company's processes, detect potential problems, and alert the appropriate people, instead of being a traditional passive transactional system.

  • The Company has experienced major financial setbacks during the last 18 months due to the combined effects of poor sales growth and an excessive R&D cost for System 21. Management's attempts to steer the Company in the right direction have been unsuccessful short-term fire-fighting "restructuring" moves without success, and have helped lead to the Company's acquisition for a price less than a quarter of its annual revenue (C$ 205 million).

  • While the merger with GEAC brings some positive prospects as mentioned above, JBA's ambitious R&D pipeline may be jeopardized. The situation becomes even more complicated with GEAC's most recent acquisition of Clarus, another mid-market ERP vendor, which will result in the coexistence of 3 products with overlapping functional modules. The integration of Clarus and SmartEnterprise financial modules may take precedence over JBA's product line development (35% probability).

  • JBA's narrow vertical industry offering does not provide it much maneuverability within an ERP market with a declining growth rate. Furthermore, the lack of Client Relationship Management (CRM) and Advanced Planning & Scheduling (APS) modules in the JBA System 21 product suite will remain even after merging with GEAC. This adds additional future integration issues to a company that already faces massive integration of its disparate ERP systems.


  • Fiscal 1999 will prove to be very challenging for JBA. We predict minor revenue growth (maximum 15%). Break-even net income is the most optimistic scenario (40% probability).

  • The four key vertical markets (automotive, style, food & beverage, and electronics) will contribute more than 80% of JBA's total license revenue within the next 3 years (70% probability).

  • Within the next 3 years, JBA will derive 40% of total revenues outside of the European market and 25% of total revenues from the North American market (70% probability).

  • The mainstream of JBA's future product development, particularly the portfolio of @ctive Enterprise products for process improvement and e-Business, will remain on track after the merger with GEAC (65% probability).


  • Further expand its North American presence, both by opening new offices and developing new affiliate partnerships, and step up marketing campaign in the North American market. Consider utilizing GEAC's infrastructure to fill existing gaps in current geographical coverage.

  • Further penetrate mid-market ERP segment in the following ways:

    • Expand business in existing customer base, by upgrading older versions of software and by offering new extended ERP modules and enterprise applications.

    • Deliver more new, focused and pre-configured vertical solutions, and offer application outsourcing to make JBA System 21 attractive to smaller, resource constrained enterprises.

  • Remain committed to its envisioned R&D pipeline (expanding @ctive Enterprise Series and releasing new vertical solutions) by focusing and leveraging existing resources, and exercising cost monitoring.


  • We generally recommend including JBA in a long list of an enterprise application selection to mid-market and low end tier 1 companies (with $50M-$1B in revenue), based on a very deep understanding of customers' needs within the following industries: Automotive Components; Apparel & Footwear; Beverage; Food; Electronics, Service and Rentals; Metals; and Repetitive Manufacturing.

  • JBA should be included on a short list in any selection within the following industries: Automotive Components; Apparel & Footwear; Beverage; and Food.

  • Until the outcome of JBA's merger with GEAC regarding its R&D vision is clear and unequivocal, any organization evaluating JBA should exercise moderate caution and consider existing functionality only.

Data Warehouse Vendors Moving Towards Application Suites

During September, two more data warehousing vendors announced product suites that they claim offer broader integration between business intelligence, data movement, data cleansing and metadata management. BI vendor Cognos (NASDAQ: COGN) announced "Cognos platform", a tool to build complete "BI-ready data infrastructures". Data Movement vendor Ardent Software (NASDAQ: ARDT) announced "DataStage XE", which is designed to "simplify integration of multiple data sources and business intelligence tools".

"Cognos platform"

Cognos claims their new product is an "end-to-end platform, the first solution for building, managing and deploying BI solutions for enterprise and e-business needs" which "includes enterprise infrastructure layers that cover data mart building, integrated meta data modeling, and integrated security" as well as content management and distribution.

The product is a suite that contains:

* Extract/Transform/Load capabilities for populating data marts. This technology was acquired with the purchase of U.K. based Relational Matters, which created the DecisionStream product, "the first OLAP-aware data integration product". DecisionStream is an ETL tool capable of populating OLAP hypercubes, such as the one used by Cognos PowerPlay.
* Metadata management capabilities to provide centralized metadata and business rules. All applications in the suite share a common meta model.
* Business intelligence tools in the form of Cognos PowerPlay and Impromptu. These products have made Cognos one of the top three business intelligence vendors.
* Additional services such as data mart modeling and common security functions.

Ardent "DataStage XE"

Ardent has acquired a number of other software vendors in the last year, and is attempting to integrate the purchased technologies into their existing DataStage 3.6 product. Like Cognos, they are offering a suite that, in addition to providing data movement capabilities, offers metadata management and data quality management to "simplify integration of multiple data sources and business intelligence tools".

The product is a suite that contains:

* Extract/Transform/Load capabilities in the form of DataStage 3.6. This product has made Ardent one of the top three ETL vendors.
* Metadata management technology acquired with the purchase of Dovetail Software. This is a proprietary meta model, Ardent promises an XML-compliant repository in a future release. (For further details on metadata repository standards, see News Analysis "Is There Finally a Metadata Exchange Standard on the Horizon?" September 28, 1999).
* Data quality technologies acquired with the purchase of Prism Solutions. Prism had previously purchased QDB Solutions, which created QDB/Analyze, a tool for complex data cleansing.
* Improved mainframe functionality, also acquired with the purchase of Prism Solutions. Prism's mainframe based ETL tool provides Ardent with mainframe job scheduling and improved access to legacy data sources.
Data warehouse vendors are flocking to the suite concept. Ardent and Cognos have joined the ranks of larger vendors, such as Microsoft (with SQL Server 7.0) and Computer Associates (with DecisionBase 1.9), in attempting to provide end-to-end data warehousing solutions. Customers and prospects have been complaining for years about how hard it is to integrate ETL and BI tools into a functional whole that includes integrated metadata management. We believe that a truly integrated product would be a better solution than a suite, but suites are a step in the right direction. Users want "one stop shopping" with the ability to procure from a single vendor.

The current market direction indicates that more vendors will merge or be acquired as the larger players in the data warehousing space attempt to buy technology and fill in holes in their product offerings.

* Ardent is the only ETL vendor that possesses a data cleansing tool, so we expect that data cleansing vendors such as Vality and Trillium will be targets for other ETL vendors. We believe the company most at risk is Carleton, which acquired data cleansing vendor Apertus in October of 1997. Carleton's (NASDAQ:CARL) stock price was recently at $1.75, and they recently had to secure a working capital line of credit with Silicon Valley Bank.
* Cognos includes a complete BI solution with their product. Ardent has no business intelligence offering in the DataStage suite. However, Ardent has partnered with Business Objects in the U.K to provide a more complete solution in Europe. We expect to see this partnership extended to North America.
* Neither vendor has adhered to the XML standard in their metadata repository. Both Ardent and Cognos will have to address this issue.
* Ardent now has stronger mainframe capabilities because of the Prism acquisition, and already had a market-leading ETL tool. Cognos will have to prove the strength of its ETL solution and ensure that the tool can extract legacy data.

Suites are typically a vendor's attempt to integrate existing technologies, either their own or acquired ones. We recommend that users ensure that the vendor's integration effort has been successful and is not simply packaging. Seamless integration of software products takes time.

Potential integration issues:

* Ardent acquired Prism less than one year ago. Prism had already been in the process of attempting to integrate its QDB acquisition.
* Cognos acquired Relational Matters less than one year ago.

Each suite is missing components, therefore, users should determine which components they need for their particular application.

* If data cleansing is not an issue for the customer, then Cognos' lack of this capability should not be an issue.
* The fact that Ardent does not supply a business intelligence tool can be rectified by the purchase of one from another vendor. However, users must be aware that Ardent's metadata repository is proprietary, and any BI tool purchased will not be able to access it without customization.

As a complete end-to-end solution, Cognos has the better offering of these two, but all of the available suites on the market should be evaluated in their entirety before a purchase decision is made. Depending on the particular needs of the company, the different strengths of the vendors will influence the decision.

Enterprise Resources Planning (ERP) Market - Dismal 1999, the New Millennium to bring Relief (for Some)

Integrated enterprise resource planning (ERP) software solutions have become synonymous with competitive advantage, particularly throughout the 1990's. ERP systems replace "islands of information" with a single, packaged software solution that integrates all traditional enterprise management functions like financials, human resources, and manufacturing & logistics (See Market Information Sidebar for more details). We also believe that having an ERP system is a prerequisite in most business environments to fully take advantage of the latest business information processing trends, such as e-Business and customer relationship management (CRM).

One could distinguish the following two segments within the ERP market:

  1. Corporate ERP solutions are primarily focused on the consolidated data management, financial and human resources needs of large Fortune 1000 companies. It evolved from accounting and contract management systems in the early 1980s. Human resources and more comprehensive financial planning and control systems were added in the 1990s. Leading vendors of these solutions are SAP, Oracle, and PeopleSoft.

  2. Plant/Operations ERP solutions are primarily focused on the specific needs of mid-range manufacturing plants and distribution sites or the operations level of global companies. This ERP market segment's roots are in the control automation market of the 1960s and 1970s and the manufacturing planning software market of the 1980s. This evolved into the ERP of the 1990s. Leading vendors of these ERP solutions include SAP, Oracle, PeopleSoft, J.D. Edwards, Baan, JBA (now a division of Geac Software Corp.), Intentia International, SSA, Lawson Software, QAD, IFS AB, Symix Systems, MAPICS, Navision, and a number of smaller niche ERP players.

In 80's and 90's, businesses have been subject to increasing global competition, resulting in a pressure to lower production costs, improve product performance and quality, increase responsiveness to customers and shorten product development and delivery cycles. Furthermore, globalization has greatly increased the scope and complexity of multinational manufacturing organizations. Therefore, companies have long been urged to develop or purchase and implement software applications to automate their business processes, leverage their transnational data stores in order to make more informed decisions, and ultimately, decrease operating costs. Companies realized the need to be able to react rapidly to change due to increasing competition, deregulation, globalization, and mergers & acquisition activity.

During the second half of the 1990s, the market for ERP systems has experienced strong growth rates in excess of 50% per year, from US$ 5.7B in 1995 to US$ 16.6B in 1998 [Source: AMR Research]. Some of the key drivers, in addition to the above mentioned underlining reasons, were:

  • The transition from custom-designed legacy software (software developed by or for a specific customer) to the implementation of standard systems that can be applied across different types of industries. This was particularly true for the largest companies, who previously thought that they had the resources to develop business solutions under their own steam.

  • In addition to the transition to standard systems, ERP systems have been extended to support an increasing number of business processes in integrated solutions like engineering, customer support, sales support, human resources, etc.

  • The customer base has also expanded from mainly manufacturing, trade, and distribution to the public and financial sectors, transportation, infrastructure, defense, federal and local governments, utilities, etc.

  • In the past three years, Year 2000 (Y2K) and the adoption of the Euro currency have been important driving forces in the development of the market. As a matter of fact, resolving the Y2K problem has, in many instances, led to the installation of a new ERP system.

The worsening plight of most ERP vendors, caused by the market slowdown, which started in the fourth quarter of 1998, continued in full force throughout 1999. During the last 12 months, the 20 largest ERP vendors achieved an estimated average growth of 25% [Source TEC; this figure should not be confused with the absolute ERP market revenue annual growth], which is much less compared to the equivalent growth of over 40% a year earlier. Particularly affected was the license revenue, which is expected to decline more than 10% in 1999 compared to 1998 (See Table 1). The market was dramatically less profitable than in 1998 (down 27.3%), measured in the total raw $ net income (See Table 1).

Table 1
ERP Market Financial Data
1997
1998
1999 (est.)
2000 (est.)
Total Revenue 11.0 16.6 18.5-19.5 25.0-27.0
Total revenue growth of the market 43% 40% 12%-16% 30%-38%
Average Licenses Revenue/Total Revenue Ratio 56.2% 48.2% 39.0% 35%-40%
Total license revenue growth 43% 20% -10% 10%-20%
Net income growth over previous years 74.9% -28.3% -27.3% 5%-25%
Average R&D Investment/License Revenue Ratio 22.0% 28.5% 32.4% 30%-35%
Average R&D Investment/Total Revenue Ratio 12.4% 13.7% 12.6% 13%-15%

We believe that the continued ERP market slowdown in 1999 was primarily attributable to the following factors:

* The historical growth in sales of ERP applications has come from large, Fortune 1000 multinational corporations. This market has been highly penetrated, and new, large-scale back-office implementations in the F1000 customer base have all but stalled.

* Continued focus of companies on Year 2000 (Y2K) remediation brought the purchases of new ERP systems in 1999 to a significant standstill.

* The relatively untapped Small-to-Medium Enterprises (SME) market has been cautious about starting new projects due to the bad publicity of a large number of unsuccessful ERP implementations in the past. This fear has been additionally aggravated by the need to integrate disparate systems, given that currently no single vendor can offer a complete end-to-end solution (from supplier to end customer).

* The technology paradigm shift from Client/Server to the Internet created uncertainty about investing in the traditional Client/Server technology, which is still prevalent among leading ERP players.

* The economic recession in markets outside North America, particularly in Asia.

The market size for 1999, with the 4th quarter yet to be reported, is estimated at $18.5B-$19.5B (12%-16% growth over 1998), with sales expected to top $55B-60B by 2003, for a CAGR of 28%-32%. The market appears to be consolidating. The top 6 ERP vendors, SAP AG, Oracle Corporation, PeopleSoft Inc., Geac Software Corporation (See TEC's News Analysis article: "Geac and JBA Join Forces to Form New ERP Giant" October 6, 1999), J.D. Edwards & Company, and Baan Co., account for ~70% of total ERP revenue. Consolidation, mergers and acquisitions are expected to intensify. Over the last two years, the ERP market became stratified into growing and profitable vendors on one side, and stagnating and non-profitable vendors on the other side (See Market Winners, Market Challengers, and Market Losers). We believe that this will become more accentuated, with customers becoming more vendor viability wary. We expect larger ERP vendors to swallow up their smaller brethren, both in ERP and related markets, such as the recent IFS AB acquisition of Effective Management Systems, Inc., the manufacturing execution systems (MES) vendor, and MAPICS' acquisition of Pivotpoint, the vendor of extended ERP for mid-market companies. We also expect companies with related software products to move into the ERP space through acquisition like Invensys, Plc. with its acquisition of Marcam Solutions.

ERP systems have earned the general perception of being exorbitantly expensive to license and implement, and vendors have recently been trying to change that infamous image with new pricing options in order to keep users' costs down. Users typically pay an up-front per-user (either concurrent or named) license fee and an annual maintenance charge to use ERP systems (typically 12%-20% of the license fee). The per-seat price for ERP varies greatly depending on the number of users, the number of modules to be deployed and what "bells and whistles" are added, and whether the company belongs to the high-end Tier 1 (Fortune 500) or the SME (Tier 2 and 3) market segment. The per-user price range has been from $2,000 to $8,000 (typically higher values for larger companies), with the continual price decline trend owing to fierce competition and the reduced or postponed demand for software. Many vendors offer per-month per-user rental or outsourcing deals as an alternative to traditional up-front licenses. Fixed price, preinstalled, pre-configured ERP is also available and is particularly attractive for the lower-end of market.

Sales cycles vary from months to years depending on the company size, its organizational structure (single or multi-site, international or not), and the functional scope of the project. While the selection phase of software acquisitions will increasingly gain critical importance (due to customers' increased awareness of possibly fatal consequences from selecting a wrong software), the pressure for faster decision-making will mount both from vendors (who want shorter and less fluctuating sales cycles) and users (in order to stay ahead of their competitors). As a rule, every $1 of ERP software sales drives on average another $3-$6 of additional hardware, third party integration and consulting, and resellers revenue, although in some cases additional costs can reach $10-15 for each dollar spent on software.

During the last two years, the functional perimeter of ERP systems began an expansion into its adjacent markets, such as supply chain management (SCM), customer relationship management (CRM), business intelligence, and e-Business. While most traditional ERP software enables the integration and management of critical data within enterprises, companies have increasingly recognized the need to deploy more advanced software systems that manage the global supply chain by enhancing the flow of information to and from customers, suppliers and other business partners outside the enterprise. More recently, the availability and use of the Internet has created a demand for software that operates across the Internet and intranets. This global logistics concept merged with new constraint-based optimization solutions called advanced planning systems (APS) and specialized warehouse management software, resulting in SCM (See TEC's Technology Research Note: "Advanced Planning and Scheduling: A Critical Part of Customer Fulfillment" December 10th, 1999 ). The major ERP players already have offerings or strategies addressing this important need (See TEC's Technology Research Notes: "The Essential Supply Chain" September 16th, 1999, and "SAP APO - Will It Fill the Gap" September 2nd, 1999).

Another important area of functional expansion is in the front office/customer relationship management (CRM) arena. Customers are demanding applications and tools that allow them to link back-office ERP systems with front-office CRM systems. They are also demanding enhanced capabilities for e-Business, especially business-to-business (B2B) and business-to-customer (B2C) electronic commerce. The leading ERP vendors have begun to discern the opportunity these products present and the benefit potential for organizations implementing them. CRM has gone from a vast field of point solutions to suites of customer care applications covering sales force automation, field service, telesales, call center, marketing automation, etc. ERP vendors have explored various routes to penetrate the CRM and e-Commerce markets, such as developing in-house products (SAP, with its telesales module and mySAP.com portal), acquiring point specialists to augment their offering (Oracle through its acquisitions of Versatility for call center, Tinoway for field service, and Concentra for product configurator module), merging full suites (Baan with its acquisition of Aurum in 1997, and PeopleSoft with its acquisition of Vantive in 1999), and partnering with CRM and e-Commerce leaders (J.D. Edwards with Siebel and Ariba, and SAP with Recognition Systems Group for its market campaigns module).

* The historical growth in sales of ERP applications has come from large, Fortune 1000 multinational corporations. This market has been highly penetrated, and new, large-scale back-office implementations in the F1000 customer base have all but stalled.

* Continued focus of companies on Year 2000 (Y2K) remediation brought the purchases of new ERP systems in 1999 to a significant standstill.

* The relatively untapped Small-to-Medium Enterprises (SME) market has been cautious about starting new projects due to the bad publicity of a large number of unsuccessful ERP implementations in the past. This fear has been additionally aggravated by the need to integrate disparate systems, given that currently no single vendor can offer a complete end-to-end solution (from supplier to end customer).

* The technology paradigm shift from Client/Server to the Internet created uncertainty about investing in the traditional Client/Server technology, which is still prevalent among leading ERP players.

* The economic recession in markets outside North America, particularly in Asia.

The market size for 1999, with the 4th quarter yet to be reported, is estimated at $18.5B-$19.5B (12%-16% growth over 1998), with sales expected to top $55B-60B by 2003, for a CAGR of 28%-32%. The market appears to be consolidating. The top 6 ERP vendors, SAP AG, Oracle Corporation, PeopleSoft Inc., Geac Software Corporation (See TEC's News Analysis article: "Geac and JBA Join Forces to Form New ERP Giant" October 6, 1999), J.D. Edwards & Company, and Baan Co., account for ~70% of total ERP revenue. Consolidation, mergers and acquisitions are expected to intensify. Over the last two years, the ERP market became stratified into growing and profitable vendors on one side, and stagnating and non-profitable vendors on the other side (See Market Winners, Market Challengers, and Market Losers). We believe that this will become more accentuated, with customers becoming more vendor viability wary. We expect larger ERP vendors to swallow up their smaller brethren, both in ERP and related markets, such as the recent IFS AB acquisition of Effective Management Systems, Inc., the manufacturing execution systems (MES) vendor, and MAPICS' acquisition of Pivotpoint, the vendor of extended ERP for mid-market companies. We also expect companies with related software products to move into the ERP space through acquisition like Invensys, Plc. with its acquisition of Marcam Solutions.

ERP systems have earned the general perception of being exorbitantly expensive to license and implement, and vendors have recently been trying to change that infamous image with new pricing options in order to keep users' costs down. Users typically pay an up-front per-user (either concurrent or named) license fee and an annual maintenance charge to use ERP systems (typically 12%-20% of the license fee). The per-seat price for ERP varies greatly depending on the number of users, the number of modules to be deployed and what "bells and whistles" are added, and whether the company belongs to the high-end Tier 1 (Fortune 500) or the SME (Tier 2 and 3) market segment. The per-user price range has been from $2,000 to $8,000 (typically higher values for larger companies), with the continual price decline trend owing to fierce competition and the reduced or postponed demand for software. Many vendors offer per-month per-user rental or outsourcing deals as an alternative to traditional up-front licenses. Fixed price, preinstalled, pre-configured ERP is also available and is particularly attractive for the lower-end of market.

Sales cycles vary from months to years depending on the company size, its organizational structure (single or multi-site, international or not), and the functional scope of the project. While the selection phase of software acquisitions will increasingly gain critical importance (due to customers' increased awareness of possibly fatal consequences from selecting a wrong software), the pressure for faster decision-making will mount both from vendors (who want shorter and less fluctuating sales cycles) and users (in order to stay ahead of their competitors). As a rule, every $1 of ERP software sales drives on average another $3-$6 of additional hardware, third party integration and consulting, and resellers revenue, although in some cases additional costs can reach $10-15 for each dollar spent on software.

During the last two years, the functional perimeter of ERP systems began an expansion into its adjacent markets, such as supply chain management (SCM), customer relationship management (CRM), business intelligence, and e-Business. While most traditional ERP software enables the integration and management of critical data within enterprises, companies have increasingly recognized the need to deploy more advanced software systems that manage the global supply chain by enhancing the flow of information to and from customers, suppliers and other business partners outside the enterprise. More recently, the availability and use of the Internet has created a demand for software that operates across the Internet and intranets. This global logistics concept merged with new constraint-based optimization solutions called advanced planning systems (APS) and specialized warehouse management software, resulting in SCM (See TEC's Technology Research Note: "Advanced Planning and Scheduling: A Critical Part of Customer Fulfillment" December 10th, 1999 ). The major ERP players already have offerings or strategies addressing this important need (See TEC's Technology Research Notes: "The Essential Supply Chain" September 16th, 1999, and "SAP APO - Will It Fill the Gap" September 2nd, 1999).

Another important area of functional expansion is in the front office/customer relationship management (CRM) arena. Customers are demanding applications and tools that allow them to link back-office ERP systems with front-office CRM systems. They are also demanding enhanced capabilities for e-Business, especially business-to-business (B2B) and business-to-customer (B2C) electronic commerce. The leading ERP vendors have begun to discern the opportunity these products present and the benefit potential for organizations implementing them. CRM has gone from a vast field of point solutions to suites of customer care applications covering sales force automation, field service, telesales, call center, marketing automation, etc. ERP vendors have explored various routes to penetrate the CRM and e-Commerce markets, such as developing in-house products (SAP, with its telesales module and mySAP.com portal), acquiring point specialists to augment their offering (Oracle through its acquisitions of Versatility for call center, Tinoway for field service, and Concentra for product configurator module), merging full suites (Baan with its acquisition of Aurum in 1997, and PeopleSoft with its acquisition of Vantive in 1999), and partnering with CRM and e-Commerce leaders (J.D. Edwards with Siebel and Ariba, and SAP with Recognition Systems Group for its market campaigns module).
We generally believe that, in the long run, market winners will be those vendors with an established large customer base and with huge financial and human resources that would make them more responsive to any future challenges such as sudden market trends and/or technology paradigm shifts. Rated according to this metric, the current market leaders, SAP, Oracle, PeopleSoft, J.D. Edwards, and Baan would be seen as long-term market winners. However, we would like to make a clear distinction between SAP and Oracle, as undisputed winners on one side, and the latter three as winners/challengers on the other side, owing to their substantially lower market share and dismal results in 1999.

* SAP is the current market share leader (~32%) after taking global markets by storm with the release of its flagship R/3 client/server product at the beginning of the 1990s.

Strengths: Commanding market position and brand recognition, very sound financial situation, functional breadth of the core R/3 product, attractiveness of mySAP.com portal for its existing large customer base.

Challenges: Lengthy and costly implementations in the past, a complex and rigid product, slower total revenue growth in 1999 (~12%) with an ~5% decline in licenses revenue and an ~23% decline in net income, delayed delivery of CRM and SCM modules.

For more details, see TEC's note on SAP: "SAP AG - ERP Leader with a 'New Dimension'" September 1st, 1999.

* Oracle fortified its position as 2nd largest ERP vendor during 1999 by increasing its ERP market share (up to ~14%) after being the only large vendor to achieve significant growth in both total revenue (~24%), license revenue (~16%) and net income (~59%).

Strengths: Corporate viability, solid reputation of horizontal applications for functionality and scalability, technology infrastructure ownership, strong international professional services, early Internet architecture adoption and entry to CRM market.

Challenges: Product integration issues, delayed delivery of CRM and SCM modules, divided management attention on a wide range of initiatives, inefficient sales execution.

For more details, see TEC's note on Oracle: "Oracle Co. - Internet Paradigm Boosts Applications Growth" September 1st, 1999.

* PeopleSoft retained its position as 3rd largest ERP vendor, despite sharply sliding license revenue (down ~43%), mostly flat total revenues, the first non-profitable fiscal year, and management upheavals during 1999.

Strengths: Large and loyal HRMS and financial module customer base, corporate viability and culture, user-friendly user interface and development tools (modification feasibility), strong vertical focus for certain non-manufacturing industries.

Challenges: Product integration of acquired Vantive CRM product, market perception of its manufacturing product weakness, no significant number of full ERP reference sites, floundering Internet strategy throughout 1999, low brand awareness outside North American market.

For more details, see TEC's note on PeopleSoft: "PeopleSoft - Are Business Intelligence and e-Commerce Enough?" September 1st, 1999.

* J.D. Edwards lost its 4th largest ERP vendor position owing to Geac's acquisition of JBA International. Fiscal 1999 was the least successful year in the company's history of public trading, with a dismal total revenue growth (~1%), declined license revenue (down ~19%), and the hefty loss of ~$39M.

Strengths: A well-established leading global position in the mid-market, advanced cross-platform migration strategy, OneWorld's architecture that promotes flexibility and ongoing post-implementation system agility, well-developed affiliate channel.

Challenges: Product integration of acquired Numetrix and Premisys SCM products, bland marketing efforts in the past, OneWorld initial product functionality glitches, lack of own CRM and e-Commerce products and need to rely on a number of partnering agreements.

For more details, see TEC's note on J.D. Edwards: "J.D. Edwards - Creating OneWorld of Mid-sized ERP Users" September 1st, 1999.

*

Baan continued its descent on the ERP ladder by dropping to the 6th largest ERP vendor position owing to Geac's acquisition of JBA International. Fiscal 1999 was less disastrous compared to 1998, however still very bleak, with continued declining both license revenue (down ~46%) and total revenues (down ~15%), another non-profitable fiscal year, with significant management upheavals.

Strengths: Discrete manufacturing and project industries functionality, DEM SE concept of rapid implementation and easy reconfiguration, product scalability, potential for offering extended ERP 'one-stop shop' capability.

Challenges: Product complexity, unproven integration of its confederacy of disparate products, prolonged poor financial performance, affiliate channel shake-out, regaining market confidence in the US market.

For more details, see TEC's note on Baan: "Baan Company N.V. - Is the Worst Over?" September 1st, 1999.
While there are a number of successful smaller vendors with exciting product offerings and stellar results in 1999 (e.g. Symix Systems, Great Plains Software, Navision, Fourth Shift Corporation, to name but a few), we will limit our list of market challengers to the four vendors described bellow. They are either already ranked high on the ERP ladder or have exhibited steady growth and expansion in recent years. In addition, they possess attractive product portfolios and innovative technology foundations.

* Geac has snatched the 5th largest ERP vendor position owing to its acquisition of JBA International. Geac is also the largest Canadian software company.

Strengths: Strong history of growth, cross-platform and scalable products, potential for serving a wide range of industries, strong global coverage.

Challenges: Merger growing pains, integration issues and discontinuation of redundant products, lack of a CRM product within the product portfolio, no significant number of full ERP reference sites.

For more details, see TEC's note on JBA International: "JBA: Will it Remain '@ctive Enterprise'?" November 1st, 1999, and News Analysis article: "Geac Metamorphosises JBA Into Gear, but Cuts 20% of Staff" November 17th, 1999. A more detailed TEC's note on Geac Software Corporation is currently in the works and is expected to be published in a due course.

* Intentia is expected to occupy the 7th largest ERP vendor position owing to its revenue growth of ~20% in 1999, while languishing SSA suffered a revenue decrease of ~25% during the same period. Fiscal 1999 was however a challenging year, with declining license revenue (down ~14%) and an expected non-profitable fiscal year.

Strengths: Versatile product functionality (both for discrete and process manufacturing), tight vertical focus, strong track record, corporate culture and viability, heavy R&D investment.

Challenges: Low brand awareness outside the European market, non-uniform global availability of some modules (HR/Payroll, Transportation), dubious future attractiveness of its fully Java-written product due to performance.

For more details, see TEC's note on Intentia: "Intentia: Java Evolution From AS/400" October 1st, 1999.

* Lawson Software is entrenched in the 9th largest ERP vendor position owing to its revenue growth of ~35% in 1999, reaching $270 million in revenues. The company is currently the largest privately held ERP vendor.

Strengths: Innovative product technology (early Web-enablement, interconnectivity, and very intuitive user interface), tight vertical focus, solid track record and viability, heavy R&D investment, cross-platform and open-database product, very high customer retention rate (96%).

Challenges: Low brand awareness outside of the North American market, non-support for manufacturing applications, late development of CRM modules, dubious future attractiveness of its immunity to financial statements disclosure to more conservative CFOs.

A more detailed TEC's note on Lawson Software is currently in the works and will be published in a due course.

* Industrial & Financial Systems, IFS is expected to occupy the 10th largest ERP vendor position within the next 18 moths owing to its revenue growth of 96% in 1998, and expected growth of over 60% in 1999. Fiscal 1999 is however expected to be non-profitable, due to a number of recent acquisitions and worldwide expansion costs.

Strengths: Product technology (component and interconnectivity), expanded ERP product breath, strong track record and current status as the fastest-growing ERP vendor, corporate culture and viability.

Challenges: Maintaining management effectiveness while growing very fast, low brand awareness outside of the European market, integration of recently acquired products, narrow choice of database (only Oracle).

For more details, see TEC's note on IFS: "Industrial & Financial Systems, IFS AB: Thriving on Product Flexibility and Incremental Deployability" January 3rd, 2000.
We predict that more than 50% of current ERP vendors will not survive until 2004 (65% probability). About half of these will transform into system integrators, while either relegating their product to a niche 'bolt-on'or legacy status. The remaining half will be acquired, and those will be vendors with poor financial performance and undervalued market capitalization but with a large customer base and a deep focus and expertise in a certain industry. The following two vendors are case in the point.

* System Software Associates, SSA continued its free fall on the ERP ladder by dropping to the 8th largest ERP vendor position owing to its prolonged dire situation. Fiscal 1999 was a somewhat less disastrous year compared to 1998, however still very dramatic, with continued declining in both license revenue (down ~51%) and total revenues (down ~25%), another hefty loss of $88.2M, and management upheavals.

Strengths: BPCS functionality breath and industry focus, large customer base and international presence, fast implementations and low total cost of ownership (TCO), cross-platform product.

Challenges: Dire financial situation, BPCS 6.0 quality and performance glitches, installed-base dissatisfaction due to migration glitches, lack of own expanded ERP modules.

For more details, see TEC's note on SSA: "SSA: Evolving Into Systems Integrator To Survive" November 1st, 1999.

* Marcam Solutions continued to struggle in the 1st half of 1999 until being acquired by Wonderware, the factory automation division of Invensys Plc., a global electronics and engineering company with headquarters in London, UK for the price less than a half of its annual revenue ($60 million).

Strengths: Protean, PRISM, and Avantis niche functionality and plant-level features, product flexibility and ongoing post-implementation system agility, tight process manufacturing focus, cross-platform product.

Challenges: Poor financial performance, dubious ERP strategy, confinement to process manufacturing, weak financial and distribution modules, lack of expanded ERP modules.

For more details, see TEC's note on Marcam Solutions: "Marcam Solutions: Shifting its Focus to MES" December 13th, 1999.
We believe that growth rates above 40% will be hard to sustain, however growth will remain the word associated with the ERP market in the 2000's. As mentioned earlier, the market size for 2003 is expected to top $55B-60B [Source: TEC]. In addition to the growth created by the fact that many companies have not yet solved their basic ERP needs, particularly in non-manufacturing sectors, we believe that the following factors will further drive this growth:

* The great number of companies who were reticent in making their strategic ERP investments before 2000 and resolution of Y2K, will have to make that investment in the foreseeable future in order to meet competitive pressures.

*

The emergence of Internet-based system solutions during the next 3 years will lead to a faster flow of information between all members of the logistics chain. Demands on quality, customer-focus and faster deliveries are intensifying at an increasing pace. This will require extensive change and a need for new enhanced ERP systems. The future of ERP lies in improving the supply chain and fostering better collaboration across multiple enterprises. Some ERP vendors have already started creating virtual trading communities consisting of their large existing users and their trading partners, whereby ERP vendors provide all the necessary 'plumbing' work.

* The enhanced functionality offered by ERP vendors will increase the number of end users within the current customer base. Currently, ERP is used by less than 20% of a company's employees, on average. We predict that number to double within the next 3 years (70% probability)..

* The emergence of e-Commerce has as a consequence the rapid increase in the number of new 'dotcom' companies. These companies have the same need for business systems as other trading companies with respect to human resources management, financial management, order management, warehousing and distribution, etc. Moreover, e-commerce will create new paradigms for business that will fuel a new wave of business process re-engineering, and therefore more ERP software sales.

* Some geographic markets outside North America and Western Europe have not been significantly penetrated by ERP systems thus far, and we expect further vendors' expansion there in the future.

* Many sectors, such as telecommunications, utilities and the public sector, are now exposed to increased competition due to deregulation and increased globalization, and are turning to deployment of ERP software in order to remain competitive.

We believe that, within the next two years, ERP will be redefined as a platform for enabling e-business globally. Originally focused on automating internal processes of an enterprise, ERP systems will include customer and supplier-centric processes as well. The conclusive evidence of this redefinition is the move of all major ERP players into CRM and SCM applications. ERP software suites will become universal business applications that will encompass front-office, business intelligence, and e-commerce/supply chain management, and ERP will no longer be the acronym sufficient enough to cover it, so we would like to suggest a new acronym - iERP, meaning inter(net)-enterprise resource planning.
While the concept of best-of-breed will not go away, users will increasingly look for one strategic vendor to fulfill the majority of their business application needs. This is particularly true for the lower end of the market. This trend, bundled with strong vendor competition, will drive increased merger & acquisition activity in the entire business applications market. Smaller ERP vendors and best-of breed CRM or SCM vendors will acquire new functionality and merge to protect themselves. We predict that more than 50% of current ERP vendors will not survive until 2004 (65% probability). About half of these will transform into system integrators, while either relegating their product to a niche 'bolt-on'or legacy status. The remaining half will be acquired. The most likely acquisition candidates will be those vendors with poor financial performance and undervalued market capitalization but with a large customer base and a deep focus and expertise in a certain industry. This should not necessarily be a bad thing for current users of those products. The acquirer will either continue product development and support of the acquired product (40% probability) or offer a relatively attractive migration path to its product (35% probability). However, there is a 25% probability that the acquirer is only interested in milking the maintenance revenue without ongoing product support. These users may find themselves left in the lurch with a legacy product. In addition, we predict some unconventional acquisitions, such as the acquisition of ERP vendors by best-of-breed CRM or SCM vendors, with a view to offer a more comprehensive solution. We believe that, within the next two years, Siebel Systems and i2 Technologies will have to resort to acquiring an ERP vendor (60% probability).

As a result of the above described activities, we predict that within the next three years, over 65% of the license revenue of the SCM market and over 50% of the license revenue of the CRM market will come from current ERP vendors (70% probability). Currently, these figures are estimated to be less than 10%. Furthermore, ongoing merger & acquisitions as well as the need to develop new product features will increase R&D investments in the future, measured as a percentage of total revenue (See Table 1).

Despite the user preference for a single, 'one-stop shop' vendor, componentized software products, interoperability standards and Internet technology will lead to fewer large-scale projects and an ongoing stream of smaller ones. This will force third-party system integrators and consulting companies toward fixed-price, fixed-time implementations. Moreover, vendors will increasingly attempt to conduct system integrating and consulting work themselves, which will further decrease the industry average license revenue/total revenue ratio (See Table 1).
We believe that vendors that are best positioned to survive fierce competition will have to exhibit certain core competencies. Competitive costs (low and flexible software license pricing and implementation costs) and outstanding global service (proven fast implementations and customer loyalty) will remain important requirements for success, particularly in the lower end of the market. However, focus will be the key factor for survival. Vendors that will survive the next three years will have focused their business and product on particular industries, preferably those with a current low penetration (federal government, insurance, healthcare, transportation), instead of a more generic, horizontal approach. Winning ERP products will demonstrate deep industry functionality and tight integration with best-of-bread 'bolt-on' products in a particular vertical. Seamless interfaces to other vendors' products will be a matter of course (to achieve real-time collaboration among business partners' disparate systems, as well as to more easily penetrate a competitor's client base with their 'bolt-on' components), as well as growing partnerships with renowned system integrators, consulting companies, and application service providers (ASP).

Buyers will increasingly realize that architecture plays a key role in how quickly vendors can implement, maintain, expand/customize, and integrate their products. An adaptable architecture is the least common denominator for a flexible ERP system. Although a component-based architecture is not an explicit requirement for ERP flexibility, component-based applications generally provide greater flexibility than their monolithic counterparts. Further prerequisites for flexibility will be abstraction of technical complexity (manifested via the use of intuitive tools, aids, or wizards that guide user through a set of steps to achieve a desired end result) and an intuitive, easy-to-use user interface.

Global financial capabilities (including support for the Euro), advanced planning and scheduling (APS), product configurators, supply chain management (SCM), customer relationship management (CRM), e-Commerce, business intelligence (BI), and component (object-oriented) architecture will remain the order winners for the next 2 years. After that period of time, we believe these functional and technological features will be demoted into commodities (order qualifiers), whereas the vendors' financial viability, their service & support capability, and their strategy for improving their products and services over time will become winning criteria.

The large players (i.e. the Big Six) have inherent advantages and incentives to develop needed competencies: their installed base, their market clout, and their ability to commit resources to development. To separate themselves from the rest of the pack, they will either (1) have to use those internal resources to develop their own extended products and capabilities, as SAP has done, or (2) have to buy/use someone else's superior technology/product, which was the route generally pursued by other large vendors.

Small vendors should either (1) try to develop the above mentioned required competencies and build up as much market share as possible, either under their own steam or by means of mergers & acquisitions, thereby strengthening their position, or (2) align themselves with a major vendor.

Users' need to understand their business requirements and critical business processes can never be overemphasized. Not knowing their present business state of affairs as well as their strategic intent and direction will disqualify any future ERP system implementation from being a success. Is the customer a multinational corporation that requires sophisticated methods of dealing with multinational currency? Is the customer a very large corporation that will have to provide for a significant scalability and multi-byte character strings (MBCS)? Answers to these questions and a myriad of similar ones should help users create a long list of vendors to include in an ERP package selection. Precedence should be given to vendors with a proven vertical focus on the user's industry. Another frequently forgotten, but important aspect in software selections is detail. Selections that fail to consider requirements at a sufficient level of detail inevitably produce costly surprises during subsequent implementation.

Users should also be aware of consolidation in the ERP market, and corporate viability should play a prominent role in every selection process. Virtually all software selection teams appreciate the importance of product functionality and product technology requirements in making the right decision. Too often, however, these are the only criteria that play a role in the decision-making process. Other often overlooked factors can determine the eventual success or failure of a new system, including vendor corporate strategy, global service and support capabilities, financial viability, and, of course, cost.

We strongly advise users to exercise their prerogative of "scripted scenario" software demonstrations, in order to further distinguish between the vendors who made the short list. "Scripted scenarios" are detailed sequences of business activities that need to be supported by the software. Vendors present these business scenarios on their live products - tailored to the way the organization does business as defined in the scenarios. These scenarios allow the organization to see how the live product operates in their specific environment, according to the critical business processes outlined by the selection team. In addition, the users gain an understanding of the extent to which the vendor would be able to modify the software to accommodate the users' special needs.

After receiving the final proposal from each of the vendors included in the negotiation stage, users are advised to perform sensitivity analysis to determine the ultimate vendor of choice. This analysis should not be based strictly on price, but also a head-to-head comparison of the functional and technical capabilities of the products, quality of initial implementation and ongoing service and support quality, the vendors' relative financial stability, and their strategy for improving their products and services over time. These factors ultimately lead to the appropriate vendor choice. At this point, users may want to put into action any counter-proposal or negotiation steps, which may include a combination of the following: a request to lower initial software costs, inclusion of free consulting or training resources, reducing the scope of the services offered, a decrease in maintenance fees, negotiating the license fee per module, negotiate discounted license fees for casual users, provision for future incorporation of "extended ERP" components by bundling them into the contract now at negotiated license fees, etc. 'Bolt-ons' should be selected only from official business partners of the primary ERP vendor, after making sure that partnership is not a mere marketing pitch.

Last but not least, users should ensure that their critical requirements are unequivocally spelled out in a contract with a selected ERP vendor. Future clients are also advised to request the vendor's written commitment to promised functionality, length of implementation, and seamless future upgrades, particularly for recently released products and products whose release date is due in the near future.