Thursday, February 28, 2008

IQMS prospers with niche industry ERP focus

I don't have a lot of time for "product briefings," but I did take time this morning to speak with Randy Flamm (President) and Glenn Nowak (Vice President) at IQMS.

IQMS is a small (80 person) enterprise system vendor, based in Paso Robles, CA. It is one of those ERP providers that the vendor consolidation wave seems to have passed by. So, I was interested to know how they had managed to stay in business, with so many of their peers being swallowed up by larger vendors.

According to Flamm, IQMS has not only survived but thrived by serving a few targeted industries with a full-function system that fills most if not all of customer needs, and providing good technical performance. It also helps that the firm is privately held and not beholden to the demands of private equity firms, venture funds, or public shareholders.

Target industry focus
The firm started in 1989, catering to plastics manufacturers. Since then they have expanded their focus to small and mid-size automotive suppliers, packaging manufacturers, and medical device makers, in particular.

I'm a fan of the niche approach to enterprise systems. It allows the developers to focus deeply on the requirements of the niche and really gain subject-matter expertise on the problems and issues of those customers.

IQMS's niche focus has driven them to try to address as many needs of its customers as it can. As a result, it has a pretty wide footprint of functionality for such a small vendor, providing extended enterprise applications such as asset management, EDI, warehouse management, and even shop-floor equipment monitoring--functionality that you don't even see in vendors that are much, much larger. They have even introduced mesh networking into some of their asset management, WMS, and shop floor systems.

Now, having said that, I'm sure there are major gaps in IQMS functionality for some clients, especially once you get outside of its target niche. But that's the beauty of a niche strategy. IQMS doesn't have to be all things to all customers. It only needs to be all things (or most things) to a few customers.

IQMS's big footprint of functionality means that it generally doesn't have to reach out to partners to provide complementary products, though it does use Crystal Reports for end-user reporting. Nevertheless, functionality such as EDI, where many larger vendors rely on third-party providers, is offered as part of IQMS core product set. This allows a much greater degree of integration with the rest of IQMS, for processes such as outsourcing management, where product may move through multiple levels of supply chain management. IQMS provides visibility to this material in the supply chain, relying on advanced shipment notices (ASN) in its EDI capabilities to track the movement.

Another point of functionality that is quite interesting, if true. IQMS claims support for multiple facilities, multiple languages, and multiple currencies that I find unusual for such a small vendor. I drilled down a bit on each of these and heard all the right noises (facility-specific planning on a single database instance, double-byte for support of Chinese, ability to specify language by user in a single system, etc.). Again, this level of sophistication is customer driven, as even small manufacturers in this age need to operate parts of a global supply chain.

Technical architecture
Flamm spent quite a bit of time describing IQMS's technical performance, which he sees as important part of his value proposition. The product was originally written in Delphi (from the client server days) over an Oracle database, in a two-tier architecture, with all business logic residing on the server. The product is now largely rewritten in Visual Studios .NET, which gives it a Microsoft development framework, while still using Oracle on the back end. He claims this configuration results in transaction processing that is very fast, much faster than if IQMS had adopted a service-oriented architecture (SOA), and that processing speed is an important criterion in customers selecting IQMS.

Does the reliance on Oracle cost IQMS sales to prospects, especially smaller companies that are standardizing on MS SQL Server? Flamm thinks prospects are more focused on the solution than on the technology, and that the database system doesn't matter. (However, later in the discussion he indicated that he doesn't see Microsoft Dynamics competing in many deals, which tells me he may not be getting to the table where the prospect has a decided preference for MS SQL Server.)

Can IQMS Compete?
IQMS shows that it is still possible to successfully own and operate a small ERP development and sales organization. It claims about 500 customers in its installed base, with about 50 new deals last year, and a 98% customer retention rate. I believe the math works out that they would double in seven years at that pace.

All sales and professional services are delivered direct in North America, and through resellers/partners in Europe and the Far East. The target market is manufacturers in its niche industries between $20 million and $500 million in annual revenue. I would have doubted the upper end of that range, but with the claimed "multi-multi" support, I am more likely to believe it.

Nowak says that he sees Epicor, Syspro, and Plexus in deals, along with Oracle and SAP of course. He is particularly happy with a win against SAP in a 10-day demo shoot out for a $500 million automotive manufacturer last year. Consona (Made2Manage) has not been seen as much as a year or two ago. QAD is seen more in the medical device sector than in automotive, which surprises me. (I'm sure each of these vendors will have a different perspective, of course. I'm just reporting here, not endorsing).

How has IQMS avoided being swallowed by larger vendors? The firm is privately held, so they can simply say no to offers. Not that they haven't had any. Flamm says he gets hit up two or three times a month by private equity and venture capitalist firms that would like to invest in IQMS.

I haven't had a chance to review IQMS's product, nor have I seen them in a competitive situation. But for a small to mid-size manufacturer in the automotive, medical products, or plastics industries, I'd definitely put them on the short list for consideration.

If you've got first-hand experience with IQMS, please drop me a message or leave a comment on this post (link to comments is below).

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Tuesday, February 26, 2008

SAP winning BI customers from Oracle

SAP is now claiming that it is gaining customers at the expense of Oracle and Oracle's new business intelligence acquisition, Hyperion.

SAP reports that over the past several months more than 100 customers worldwide have chosen SAP for enterprise performance management with the intention to replace Hyperion solutions. It lists a number of wins specifically in its press release linked above.

Josh Greenbaum has some interesting commentary on SAP's claim. He thinks that it reflects a shift in tactics on the part of SAP, to more aggressively counter Oracle and its attempts to dislodge SAP from its position as the leading provider of enterprise systems worldwide.

He also points out that SAP may have even more success in winning business intelligence customers from Oracle in the future:
What’s interesting about SAP’s Hyperion wins is that they had nothing to do with Business Objects technology — all of them were recorded before the acquisition was complete. So the folks at SAP are promising an even stronger position vis-a-vis Oracle as the BO product line starts to make its way into the hands of SAP’s sales force.

How this will all end with respect to Oracle’s and SAP’s market position is anyone’s guess at this point. But I think it’s healthy to see a little balance restored in the marketplace of ideas: the onus is now on Oracle to prove that it’s gaining ground on SAP, and I can’t wait to see what they come up with. Not just because it provides fodder for this and many other blogs, but because it charges the companies’ respective customer bases with a little skepticism and some healthy doubt about how one-sided any part of the enterprise software market is at any given time. The rivalry between SAP and Oracle is complex, nuanced, and constantly evolving. Today we saw another example of how this statement becomes more true with every day.
Business intelligence is an interesting battleground for SAP and Oracle. Companies deciding on a new ERP system rarely make business intelligence the primary factor driving the decision. But for large enterprises that have both Oracle and SAP in various parts of the organization, the choice of a unified business intelligence platform could shift the balance of power from one vendor to the other. Ultimately, it could lead to standardizing on one ERP vendor or the other.

Senior executives don't enter purchase orders, process credits and debits, or release shop orders. But they do interact with enterprise performance management applications. Business intelligence is the one enterprise application that senior executives--the ultimate decision makers--use on a day to day basis. Therefore, whether an executive uses a business intelligence solution from Oracle or SAP is a big deal. So, it's no wonder that these two vendors are going after each other for BI mind-share.

Related posts
SAP to buy Business Objects
Oracle hustles Hyperion
IBM buying Cognos
Two more business intelligence vendors are hooking up
Vendor consolidation hits business intelligence sector

Sunday, February 24, 2008

Microsoft-Yahoo: What would Larry do?

I haven't written anything about Microsoft's bid for Yahoo, because it doesn't have an enterprise systems focus. But an article by Randall Stross in the New York Times this morning takes the story down a different path. It argues that if Microsoft wants to do a big deal, a much better target would be SAP.

Stross reasons that if Larry Ellison were running Microsoft, he most certainly would be pursuing SAP instead of Yahoo. The logic: SAP would greatly strengthen Microsoft's relationships with the world's largest corporations, strategically more valuable than picking up Yahoo's millions of free email users.

Stross also quotes me regarding a potential Microsoft-SAP merger:
It's amusing to note that the most Larry-like choice, Microsoft's acquiring of SAP and leaving it alone as an autonomous division to avoid a cross-cultural integration fiasco, is the course that would be most discomfiting to Oracle. Frank Scavo, president of Computer Economics, an information technology research firm, in Irvine, Calif., said that "a Microsoft-SAP combination would be Oracle’s worst nightmare."
However, as I wrote back in December, I still believe that a Microsoft-SAP merger is unlikely, for four reasons.
  • It is unlikely to pass antitrust scrutiny in the U.S. and especially in the European Union, where SAP is headquartered.

  • It also represents a clash of cultures even greater than the difference between Microsoft's and Yahoo's. At least Microsoft and Yahoo have historical roots as consumer businesses.

  • SAP's technical infrastructure (J2EE) is entirely different than Microsoft's (.NET). If Microsoft were to acquire SAP it would either need to completely rewrite SAP's applications (no small feat, even for Microsoft) or allow them to co-exist with its own, undermining its efforts to establish .NET as a dominant platform.

  • Microsoft's previous foray into selling enterprise applications has already been, in Microsoft's own words, "a humbling experience." This, despite predictions that Microsoft's acquisition of Great Plains and Navision would lead to Microsoft's dominance of the business applications market. Does Microsoft really want to go further down that road?
So, for now, I think Larry can sleep peacefully.

Related posts
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Friday, February 22, 2008

More on Epicor's management changes

On Wednesday's post regarding Tom Kelly's move into Epicor's CEO spot, replacing George Klaus, an anonymous commenter points out that Klaus's departure "had been announced for over a year."

A quick search (which I should have done yesterday before posting) does find an Epicor press release from 2005 that refers to long term succession planning and implies the departure of Klaus sometime after 2007: announced the promotion of three senior executives designed to continue to support the company's successful growth and market expansion and to solidify the long term succession planning for the organization. The company also announced that George Klaus will remain Epicor chairman and chief executive officer through 2007.
The press release doesn't indicate who Klaus's replacement will be, but the clear implication is that it would be one of the three executives newly promoted. One of the three was including Mark Duffell, who moved into the post of President and COO. Duffell's departure from Epicor was announced yesterday, along with Klaus's transition out of the CEO role.

So, the most likely explanation is that Duffell was considered for the CEO role and, for whatever reason, was passed by. That would explain why his departure was announced at the same time as Kelly's move into the CEO position.

It's not possible to confirm my theory at this time. Managing Automation has a more extensive report on the management changes at Epicor, but notes that Epicor is refusing requests for interviews with either Kelly or Klaus. This again would be consistent with a transition that was not entirely happy.

Investors seem to see it the same way, as Epicor's share price fell 2.84% on the news of the management change, to $11.99. Yesterday, two days later, the stock closed at $11.73.

Still the question remains: why the need for fresh leadership? I speculate that reported quality and support problems with Epicor's Vantage product may be part of the equation. I saw first-hand such problems several years ago, and a quick check of Internet chatter shows that the reports continue.

Again, if readers have further insights, I'd love to hear them.

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Epicor replaces CEO and COO: why?

Wednesday, February 20, 2008

Epicor replaces CEO and COO: why?

Epicor announced yesterday that Tom Kelly, a member of Epicor's board, is replacing longtime CEO George Klaus. Klaus will remain as Executive Chairman of the board. Although Klaus is quoted in the press release saying that the move is "the culmination of a carefully architected succession plan," I don't know of any prior public indication that this transition was imminent. Normally, when an organization plans to switch CEOs, there is plenty of warning.

Adding to the mystery, in the same press release, the firm revealed that Epicor's President and COO, Mark Duffell, is "leaving to pursue other opportunities." Generally, this is a polite way of saying that an executive was asked to resign, although we have no way to know whether it is true in this case. Kelly will assume Duffell's role of President in addition to Klaus's role of CEO.

It's hard to pin these management changes on poor quarterly performance. Epicor just announced fourth quarter results that were positive. Earnings were up 14%, driven by new license revenue, and profits were in line with Wall Street expectations. In addition, the firm just completed its acquisition of NSB Retail Systems, which should significantly improve its portfolio of offerings for the retail industry, a potentially fertile niche.

So, why the sudden need to replace two top executives at Epicor? If you have a theory, let me know.

Update, Feb. 22. See my Epicor follow up post on this subject.

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Friday, February 15, 2008

All not sweet with NetSuite

NetSuite is probably the second best-known example of a vendor offering enterprise applications under a SaaS model, after The company was founded in the late 1990s as NetLedger, but later changed its name to NetSuite to avoid the financials-only connotation of its original name. Larry Ellison is a major shareholder.

Though the company has gotten a lot of media attention in its attempts to disrupt the business applications market, things may not be going as swimmingly as the firm's press releases indicate.

Jason C, notes on his blog, that NetSuite appears to be losing customers:
In scanning the company's S-1 filing with the SEC there is a note that the customer base was "over 5,400". That should have caught my eye. It didn't. But today, reading the earnings press release I saw the company added 432 customers during Q4, bringing the customer count to "over 5,600". Interesting. I would not have expected it to be 5,832 as there has to be some churn in this business. But what does it say when your rate of churn is about half of your customer add rate?
He further points out that a 2003 press release on NetSuite's website indicates their customer count at that time was 6,000.

So, either NetSuite was (ahem) exaggerating its customer count in 2003, or else it has fewer customers today than it did five years ago.

Jason points out that the apparent drop in customers is a confirmation of customer dissatisfaction, as indicated in two posts on Dennis Howlett's blog. Read the first post and the second one to get an idea of the problems being reported: salespeople over-promising, pricing surprises, and post-sales support problems.

My take
Most of the problems sound like a throw-back to the bad old days of ERP in the 1990s. Few of them appear to be unique to the SaaS model. If legitimately reported, they appear to be the result of an organization under a lot of pressure to make its revenue numbers.

On the other hand, small and mid-size businesses--where NetSuite is focuses--are not exactly the most sophisticated buyers of enterprise systems. I suspect there are many false expectations for how easy it will be to implement NetSuite, likely encouraged by a sales force eager to close deals.

NetSuite has responded to Howlett's commentary on the drop in customer counts by pointing out that its most recent press release is talking about "active customers" only. However, that explanation doesn't fly in my book. Whether active, or newly-sold-but-not-implemented, or inactive, the fact remains that NetSuite's reported customer count today is less than it trumpeted five years ago.

I have great long-term hopes in the on-demand model for enterprise applications. But it won't succeed if vendors oversell and under-deliver.

For raw unfiltered commentary, see this feedback on an old Business Week article that is still getting comments. Note: there's no way to verify that comments are actually being written by NetSuite customers. Still, it's a pretty sad commentary.

There's even a website, NetSuite Consumer Fraud, set up for gathering complaints for a class-action suit.

If you have first-hand experience with NetSuite, drop me an email, or post a comment below.

Update, Feb. 16. The first poster in the comments section points out that four comments on the Business Week article are from the same individual, using different names. Probably so. That's why I called the comments "raw, unfiltered commentary." Still, I don't know of another software vendor today, major or minor, where I've seen this much negative feedback displayed in such a public fashion. Click through on all the links above and be sure to read the many comments on those articles.

I say, where there's smoke, there's fire.

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Thursday, February 14, 2008

Court orders mediation in Oracle vs. SAP/TomorrowNow case

Judge Martin Jenkins on Tuesday ordered SAP and Oracle to attempt mediation to resolve their dispute over Oracle's claims that TomorrowNow engaged in theft of Oracle's intellectual property.

The court record also indicates that Oracle anticipates filing an amended complaint against SAP. As reported last month, Oracle claims to have found a broader pattern of copyright infringement than it originally alleged.

I doubt whether this dispute can be resolved by mediation, unless SAP is willing to concede quite a bit to Oracle. SAP is on the ropes in this case, having already classified TomorrowNow as a discontinued operation and indicating its intent to sell the unit. In the meantime, no buyers have appeared.

With TomorrowNow going nowhere, and Oracle enjoying the PR value playing the victim, what incentive does Oracle have to agree to a settlement?

However, as I wrote previously, it will be very interesting if, through this case, more information regarding the profitability of Oracle's maintenance business become public record.

Related posts
Oracle wants to broaden lawsuit against SAP and TomorrowNow
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TomorrowNow and the future of third-party support providers
SAP considering sale of TomorrowNow
SAP admits wrongdoing in Oracle lawsuit
Oracle now charges SAP with copyright violation
Latest on the Oracle/SAP lawsuit
Oracle/SAP lawsuit: view from Rimini Street
SAP subject to criminal charges?
Oracle sues SAP and its TomorrowNow unit

Monday, February 11, 2008 shopping itself to Oracle?

Tom Foremski is reporting that a "reliable source" indicates that " has approached Oracle to gauge if there is any interest in a sale at $75 a share."

At first glance it would appear strange for Marc Benioff, who has long trumpted his software-as-a-service (SaaS) model as the "death of software," to be offering his firm for sale by to the world's second largest enterprise software vendor.

But Foremski thinks the deal makes sense for several reasons. Apart from the obvious synergies of Oracle's market presence with's technology, he also points out that Benioff appears to be losing interest in his current job and has been selling an enormous number of shares recently. He also speculates that Benioff would make a great candidate to replace Ellison, whenever Larry sees fit to retire.

There is a lot of other good information in Foremski's post. Read the whole thing: Is Salesforce Worth $75/Share To Oracle?

My take
There was a time when I would discount rumors such as this one. But after watching Oracle for the last five years, I rule nothing out.

It would certainly launch Oracle to the front of the on-demand market. Oracle's only true multi-tenant SaaS offering is the online CRM offering it picked up from Siebel, which was a fraction of the revenue from Siebel's on-premise product line. Oracle's main on-demand offering is simply its traditional E-Business Suite, offered on a single tenant hosted basis. Oracle has been touting this model as superior to the multi-tenant model lately, but to me it smells of "if you can't fix it, feature it."

There's one other big plus for Oracle. Buying would take the wind out of the sails of SAP's recent launch of its own on-demand offering, Business by Design. With SAP making such a strong move into the SaaS market, can Oracle afford to appear as a laggard?

Update, Feb. 12:'s share price was up nearly 8% yesterday on the rumor of its interest in a deal with Oracle.

Upon further consideration, however, it seems to me there are two possibilities, both of which are problematic:
  1. Contrary to Foremski's assertion, the source is not reliable. The rumor could be a ploy by someone interested in pumping up the share price.

  2. Foremski's source is reliable. If so, and the source has factual knowledge of a $75 per share offer from, then the source is disclosing insider information.
Either way, the SEC should investigate.

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