As the first cloud-only manufacturing ERP system, Plex Systems has a wide footprint of functionality, going beyond what is offered by newer cloud vendors.
Nevertheless, after more than a decade of development, Plex has fewer than 1000 customers and its presence is limited mostly to smaller manufacturing companies in a few sub-sectors.
As evidence, there were about 700 attendees at last year's PowerPlex conference. This year's PowerPlex, which I attended this week in Columbus, Ohio, saw about 750 Plex users in attendance. Granted, overall, these are highly satisfied and enthusiastic customers. There just needs to be more of them.
On the one hand, Plex claims a compound annual growth rate of nearly 30% over the past three years--an impressive number. But as the
first fully multi-tenant manufacturing cloud vendor, Plex could have, and should have, been growing at a faster pace. Now, there are several other cloud vendors taking aim at Plex's market, such as
NetSuite,
Acumatica,
Rootstock, and
Kenandy.
Plex must grow more aggressively, for two reasons. First, the company was acquired last year by two private equity firms. Private equity is not known for patience. Second, as CEO Jason Blessing pointed out in his keynote, growth protects the investments of existing Plex customers. Software companies that do not grow do not have the resources for continued innovation. Eventually, they only provide enough support to keep current customers--at best. They become, in effect, "zombie vendors," to use Blessing's term.
So, what does Plex need to do to grow at a more substantial pace in the coming years? I see six mandates. Some of these are fully embraced by Plex, while others, in my view, could use more emphasis.
1. Get Noticed
If some cloud vendors need to tone down their marketing hype, Plex needs to kick it up a notch. Plex was not only the first truly multi-tenant cloud manufacturing systems, it was also one of the first cloud providers period. Yet still the majority of manufacturing systems buyers have not heard of Plex. Reflecting Plex's home turf in Michigan, discussions with Plex insiders about this often includes the phrase, "midwestern values"--in other words, not blowing one's own horn. However admirable this humility may be on a personal basis, it is not useful from a business perspective.
Hopefully, this is about to change with the hiring of
Heidi Melin as Chief Marketing Officer. Melin worked with CEO Blessing at Taleo, and more recently she was CMO at Eloqua, which was acquired by Oracle. In my one-on-one interview, Blessing was high on Melin's arrival, and indicated that she would be especially focused on digital marketing to reach the many thousands of companies in Plex's target market.
2. Put More Feet on the Street
Blessing also indicated that he intends to beef up Plex's sales efforts, which to date have been concentrated largely in the Great
Lakes region. This has left many sales opportunities poorly supported in
other US geographies, such as the southern states (home to many
automotive suppliers), Southern California (home to many aerospace
suppliers), and other parts of the country that are home to many food
and beverage companies. Increased sales presence in international
markets is also needed.
This is a step long overdue. When my firm Strativa short lists Plex in
ERP selection deals, Plex is often flying in resources from across the country, which does not sit well with most prospects. Opening regional sales offices, like Plex has now done in Southern California, will help put more feet on the streets of prospects.
3. Move Up-Market
Historically, Plex's system architecture is oriented toward single-plant operations. There is some logic to this approach. As Jim Shepherd, VP of Strategy, points out, most of the information needed by a user is local to the plant he or she is working in. However, even small manufacturers often have needs that include multiple plants, cross-plant dependencies, and central shared services. Plex does have some multi-billion dollar customers, but these are
primarily companies with collections of plants that are relatively
independent of one another.
In response, Plex is building out its cross-site and multi-site capabilities while keeping its primary orientation around the single plant. In my view, this will be a key requirement in Plex moving up-market and serving larger organizations.
4. Build Out the International Footprint
The bulk of Plex's sales are to US companies, but if Plex is to grow more aggressively it will need to better support the international operations of these companies. It will also need to sell directly to companies outside of the US.
In his keynote, Shepherd pointed to the new ability for Plex to print reports on A4-size paper, commonly used in parts of the world outside North America. The fact that Plex is just now getting around to formatting reports on A4-sized paper shows just how US-centric Plex has been. To be fair, Plex does support multiple currencies and has support some international tax requirements, such as in Brazil, India and China, although some of this is done through partners. Nevertheless, Plex has much it could do to improve its appeal to multinational businesses. In this day and age, even small companies--like those Plex targets today--have international operations. Building out its international footprint is another prerequisite for Plex to achieve more rapid growth.
5. Venture Outside of Traditional Subsectors
Plex sees its current customer base primarly as three manufacturing subsectors today: motor vehicle suppliers, aerospace and defense, and food and beverage. Blessing indicates that by Plex's calculations, these three sub-sectors account for about 25-30% of the manufacturing ERP market. Surprisingly, however, Plex currently has no plans to expand outside of these sub-sectors. Blessing believes that simply by increasing Plex's sales execution in its current markets it can continue its compound annual growth rate of nearly 30% for the next several years.
Count me skeptical. First, as indicated above, Plex no longer has exclusive claim to the cloud manufacturing ERP market. Plex is going to have to fight a lot harder than it has in the past for new customers. Second, why is 30% growth the benchmark? I understand that there are risks in more aggressive growth. But aiming higher might be needed in order to meet the 30% goal.
In my view, Plex is not far off from being able to address the needs of manufacturers that are adjacent to its existing markets. These would include industrial electronics, medical devices, and industrial equipment. Plex already has some customers in these sub-sectors, so it's not like the company is starting from scratch. Hopefully Plex will formally target these industries, sooner rather than later.
6. Target the Customers You Want Not Just Those You Have
Over the past 10+ years , Plex has let customer requests drive its
product roadmap. In fact, much of Plex's development has been funded
directly by customers or groups of customers who desired certain new
features. This worked well to minimize Plex's up-front costs of new
development and also led to high levels of customer satisfaction.
However, it had one major drawback: if you only have customer-driven
development, everything you build will by definition only be of
interest to the type of customers you have today. In addition, a single
customer or group of customers are not able to fund major new
development that are more strategic in nature.
Here Plex is on the right track. Recognizing this need,
Plex is now allocating product development funds for strategic
initiatives, including a revamp of its user interface, cross-browser
access, business intelligence and reporting capabilities (Inteliplex),
as well as other major initiatives. In conversations with customers at PowerPlex they expressed these as welcome developments, although they have, apparently, diverted Plex resources from some of the customer-requested enhancements they also wanted.
The Way Forward
There's plenty that I admire about Plex:
its zero-upgrades approach, its broad functionality, and the fact that it proves manufacturing companies have been ready for cloud computing for many years, contrary to the claims of on-premise ERP providers. Most of all, Plex allows me to roam around its user conference and speak informally with customers. Nearly without exception, everything I hear is positive. Not a single customer has told me they made the wrong choice with Plex, although with any ERP implementation there are always bumps in the road.
But none of this guarantees that Plex will thrive in the future. Like
proverbial sharks, software vendors must continue to move forward, lest they die. The management team at Plex has some new blood, including the CEO, and a new perspective. They understand the opportunities ahead, but will they fully rise to the challenges? We'll be watching.
Note: Plex Software covered some of my travel expenses to their annual user conference.
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