Project Lifecycle Management Implies Long Term Value; Forget the Total Cost of Ownership Fuss

Product lifecycle management (PLM) software vendors are consistent in their belief that PLM applications software is well worth the investment because the life cycle costs of new product design and initiation (NPDI) are inherently weighted at the front end. Therefore the better job a company does in managing an efficient process toward NPDI will imply considerable cost savings over time. After a product launch, there are additional and significant gains that can be achieved by properly and efficiently managing the product life cycle through product retirement, but the real nugget for most manufacturers lies in the front-end of the product design and development cycle where an average (over multiple long NPDI industries) of over 80 percent of the costs resides.

Life Cycle Costs Over Time—Efficiency Starts with Design

Current global market forces are driving the need for manufacturers to re-examine their ways of conducting business, and are, in turn, driving PLM applications initiatives. These global market forces include

* Mergers and acquisitions
* Outsourcing and off-shoring
* Globally distributed manufacturing operations
* Broader supply chain networks
* New product market opportunities

At the same time, the recognition of inefficiencies and complexities across comprehensive business processes throughout a companies' design, engineering, manufacturing, marketing, and support organization are driving interest in PLM:

* Market assessment including segmentation and demographics
* Forecast demand and market window
* Conceptual design and product definition
* Detailed design
* Manufacturing release and change management
* Parts selection and sourcing
* Production process planning
* Market rollout
* Aftermarket support
* Portfolio management

The dynamics of these global market forces coupled with existing but inefficient product development business processes are opening the door to increasing PLM software adoption. Manufacturers are achieving better time-to-market improvements from the adoption of NPDI techniques and technology, but there are still bottlenecks during execution of these processes. Global design teams are becoming more commonplace due to mergers and acquisitions and outsourcing, dictating a more dispersed cross-functional team to collaborate on NPDI. Global expansion is also seeding collaborative NPDI activities. At the same time, regulatory requirements and other compliance initiatives are increasing the data capture requirements as new products go to market. Studies show that NPDI cycles are shrinking, indicating that collective PLM targeted processes and technology are paying off.

PLM Payback Is Complex and Subjective, But Real

Demand for PLM and recognition of value can be translated by the fact that key vendors like PTC, Dassault Systems, Agile, MatrixOne, and UGS are experiencing mixed to healthy growth in revenues for both design tools and broader PLM capabilities. PLM vendors, as a group, are meeting or exceeding market growth expectations, and the bar has been set high. The CEO of Compaq was recently quoted as saying that PLM offers "more pure ROI" than any other business application. So where does the value come from? Many of the subjective revenue gains and objective cost reductions lie in

* Improved new product design innovation
* Coordination across multiple product design and development locations
* Improved design quality while reducing design cost
* Reduced product time-to-market cycle times
* Better support for customers located worldwide
* Opportunity recognition via portfolio management
* Improved custom product development
* Enabled patent management
* Improved channel management
* Enabled intellectual property management

The Business Case for PLM Varies by Industry and Timeframe

Each industry has its own view of how PLM can improve efficiency, and what drives the business case for initiating PLM projects. Industries with short NPI and short product life cycles, like electronics and apparel, are "manufacturing" driven. Their focus is on the advantages gained through PLM concept adoption from design to mass production product launch. At the other end of the spectrum, industries like automotive, aerospace and defence (A&D), and pharmaceuticals have long product life cycles and long NPI cycles. They are "program" driven, and stand to gain from PLM initiatives focused on collaborative design, project management, portfolio management, and product retirement.

Total Cost of Ownership (TCO) Models is Overkill

Total cost of ownership (TCO) is a holistic way to view the true costs of IT investment throughout an applications' life cycle. TCO is a way to understand and analyze the costs, efficiencies, and economic impacts associated with procuring, using, and maintaining IT application components over time. In short, it is the "cradle to grave" costs associated to IT investments. TCO of a PLM environment is the total cost of procuring, operating, and maintaining PLM applications including hardware, software, training, peripherals, servers and local area networks (LAN) equipment including hidden and indirect costs like training and support throughout the life cycle of the PLM software assets.

Consulting firms that specialize in TCO assessments for software acquisition embrace a TCO philosophy based on the best practices surrounding application life cycle management including acquisition, deployment, service, and support, as well as revision control. TCO benchmarks exist for detailed analysis of current expenditures related to hardware and software, operations, administration, as well as end user operations and downtime. Topics such as staffing information, outsourcing fees, service desk metrics; dispatched support calls can all be included in a thorough TCO analysis.

PLM, as a strategy, is as much process definition as it is technology. Any TCO analysis examining the costs associated with a PLM application must as well examine the scope and level of best practices you have implemented in your company today as well as in the future. This requires a sharp view of both the "as-is" and "to-be" state of a companies' product design and development cycle.

But this type of analysis can be time consuming, laborious, and expensive and is most likely not warranted if one takes a more simplified approach. A considerably more simple yet logical approach for manufacturers initiating a PLM project involves developing a process flow schematic of product design and development processes, determining estimated or average durations by process, and comparing the reduction of product life cycle design and development time versus the over all product design and development costs. A mere percentage of savings in life cycle time can result in big dollar savings. Hacking off a week or two of product development time, and the resulting ripple effect throughout the product life cycle, can result in considerable savings that far exceed the TCO of a PLM application.

SOURCE:
http://www.technologyevaluation.com/research/articles/project-lifecycle-management-implies-long-term-value-forget-the-total-cost-of-ownership-fuss-18190/

Acquisitive Vendor Expands Its Enterprise Asset Management Potential

IFS, a Swedish enterprise applications company, has had a mixed record of mergers and acquisitions in the past few years. While at first attempting to diversify, the company has lately opted to consolidate its product offerings, shedding a computer-aided design (CAD) application from its roster. And so it may have been a surprise to some that IFS Defence Ltd., a joint venture between IFS and BAE Systems, acquired Information Science Consultants (B) in July 2007. Its enterprise asset management (EAM) solution already strong, with this latest acquisition, IFS hopes to bolster its reliability-centered maintenance (RCM) capabilities for the aerospace and defense (A&D) industries.

IFS—an EAM Force

But to come back to IFS, its EAM solution is just one component of the broad IFS Applications suite used globally by customers such as the Toronto Transit Commission (TTC), Three Gorges in China, and NuCor Steel in the US, to name but a few asset-intensive ones. IFS Applications provides extended enterprise resource planning (ERP) functionality, including customer relationship management (CRM), supply chain management (SCM), product lifecycle management (PLM), corporate performance management (CPM), EAM, and maintenance, repair, and overhaul (MRO) capabilities. Translating these into major business processes, these solutions for engineering, manufacturing, service management, asset management, and so on, seamlessly work together to enable companies to employ lean enterprise concepts, control costs, manage projects, measure performance, and increase efficiencies in their supply chains.

Amongst its many EAM and MRO parts and parcels, IFS has created an asset lifecycle management (ALM) solution to take control of available asset information from design, engineering, operations, and maintenance, permitting quick information retrieval and informed decisions throughout the entire asset life cycle. A collaborative asset information repository and document management system supports sharing of information for many functional business areas and enterprise processes, such as purchasing, project management, inventory management, operations, and maintenance.

A close partnership with Bentley Systems (which acquired the former IFS Plant Design set of CAD modules in 2004) supports special integration tools for automatic import and export of plant and asset design documents to and from the repository. For example, once data is entered into the common database, it immediately becomes available to the other IFS Applications modules; as a result, information can be recycled, and it remains consistent and updated, never having to be re-entered. Also, the CAD modules provide designers with a drawing tool for process and instrumentation design, while predefined forms and the convenient lookup functionality are further examples of features that benefit all design disciplines. This integration permits instant population of the asset database upon acceptance of a new or updated plant design, along with capabilities to update the design documents to reflect “as built” changes.

To the benefit of its customers, IFS has shown a strong commitment to standards such as those created by the International Electro-technical Commission (IEC), the American National Standards Institute (ANSI), NORSOK (Norsk Sokkels Konkuranseposisjon), and the Swedish pulp and paper industry’s technical—and meticulous—cooperative standards organization, SSG Teknik AB. For instance, SSG’s aim, according to its web site, is “to promote the standardization and development of process and plant technology,” and the administration of connected product and chemical databases.

Thus, many clients (especially a number of pulp and paper mills in Sweden) have reportedly realized significant productivity benefits from IFS’s integrated ALM solution; the implementation methodology handles the entire information flow, from engineering and design through planning and implementing maintenance, including managing related documentation and drawings.

IFS plans to espouse similar standards in other industries, such as chemical, oil and gas, energy, and metals and mining, to further promote the development and adoption of ALM by other forward-thinking customers worldwide. This effort might be helped by the recently announced partnership with Tata Consultancy Services (TCS), which will primarily target the project-driven manufacturing, chemical, energy, utilities, telecommunications, and oil and gas industries, increasing IFS's ability to deliver its EAM and service management functionality to larger enterprises in North America. Readers should keep their eyes open for further developments from TCS, as they become available.

What Else Does IFS Get with iSC?

In addition to the possibility of cross-selling reliability-centered maintenance (RCM) capabilities and expertise to thousands of its existing customers, IFS should benefit from iSC’s focus and expertise in the naval and maritime operations sector. On one hand, the area of RCM technologies is getting increased exposure and investments from a number of vendors, such as Lawson and Infor. This contrasts the usual tendency to leave RCM to small, specialized (or niche) companies such as Meridium or Ivara (see Lean Maintenance—Does It Impact Reliability? Lessons Learned and Best Practices).

On the other hand, the acquisition should entrench IFS's leadership within the defense industry sector, which is now also beginning to invest in IT to streamline operations. Vertical focus has been “the name of the game,” even in the EAM and MRO areas, as illustrated by Mincom’s long focus on and success in the mining sector, or Indus’s (now Ventyx) expertise in some sectors of the utilities industry (for example, nuclear power plants). While this acquisition will add value to IFS's overall defense offering, it is likely to be of particular tactical interest to maritime and naval operations, a domain in which IFS has about one dozen clients.

As for some potential caveats (in addition to the above-mentioned ownership- and responsibility-sharing arrangements between IFS and BAE [that is to say, for IFS Defence]), one should note that iSC’s technology is based on the Microsoft .NET Framework, which is not quite in tune with the IFS Applications’ Java-based architecture on the server side. This could create hurdles for the envisioned integration of the two complementary products and technologies, despite the fact that service-oriented architecture (SOA) should render the platforms moot. The fact is that any product performs best when written in a native uniform environment, as has been the case with IFS Applications.

To be fair, IFS is well versed in Microsoft technologies on the client side, and the IFS Intelligent Desktop initiative and the related IFS Business Analytics product (formerly IFS Smart Client for Excel) are good examples of this. In June 2007, IFS announced the North American launch of the IFS Business Analytics offering, an office business application (OBA) that makes the IFS Applications ERP software accessible to users of the Microsoft Office 2007 system. IFS will have to carefully consider how best to align the functionality of the two products.

There are some indications that two solutions will continue to be offered for the immediate future (though this might be somewhat deceiving, as IFS insists on having only one product; provided the clients pay maintenance, IFS will support their older releases). Logically, there could still be issues regarding support and integration, given that IFS has traditionally been a single product suite company.

SOURCE:
http://www.technologyevaluation.com/research/articles/acquisitive-vendor-expands-its-enterprise-asset-management-potential-19292/

"Once Bitten” Vendor Is Not “Twice Shy” about New Acquisition

The vendor pioneered component-based enterprise resource planning (ERP) software with IFS Applications—now in its seventh generation—whose component architecture provides solutions that are easier than most to implement, run, and upgrade. IFS Applications is available in 54 countries and 22 languages, and the vendor has over 600,000 users across seven key vertical sectors: manufacturing; automotive; process industries; utilities and telecommunications; construction, contracting, and service management; aerospace and defense (A&D); and retail and wholesale. For information on IFS’s more recent state of affairs, see Two Stalwart Vendors Discuss Mid-market Issues

One of many reasons for the vendor’s stumbling and poor financial performance of yesteryear was its ill-advised acquisitions of several enterprise software companies in the late 1990s. Namely, IFS expanded into the customer relationship management (CRM) arena by acquiring former Israel-based CRM vendor Exactium for its product configuration module. The subsequent sell-off move to Pivotal (now part of CDC Software) in 2000 (see What Is IFS Up To in the CRM Arena?! ) represented IFS’s tacit concession that it had gone beyond its means with its too-ambitious product scope and geographic expansion.

IFS aimed at further expansion in the 1990s: hoping to gain a fast US beachhead by converting its customer base from the Time-Critical Manufacturing (TCM) product to its own enterprise applications, IFS bought US-based ERP vendor Effective Management Systems (EMS). However, customer satisfaction with TCM was (unexpectedly to IFS) high and, therefore, customer loyalty made it difficult to move customers away from TCM. With the majority of TCM customers reluctant to make the transition, and with IFS reluctant to maintain two separate ERP product lines, IFS then agreed to spin off the TCM product line in November 2001. Thus, the current WorkWise organization was created of former EMS staff, and has since focused solely on the TCM product line and its customer base (for more information, see A User-centric WorkWise Customer Conference).

Yet the sell-off at the end of 2004 of IFS’s Brazilian subsidiary; of tangential computer-aided design (CAD) applications for process, electrical, piping, and instrumentation design; and of applications for payroll (see IFS Continues Its Reinvention through Pruning) was a harbinger of today’s stabilized—even “upbeat”—company. After careful soul searching, IFS's then-management decided to stay focused on core competencies instead of extending painstaking efforts to develop peripheral applications for a small fraction of customers in Scandinavia, where the payback would have been highly unlikely.

Although creating a differentiating trait might have been tempting (no other ERP vendor has ever had native CAD applications for piping design), IFS’s CAD customer base was too small for the vendor to justify developing its own CAD applications in the long term, and the company did not have enough specialists outside the Nordic region to sell and support CAD applications globally. Again, this was possibly the best proof that IFS was getting rid of its erstwhile “not invented here” attitude.

Back to the Future?

Consequently, some might not have expected the vendor to consider acquisitions for some time to come. And yet, in July 2007, IFS’s joint venture with BAE Systems, IFS Defence Ltd., bought Information Science Consultants Ltd. (iSC). A privately held company based in Cirencester, UK, iSC specializes in naval maintenance management applications and services; the UK Royal Navy fleet uses iSC’s onboard and onshore unit maintenance management system (UMMS). The company also provides leading expertise in reliability-centered maintenance (RCM) processes and tool sets to a wide range of defense and commercial organizations. At the end of 2006, iSC (in British pounds) generated revenue of £2.4 million, with earnings before interest and tax (EBIT) of £0.5 million on gross assets of £1.8 million. Following the acquisition, iSC will operate as a business unit of IFS Defence.

Market Impact

Before jumping to a “not again!” conclusion, perhaps one should note that this acquisition might be of a somewhat different nature than IFS’s previous unsuccessful ones. Acquisitions of niche specialist companies, done to fill some functional gaps or to assert leadership in a certain vertical or geographic segment, usually make sense or justify themselves quickly. To that end, having originated from the realm of computer maintenance management systems (CMMS) for utilities in the 1980s, IFS has since become one of the leading suppliers of enterprise asset management (EAM) solutions, with a leading market share in the Europe, Middle East and Africa (EMEA) region.

In a nutshell, with iSC, IFS hopes to bolster its reliability-centered maintenance (RCM) capabilities in addition to its already strong EAM; maintenance, repair, and overhaul (MRO); and project-centric manufacturing solutions for the A&D sector. IFS’s A&D customers include the British, the Norwegian, and the US defense organizations, whereas its commercial MRO shops and operators include Finnair, Bristow Helicopters, Aero-Dienst, Hawker Pacific, and Jet Turbine Services, to name a few. IFS also provides solutions to original equipment manufacturers (OEMs), such as General Dynamics, Lockheed Martin, Eurofighter, BAE Systems, Saab, and General Electric (GE) Transportation.

Further along the lines of a different acquisition tack, strong joint ventures that go well beyond the usual press release (PR) announcements and joint marketing and financial arrangements (such as those with BAE and NEC), have recently become the norm for IFS. However, acquisitions are usually done directly by IFS, whereas the iSC acquisition is unusual for its being conducted by the IFS Defence joint venture. This route was apparently chosen owing to IFS Defence’s specialization in the A&D sector.

Historically, iSC has been mainly involved in consulting (the company is a custom software developer and consulting firm, and it supports customers' implementations of its software solutions), whereas IFS has primarily been a software product provider. Though conducting the acquisition via IFS Defence mitigates the financial risk for IFS and provides a better, consulting-oriented, cultural fit, some concerns might involve the ownership of the product and whether it will be rolled out globally to IFS’s customers beyond the defense sector.

New Asset Maintenance Appeal?

EAM and MRO seem to be of increasing interest to customers, and consequently to vendors, as can be seen by many vendors’ and venture capitalists’ (VCs’) deliberate investments in these areas. For instance, IBM recently invested a good chunk of change to acquire the former MRO software, despite the giant’s reluctance to be an enterprise application provider per se (in that it has long preferred and continues to partner for applications, providing mainly the underlying platform and infrastructure).

Also recently, Vista Equity Partners combined its individual EAM and field service investments, the formerly public Indus International, with the former Mobile Data Solutions Incorporated (MDSI) to create the new company Ventyx. The investment of Francisco Partners in the formerly public Mincom; Infor’s acquisition of the formerly public Datastream (see The Impact of the “Assembler Strategy” in the Enterprise Applications Field); Consona’s acquisition of Relevant Business Systems (see Smaller Vendors Can Still Provide Relevant Business Systems; Part Four: MRO and Spare Parts Management); and Lawson Software’s merger with Intentia (a former Swedish competitor of IFS with strong EAM and MRO offerings; see EAM versus CMMS: What's Right for Your Company?) should all speak volumes about the maintenance market’s attractiveness.

The enterprise applications leaders SAP and Oracle have also been extending their own EAM offerings. While Oracle has such capabilities in both its original Oracle E-Business Suite (EBS) and JD Edwards lines, SAP recently (at its EAM-centric user event) explained how SAP Enterprise Services Architecture (SAP ESA) should enable it to weave together native product enhancements and third-party partner solutions to satisfy two critical user needs: 1) innovation through composite applications to enable revenue growth, and 2) productivity and efficiency improvement through platform consolidation and standardization to drive bottom-line (profit) growth. User enterprises seem to have been interested lately in certain areas of asset management, including EAM process efficiency improvement; maintenance effectiveness and reliability; EAM applications usability and information access; and improvement in return on investment (ROI) from EAM projects.

In fact, Lawson Software recently conducted an internal global online study on nearly 200 companies (representing the utilities, manufacturing, mining, process manufacturing, and transportation sectors). The study concluded that concerns about plant safety, demand for asset availability, and environmental awareness or corporate social responsibility (CSR) and legislation (see "Evergreen”—Environmental Regulations for High-tech and Electronics, Chemical, and Oil and Gas Industries) are encouraging manufacturers to move to preventive and predictive maintenance strategies.

In other words, in the past, plant uptime and safety have primarily been internal plant issues (concerns about keeping the plant running and operators safe). But now, however, because of the CSR and environmental issues (for example, improving energy management and emission-reduction monitoring), such issues are more a strategic and external business matter. That is, an integrated EAM solution should ensure that a company’s assets operate efficiently within environmental guidelines.

For instance, a preventive maintenance program can help to lengthen the life span of spare parts and assets, save natural resources, and reduce waste. Some really advanced EAM adopters are now even viewing maintenance as a profit opportunity, and not just as a cost burden (or a necessary evil). Indeed, these users have begun to understand that RCM methods might increase the reliability and availability of a plant, which in turn might lead to more throughput (see Reliability-driven Maintenance—Closing the CMMS “Value Gap”?). Additionally, preventive maintenance and condition-monitoring techniques also extend the lives of the assets, thereby saving on capital expenditure

SOURCE:
http://www.technologyevaluation.com/research/articles/once-bitten-vendor-is-not-twice-shy-about-new-acquisition-19291/

Project Lifecycle Management Implies Long Term Value; Forget the Total Cost of Ownership Fuss

Product lifecycle management (PLM) software vendors are consistent in their belief that PLM applications software is well worth the investment because the life cycle costs of new product design and initiation (NPDI) are inherently weighted at the front end. Therefore the better job a company does in managing an efficient process toward NPDI will imply considerable cost savings over time. After a product launch, there are additional and significant gains that can be achieved by properly and efficiently managing the product life cycle through product retirement, but the real nugget for most manufacturers lies in the front-end of the product design and development cycle where an average (over multiple long NPDI industries) of over 80 percent of the costs resides.

Life Cycle Costs Over Time—Efficiency Starts with Design

Current global market forces are driving the need for manufacturers to re-examine their ways of conducting business, and are, in turn, driving PLM applications initiatives. These global market forces include

* Mergers and acquisitions
* Outsourcing and off-shoring
* Globally distributed manufacturing operations
* Broader supply chain networks
* New product market opportunities

At the same time, the recognition of inefficiencies and complexities across comprehensive business processes throughout a companies' design, engineering, manufacturing, marketing, and support organization are driving interest in PLM:

* Market assessment including segmentation and demographics
* Forecast demand and market window
* Conceptual design and product definition
* Detailed design
* Manufacturing release and change management
* Parts selection and sourcing
* Production process planning
* Market rollout
* Aftermarket support
* Portfolio management

The dynamics of these global market forces coupled with existing but inefficient product development business processes are opening the door to increasing PLM software adoption. Manufacturers are achieving better time-to-market improvements from the adoption of NPDI techniques and technology, but there are still bottlenecks during execution of these processes. Global design teams are becoming more commonplace due to mergers and acquisitions and outsourcing, dictating a more dispersed cross-functional team to collaborate on NPDI. Global expansion is also seeding collaborative NPDI activities. At the same time, regulatory requirements and other compliance initiatives are increasing the data capture requirements as new products go to market. Studies show that NPDI cycles are shrinking, indicating that collective PLM targeted processes and technology are paying off.

PLM Payback Is Complex and Subjective, But Real

Demand for PLM and recognition of value can be translated by the fact that key vendors like PTC, Dassault Systems, Agile, MatrixOne, and UGS are experiencing mixed to healthy growth in revenues for both design tools and broader PLM capabilities. PLM vendors, as a group, are meeting or exceeding market growth expectations, and the bar has been set high. The CEO of Compaq was recently quoted as saying that PLM offers "more pure ROI" than any other business application. So where does the value come from? Many of the subjective revenue gains and objective cost reductions lie in

* Improved new product design innovation
* Coordination across multiple product design and development locations
* Improved design quality while reducing design cost
* Reduced product time-to-market cycle times
* Better support for customers located worldwide
* Opportunity recognition via portfolio management
* Improved custom product development
* Enabled patent management
* Improved channel management
* Enabled intellectual property management

The Business Case for PLM Varies by Industry and Timeframe

Each industry has its own view of how PLM can improve efficiency, and what drives the business case for initiating PLM projects. Industries with short NPI and short product life cycles, like electronics and apparel, are "manufacturing" driven. Their focus is on the advantages gained through PLM concept adoption from design to mass production product launch. At the other end of the spectrum, industries like automotive, aerospace and defence (A&D), and pharmaceuticals have long product life cycles and long NPI cycles. They are "program" driven, and stand to gain from PLM initiatives focused on collaborative design, project management, portfolio management, and product retirement.

Total Cost of Ownership (TCO) Models is Overkill

Total cost of ownership (TCO) is a holistic way to view the true costs of IT investment throughout an applications' life cycle. TCO is a way to understand and analyze the costs, efficiencies, and economic impacts associated with procuring, using, and maintaining IT application components over time. In short, it is the "cradle to grave" costs associated to IT investments. TCO of a PLM environment is the total cost of procuring, operating, and maintaining PLM applications including hardware, software, training, peripherals, servers and local area networks (LAN) equipment including hidden and indirect costs like training and support throughout the life cycle of the PLM software assets.

Consulting firms that specialize in TCO assessments for software acquisition embrace a TCO philosophy based on the best practices surrounding application life cycle management including acquisition, deployment, service, and support, as well as revision control. TCO benchmarks exist for detailed analysis of current expenditures related to hardware and software, operations, administration, as well as end user operations and downtime. Topics such as staffing information, outsourcing fees, service desk metrics; dispatched support calls can all be included in a thorough TCO analysis.

PLM, as a strategy, is as much process definition as it is technology. Any TCO analysis examining the costs associated with a PLM application must as well examine the scope and level of best practices you have implemented in your company today as well as in the future. This requires a sharp view of both the "as-is" and "to-be" state of a companies' product design and development cycle.

But this type of analysis can be time consuming, laborious, and expensive and is most likely not warranted if one takes a more simplified approach. A considerably more simple yet logical approach for manufacturers initiating a PLM project involves developing a process flow schematic of product design and development processes, determining estimated or average durations by process, and comparing the reduction of product life cycle design and development time versus the over all product design and development costs. A mere percentage of savings in life cycle time can result in big dollar savings. Hacking off a week or two of product development time, and the resulting ripple effect throughout the product life cycle, can result in considerable savings that far exceed the TCO of a PLM application.


SOURCE:
http://www.technologyevaluation.com/research/articles/project-lifecycle-management-implies-long-term-value-forget-the-total-cost-of-ownership-fuss-18190/

Acquisitive Vendor Expands Its Enterprise Asset Management Potential

IFS, a Swedish enterprise applications company, has had a mixed record of mergers and acquisitions in the past few years. While at first attempting to diversify, the company has lately opted to consolidate its product offerings, shedding a computer-aided design (CAD) application from its roster. And so it may have been a surprise to some that IFS Defence Ltd., a joint venture between IFS and BAE Systems, acquired Information Science Consultants (B) in July 2007. Its enterprise asset management (EAM) solution already strong, with this latest acquisition, IFS hopes to bolster its reliability-centered maintenance (RCM) capabilities for the aerospace and defense (A&D) industries.

IFS—an EAM Force

But to come back to IFS, its EAM solution is just one component of the broad IFS Applications suite used globally by customers such as the Toronto Transit Commission (TTC), Three Gorges in China, and NuCor Steel in the US, to name but a few asset-intensive ones. IFS Applications provides extended enterprise resource planning (ERP) functionality, including customer relationship management (CRM), supply chain management (SCM), product lifecycle management (PLM), corporate performance management (CPM), EAM, and maintenance, repair, and overhaul (MRO) capabilities. Translating these into major business processes, these solutions for engineering, manufacturing, service management, asset management, and so on, seamlessly work together to enable companies to employ lean enterprise concepts, control costs, manage projects, measure performance, and increase efficiencies in their supply chains.

Amongst its many EAM and MRO parts and parcels, IFS has created an asset lifecycle management (ALM) solution to take control of available asset information from design, engineering, operations, and maintenance, permitting quick information retrieval and informed decisions throughout the entire asset life cycle. A collaborative asset information repository and document management system supports sharing of information for many functional business areas and enterprise processes, such as purchasing, project management, inventory management, operations, and maintenance.

A close partnership with Bentley Systems (which acquired the former IFS Plant Design set of CAD modules in 2004) supports special integration tools for automatic import and export of plant and asset design documents to and from the repository. For example, once data is entered into the common database, it immediately becomes available to the other IFS Applications modules; as a result, information can be recycled, and it remains consistent and updated, never having to be re-entered. Also, the CAD modules provide designers with a drawing tool for process and instrumentation design, while predefined forms and the convenient lookup functionality are further examples of features that benefit all design disciplines. This integration permits instant population of the asset database upon acceptance of a new or updated plant design, along with capabilities to update the design documents to reflect “as built” changes.

To the benefit of its customers, IFS has shown a strong commitment to standards such as those created by the International Electro-technical Commission (IEC), the American National Standards Institute (ANSI), NORSOK (Norsk Sokkels Konkuranseposisjon), and the Swedish pulp and paper industry’s technical—and meticulous—cooperative standards organization, SSG Teknik AB. For instance, SSG’s aim, according to its web site, is “to promote the standardization and development of process and plant technology,” and the administration of connected product and chemical databases.

Thus, many clients (especially a number of pulp and paper mills in Sweden) have reportedly realized significant productivity benefits from IFS’s integrated ALM solution; the implementation methodology handles the entire information flow, from engineering and design through planning and implementing maintenance, including managing related documentation and drawings.

IFS plans to espouse similar standards in other industries, such as chemical, oil and gas, energy, and metals and mining, to further promote the development and adoption of ALM by other forward-thinking customers worldwide. This effort might be helped by the recently announced partnership with Tata Consultancy Services (TCS), which will primarily target the project-driven manufacturing, chemical, energy, utilities, telecommunications, and oil and gas industries, increasing IFS's ability to deliver its EAM and service management functionality to larger enterprises in North America. Readers should keep their eyes open for further developments from TCS, as they become available.

What Else Does IFS Get with iSC?

In addition to the possibility of cross-selling reliability-centered maintenance (RCM) capabilities and expertise to thousands of its existing customers, IFS should benefit from iSC’s focus and expertise in the naval and maritime operations sector. On one hand, the area of RCM technologies is getting increased exposure and investments from a number of vendors, such as Lawson and Infor. This contrasts the usual tendency to leave RCM to small, specialized (or niche) companies such as Meridium or Ivara (see Lean Maintenance—Does It Impact Reliability? Lessons Learned and Best Practices).

On the other hand, the acquisition should entrench IFS's leadership within the defense industry sector, which is now also beginning to invest in IT to streamline operations. Vertical focus has been “the name of the game,” even in the EAM and MRO areas, as illustrated by Mincom’s long focus on and success in the mining sector, or Indus’s (now Ventyx) expertise in some sectors of the utilities industry (for example, nuclear power plants). While this acquisition will add value to IFS's overall defense offering, it is likely to be of particular tactical interest to maritime and naval operations, a domain in which IFS has about one dozen clients.

As for some potential caveats (in addition to the above-mentioned ownership- and responsibility-sharing arrangements between IFS and BAE [that is to say, for IFS Defence]), one should note that iSC’s technology is based on the Microsoft .NET Framework, which is not quite in tune with the IFS Applications’ Java-based architecture on the server side. This could create hurdles for the envisioned integration of the two complementary products and technologies, despite the fact that service-oriented architecture (SOA) should render the platforms moot. The fact is that any product performs best when written in a native uniform environment, as has been the case with IFS Applications.

To be fair, IFS is well versed in Microsoft technologies on the client side, and the IFS Intelligent Desktop initiative and the related IFS Business Analytics product (formerly IFS Smart Client for Excel) are good examples of this. In June 2007, IFS announced the North American launch of the IFS Business Analytics offering, an office business application (OBA) that makes the IFS Applications ERP software accessible to users of the Microsoft Office 2007 system. IFS will have to carefully consider how best to align the functionality of the two products.

There are some indications that two solutions will continue to be offered for the immediate future (though this might be somewhat deceiving, as IFS insists on having only one product; provided the clients pay maintenance, IFS will support their older releases). Logically, there could still be issues regarding support and integration, given that IFS has traditionally been a single product suite company.

User Recommendations

It is difficult to argue against any vendor’s striving toward sharper vertical focus, and the market should appreciate IFS’s attempts to become more focused on the defense market. Especially impressive is the fact that IFS will continue to invest in existing customers, products, and technology, while concurrently targeting leadership positions in well-defined markets. Existing iSC customers should certainly treat the event as “business as usual,” and feel even more comfortable about their IT investment now being in the hands of a more established company. Naval and maritime businesses using IFS’s back-office applications that need to connect their plant maintenance, engineering, and procurement departments should explore how they can benefit from iSC’s RCM expertise.

Both current and prospective customers from non-defense sectors should evaluate IFS Defence’s potential to combine functional enhancements as a way to add value to their existing applications; but likewise, they should bear in mind that other ERP, EAM, MRO, or RCM vendors might also currently offer mature and functional products. IFS and IFS Defence should clarify their current ability to support users’ short- and long-term EAM, MRO, or RCM initiatives, as well as to provide a clarified product road map, given the two technologies’ likely parallel tracks for some time to come.

Past experience has shown that true product and organizational integration takes time and is very seldom painless. Currently, it is not crystal clear as to who is standing behind the commitment to long-term support of the iSC products now provided by the joint venture—whether it is one of the parent companies (either IFS or BAE), both of the parent companies, or just IFS Defence. Therefore, new customers should make sure that IFS or IFS Defence offers a single contract and is held accountable for all disparate components in its product offerings.


SOURCE:
http://www.technologyevaluation.com/research/articles/acquisitive-vendor-expands-its-enterprise-asset-management-potential-19292/

Once Bitten” Vendor Is Not “Twice Shy” about New Acquisition

Much has been said lately by Technology Evaluation Centers (TEC) and other market observers about the ongoing turnaround success of IFS (OMX STO: IFS), the global enterprise applications company. Founded in 1983 in Sweden, the company can now boast approximately $300 million (USD) in revenues and 2,650 employees worldwide.

The vendor pioneered component-based enterprise resource planning (ERP) software with IFS Applications—now in its seventh generation—whose component architecture provides solutions that are easier than most to implement, run, and upgrade. IFS Applications is available in 54 countries and 22 languages, and the vendor has over 600,000 users across seven key vertical sectors: manufacturing; automotive; process industries; utilities and telecommunications; construction, contracting, and service management; aerospace and defense (A&D); and retail and wholesale. For information on IFS’s more recent state of affairs, see Two Stalwart Vendors Discuss Mid-market Issues

One of many reasons for the vendor’s stumbling and poor financial performance of yesteryear was its ill-advised acquisitions of several enterprise software companies in the late 1990s. Namely, IFS expanded into the customer relationship management (CRM) arena by acquiring former Israel-based CRM vendor Exactium for its product configuration module. The subsequent sell-off move to Pivotal (now part of CDC Software) in 2000 (see What Is IFS Up To in the CRM Arena?! ) represented IFS’s tacit concession that it had gone beyond its means with its too-ambitious product scope and geographic expansion.

IFS aimed at further expansion in the 1990s: hoping to gain a fast US beachhead by converting its customer base from the Time-Critical Manufacturing (TCM) product to its own enterprise applications, IFS bought US-based ERP vendor Effective Management Systems (EMS). However, customer satisfaction with TCM was (unexpectedly to IFS) high and, therefore, customer loyalty made it difficult to move customers away from TCM. With the majority of TCM customers reluctant to make the transition, and with IFS reluctant to maintain two separate ERP product lines, IFS then agreed to spin off the TCM product line in November 2001. Thus, the current WorkWise organization was created of former EMS staff, and has since focused solely on the TCM product line and its customer base (for more information, see A User-centric WorkWise Customer Conference).

Yet the sell-off at the end of 2004 of IFS’s Brazilian subsidiary; of tangential computer-aided design (CAD) applications for process, electrical, piping, and instrumentation design; and of applications for payroll (see IFS Continues Its Reinvention through Pruning) was a harbinger of today’s stabilized—even “upbeat”—company. After careful soul searching, IFS's then-management decided to stay focused on core competencies instead of extending painstaking efforts to develop peripheral applications for a small fraction of customers in Scandinavia, where the payback would have been highly unlikely.

Although creating a differentiating trait might have been tempting (no other ERP vendor has ever had native CAD applications for piping design), IFS’s CAD customer base was too small for the vendor to justify developing its own CAD applications in the long term, and the company did not have enough specialists outside the Nordic region to sell and support CAD applications globally. Again, this was possibly the best proof that IFS was getting rid of its erstwhile “not invented here” attitude.

Back to the Future?

Consequently, some might not have expected the vendor to consider acquisitions for some time to come. And yet, in July 2007, IFS’s joint venture with BAE Systems, IFS Defence Ltd., bought Information Science Consultants Ltd. (iSC). A privately held company based in Cirencester, UK, iSC specializes in naval maintenance management applications and services; the UK Royal Navy fleet uses iSC’s onboard and onshore unit maintenance management system (UMMS). The company also provides leading expertise in reliability-centered maintenance (RCM) processes and tool sets to a wide range of defense and commercial organizations. At the end of 2006, iSC (in British pounds) generated revenue of £2.4 million, with earnings before interest and tax (EBIT) of £0.5 million on gross assets of £1.8 million. Following the acquisition, iSC will operate as a business unit of IFS Defence.

Market Impact

Before jumping to a “not again!” conclusion, perhaps one should note that this acquisition might be of a somewhat different nature than IFS’s previous unsuccessful ones. Acquisitions of niche specialist companies, done to fill some functional gaps or to assert leadership in a certain vertical or geographic segment, usually make sense or justify themselves quickly. To that end, having originated from the realm of computer maintenance management systems (CMMS) for utilities in the 1980s, IFS has since become one of the leading suppliers of enterprise asset management (EAM) solutions, with a leading market share in the Europe, Middle East and Africa (EMEA) region.

In a nutshell, with iSC, IFS hopes to bolster its reliability-centered maintenance (RCM) capabilities in addition to its already strong EAM; maintenance, repair, and overhaul (MRO); and project-centric manufacturing solutions for the A&D sector. IFS’s A&D customers include the British, the Norwegian, and the US defense organizations, whereas its commercial MRO shops and operators include Finnair, Bristow Helicopters, Aero-Dienst, Hawker Pacific, and Jet Turbine Services, to name a few. IFS also provides solutions to original equipment manufacturers (OEMs), such as General Dynamics, Lockheed Martin, Eurofighter, BAE Systems, Saab, and General Electric (GE) Transportation.

Further along the lines of a different acquisition tack, strong joint ventures that go well beyond the usual press release (PR) announcements and joint marketing and financial arrangements (such as those with BAE and NEC), have recently become the norm for IFS. However, acquisitions are usually done directly by IFS, whereas the iSC acquisition is unusual for its being conducted by the IFS Defence joint venture. This route was apparently chosen owing to IFS Defence’s specialization in the A&D sector.

Historically, iSC has been mainly involved in consulting (the company is a custom software developer and consulting firm, and it supports customers' implementations of its software solutions), whereas IFS has primarily been a software product provider. Though conducting the acquisition via IFS Defence mitigates the financial risk for IFS and provides a better, consulting-oriented, cultural fit, some concerns might involve the ownership of the product and whether it will be rolled out globally to IFS’s customers beyond the defense sector.

New Asset Maintenance Appeal?

EAM and MRO seem to be of increasing interest to customers, and consequently to vendors, as can be seen by many vendors’ and venture capitalists’ (VCs’) deliberate investments in these areas. For instance, IBM recently invested a good chunk of change to acquire the former MRO software, despite the giant’s reluctance to be an enterprise application provider per se (in that it has long preferred and continues to partner for applications, providing mainly the underlying platform and infrastructure).

Also recently, Vista Equity Partners combined its individual EAM and field service investments, the formerly public Indus International, with the former Mobile Data Solutions Incorporated (MDSI) to create the new company Ventyx. The investment of Francisco Partners in the formerly public Mincom; Infor’s acquisition of the formerly public Datastream (see The Impact of the “Assembler Strategy” in the Enterprise Applications Field); Consona’s acquisition of Relevant Business Systems (see Smaller Vendors Can Still Provide Relevant Business Systems; Part Four: MRO and Spare Parts Management); and Lawson Software’s merger with Intentia (a former Swedish competitor of IFS with strong EAM and MRO offerings; see EAM versus CMMS: What's Right for Your Company?) should all speak volumes about the maintenance market’s attractiveness.

The enterprise applications leaders SAP and Oracle have also been extending their own EAM offerings. While Oracle has such capabilities in both its original Oracle E-Business Suite (EBS) and JD Edwards lines, SAP recently (at its EAM-centric user event) explained how SAP Enterprise Services Architecture (SAP ESA) should enable it to weave together native product enhancements and third-party partner solutions to satisfy two critical user needs: 1) innovation through composite applications to enable revenue growth, and 2) productivity and efficiency improvement through platform consolidation and standardization to drive bottom-line (profit) growth. User enterprises seem to have been interested lately in certain areas of asset management, including EAM process efficiency improvement; maintenance effectiveness and reliability; EAM applications usability and information access; and improvement in return on investment (ROI) from EAM projects.

In fact, Lawson Software recently conducted an internal global online study on nearly 200 companies (representing the utilities, manufacturing, mining, process manufacturing, and transportation sectors). The study concluded that concerns about plant safety, demand for asset availability, and environmental awareness or corporate social responsibility (CSR) and legislation (see "Evergreen”—Environmental Regulations for High-tech and Electronics, Chemical, and Oil and Gas Industries) are encouraging manufacturers to move to preventive and predictive maintenance strategies.

In other words, in the past, plant uptime and safety have primarily been internal plant issues (concerns about keeping the plant running and operators safe). But now, however, because of the CSR and environmental issues (for example, improving energy management and emission-reduction monitoring), such issues are more a strategic and external business matter. That is, an integrated EAM solution should ensure that a company’s assets operate efficiently within environmental guidelines.

For instance, a preventive maintenance program can help to lengthen the life span of spare parts and assets, save natural resources, and reduce waste. Some really advanced EAM adopters are now even viewing maintenance as a profit opportunity, and not just as a cost burden (or a necessary evil). Indeed, these users have begun to understand that RCM methods might increase the reliability and availability of a plant, which in turn might lead to more throughput (see Reliability-driven Maintenance—Closing the CMMS “Value Gap”?). Additionally, preventive maintenance and condition-monitoring techniques also extend the lives of the assets, thereby saving on capital expenditure.


SOURCE:
http://www.technologyevaluation.com/research/articles/once-bitten-vendor-is-not-twice-shy-about-new-acquisition-19291/

Project Lifecycle Management Implies Long Term Value; Forget the Total Cost of Ownership Fuss

Product lifecycle management (PLM) software vendors are consistent in their belief that PLM applications software is well worth the investment because the life cycle costs of new product design and initiation (NPDI) are inherently weighted at the front end. Therefore the better job a company does in managing an efficient process toward NPDI will imply considerable cost savings over time. After a product launch, there are additional and significant gains that can be achieved by properly and efficiently managing the product life cycle through product retirement, but the real nugget for most manufacturers lies in the front-end of the product design and development cycle where an average (over multiple long NPDI industries) of over 80 percent of the costs resides.

Life Cycle Costs Over Time—Efficiency Starts with Design

Current global market forces are driving the need for manufacturers to re-examine their ways of conducting business, and are, in turn, driving PLM applications initiatives. These global market forces include

* Mergers and acquisitions
* Outsourcing and off-shoring
* Globally distributed manufacturing operations
* Broader supply chain networks
* New product market opportunities

At the same time, the recognition of inefficiencies and complexities across comprehensive business processes throughout a companies' design, engineering, manufacturing, marketing, and support organization are driving interest in PLM:

* Market assessment including segmentation and demographics
* Forecast demand and market window
* Conceptual design and product definition
* Detailed design
* Manufacturing release and change management
* Parts selection and sourcing
* Production process planning
* Market rollout
* Aftermarket support
* Portfolio management

The dynamics of these global market forces coupled with existing but inefficient product development business processes are opening the door to increasing PLM software adoption. Manufacturers are achieving better time-to-market improvements from the adoption of NPDI techniques and technology, but there are still bottlenecks during execution of these processes. Global design teams are becoming more commonplace due to mergers and acquisitions and outsourcing, dictating a more dispersed cross-functional team to collaborate on NPDI. Global expansion is also seeding collaborative NPDI activities. At the same time, regulatory requirements and other compliance initiatives are increasing the data capture requirements as new products go to market. Studies show that NPDI cycles are shrinking, indicating that collective PLM targeted processes and technology are paying off.

PLM Payback Is Complex and Subjective, But Real

Demand for PLM and recognition of value can be translated by the fact that key vendors like PTC, Dassault Systems, Agile, MatrixOne, and UGS are experiencing mixed to healthy growth in revenues for both design tools and broader PLM capabilities. PLM vendors, as a group, are meeting or exceeding market growth expectations, and the bar has been set high. The CEO of Compaq was recently quoted as saying that PLM offers "more pure ROI" than any other business application. So where does the value come from? Many of the subjective revenue gains and objective cost reductions lie in

* Improved new product design innovation
* Coordination across multiple product design and development locations
* Improved design quality while reducing design cost
* Reduced product time-to-market cycle times
* Better support for customers located worldwide
* Opportunity recognition via portfolio management
* Improved custom product development
* Enabled patent management
* Improved channel management
* Enabled intellectual property management

The Business Case for PLM Varies by Industry and Timeframe

Each industry has its own view of how PLM can improve efficiency, and what drives the business case for initiating PLM projects. Industries with short NPI and short product life cycles, like electronics and apparel, are "manufacturing" driven. Their focus is on the advantages gained through PLM concept adoption from design to mass production product launch. At the other end of the spectrum, industries like automotive, aerospace and defence (A&D), and pharmaceuticals have long product life cycles and long NPI cycles. They are "program" driven, and stand to gain from PLM initiatives focused on collaborative design, project management, portfolio management, and product retirement.

Total Cost of Ownership (TCO) Models is Overkill

Total cost of ownership (TCO) is a holistic way to view the true costs of IT investment throughout an applications' life cycle. TCO is a way to understand and analyze the costs, efficiencies, and economic impacts associated with procuring, using, and maintaining IT application components over time. In short, it is the "cradle to grave" costs associated to IT investments. TCO of a PLM environment is the total cost of procuring, operating, and maintaining PLM applications including hardware, software, training, peripherals, servers and local area networks (LAN) equipment including hidden and indirect costs like training and support throughout the life cycle of the PLM software assets.

Consulting firms that specialize in TCO assessments for software acquisition embrace a TCO philosophy based on the best practices surrounding application life cycle management including acquisition, deployment, service, and support, as well as revision control. TCO benchmarks exist for detailed analysis of current expenditures related to hardware and software, operations, administration, as well as end user operations and downtime. Topics such as staffing information, outsourcing fees, service desk metrics; dispatched support calls can all be included in a thorough TCO analysis.

PLM, as a strategy, is as much process definition as it is technology. Any TCO analysis examining the costs associated with a PLM application must as well examine the scope and level of best practices you have implemented in your company today as well as in the future. This requires a sharp view of both the "as-is" and "to-be" state of a companies' product design and development cycle.

But this type of analysis can be time consuming, laborious, and expensive and is most likely not warranted if one takes a more simplified approach. A considerably more simple yet logical approach for manufacturers initiating a PLM project involves developing a process flow schematic of product design and development processes, determining estimated or average durations by process, and comparing the reduction of product life cycle design and development time versus the over all product design and development costs. A mere percentage of savings in life cycle time can result in big dollar savings. Hacking off a week or two of product development time, and the resulting ripple effect throughout the product life cycle, can result in considerable savings that far exceed the TCO of a PLM application


SOURCE:
http://www.technologyevaluation.com/research/articles/project-lifecycle-management-implies-long-term-value-forget-the-total-cost-of-ownership-fuss-18190/

Is Baan Showing Signs of Life After Death?

Baan, once a high flying Dutch ERP vendor has won its first new contract since being acquired by Invensys plc, a large British automating equipment provider; Baan is part of the Invensys Software Systems Division. Baan has won a major 3,000-user, multi-million pound order from the Defence Aviation Repair Agency (DARA). Part of British Ministry of Defence, DARA is the largest government-owned Aerospace and Defence facility in Europe.

DARA claims to have selected Baan because its solutions offered the best business fit for DARA's complex supply chain and production requirements. In particular, Baan's approach will enable DARA to accelerate the mapping of its new, best-in-class business processes onto the Baan software. The order comprises Baan Enterprise Resource Planning, Supply Chain Management, BaanFrontOffice, e-commerce and Baan Enterprise Knowledge Management, which combine to provide a comprehensive enterprise management and e-fulfillment solution. DARA hopes to reduce costs and significantly improve production turnaround time by increasing the visibility of design, product and maintenance information across the organization's multiple divisions and sites.

Bruce Henderson, Chief Executive of Invensys Software Systems Division, said: "Because of its product quality, it was clear that customers would return to Baan as soon as its future was assured. This is the first demonstration of that belief and we are confident that there will be many more contracts in the coming months."

Andy Hamilton, Corporate Development Director for DARA, said: "We chose the Baan package after an exhaustive 15 month evaluation period, not simply on the grounds of its unrivalled functionality in the Aerospace and Defence market, but also because of the attractiveness of Baan's e-commerce strategy and complete e-suite of products."

Market Impact

While "one swallow does not make summer", the news is, nevertheless, a sign of encouragement - particularly for Baan's existing customer base. Invensys, as a profit-driven company, has in the initial stages primarily addressed the issue of realigning Baan's financial structure to support its diminished revenue streams. Despite its assured future under Invensys' roof, Baan's negative publicity, personnel departures and channel shakeout, as well as the uncertain future product direction, have begun to take its toll on customers' loyalty and patience. There has long been an open season on disconcerted customers of struggling ERP vendors, Baan being the most prominent. Many more viable vendors have, with different levels of candidness, developed strategies of preying on dissatisfied and apprehensive organizations where those doomed systems were implemented (For more information, see Baan Defectors - Is This Only Tip of an Iceberg?).

However, Invensys has recently made some more determined steps with a view to stem the tide of defecting customers and to possibly start winning new deals. The blessing in disguise was that throughout the entire tumultuous period, and despite all the negative publicity and personnel departures, Baan has maintained its core development organization in the Netherlands. Also, the initial restructuring effort within Invensys, has spared much of the core development team and focused instead on sales, marketing, services, and administration. Another positive sign for the entire Baan Suite was the fact that Invensys has become one of its biggest users. Baan has therefore become a corporate strategy, which may well mean that Invensys is committed to the enhancement of the functionality and underlying technology. Since the acquisition, Baan stepped up plans to deliver on its Internet strategy with the upcoming release of a new Internet/HTML client, which is slated for delivery with BaanERP release 5.2.

Invensys has also allayed speculations regarding Baan's CRM product future by appointing Robert Karulf as Baan's Aurum CRM division leader. Finally, the company has recently launched an advertising campaign in some prominent magazines like Newsweek where it touts that "there has never been a better time to become one of our customers". The ad also reads "Our software is at the very cutting edge of technology and supports every facet of business processes including manufacturing, distribution and transportation, E-Enterprise, E-Fulfillment, supply chain and CRM no less. And, of course, we can guarantee absolute integration across your business processes".

While it may be too early to predict the future of the Baan product at this stage and while the market may not fall for the typical 'fluffy' marketing rhetoric, we believe that Invensys stands a chance of salvaging, and possibly expanding its customer base. It should, however, without any delay, further address customers' concerns by unequivocally stating a more detailed product strategy and the timeframe for its delivery.

The fact remains that Baan still has a competitive product within some industries, despite its dismal enhancements during the above-mentioned difficult period and a dubious history of functional consistency and integration across the entire product portfolio. But core product functionality and technology are only a small part of the selection process, with ever diminishing significance. While the acquisition may have allayed the viability issue, the company's channels, both direct and indirect, to sell and support its products were all but decimated during the last two years, and particularly recently, before and during the acquisition. Failure to rebuild these channels may annul all the above-mentioned steps in the right direction.




SOURCE:
http://www.technologyevaluation.com/research/articles/is-baan-showing-signs-of-life-after-death-16168/

IFS Glows Amidst The Mid-Market Gloom

On August 24, IFS AB (XSSE:IFS), a Swedish mid-market enterprise applications vendor, reported upbeat results for the second quarter of fiscal 2001 amidst a prevailing gloom within the Tier 2 & 3 vendors. After four consecutive losing quarters, IFS was pleased to report Q2 2001 profits of ~$2 million after net financial items, compared with a loss of ~$10 million for the corresponding period in 2000 (See Figure 1). Total revenue increased by 62% to ~$84 million, compared with ~$52 million for Q2 2000. License revenue was up a whopping 82% to ~$40 million, compared with ~$22 million a year ago.

Figure 1.

This positions IFS as the fifth largest ERP provider during the second quarter in terms of license sales, while the company occupied the first position in terms of the fastest total and license revenue growth, stealing thereby the thunder from recently ebullient SAP and PeopleSoft. More important, the growth has been almost completely organic, as no significant acquisitions were made during the past 12 months.

Furthermore, IFS North America reported earnings of ~$2 million and is now IFS' largest market with 35% of total sales. The contract won from General Electric was the largest in the company's history and was of multifaceted paramount importance. GE Engine Services (GEES) has selected IFS software to run its 60 worldwide Maintenance, Repair, and Overhaul (MRO) facilities. GE will also market the application to airline and independent MRO providers. The multi-million dollar agreement will start with a deployment for 4,500 users. GE will then market the application to commercial airline maintenance facilities.

Also recently, an agreement has been signed concerning deeper technological and commercial collaboration with ABB. ABB has also acquired 3.7% of IFS, which represents 1.8% of the voting rights, through a direct share issue valued at roughly $10 million. The investment by ABB New Ventures strengthens an existing technical and commercial alliance between ABB and IFS. For more than a year, IFS has been developing ways to integrate its business software with ABB's Industrial IT platform. ABB signed an agreement with IFS in January to resell IFS Applications components. In the long term, cross licensing of system components between the companies might decrease research and development costs for both partners.

Bengt Nilsson, president and CEO of IFS, said, "The positive earnings trend is a result of strong license sales, especially during the second quarter. The market for business applications has grown 10%. Thanks to a strong product, we have succeeded in taking market share and increasing sales despite tight cost controls and fewer personnel. The orders from General Electric and General Dynamics and the partnership alliance agreements with General Electric and ABB are vital steps in our strategy to become a market leader in selected segments and thereby improve margins in the long term. We are pleased by the confidence shown in IFS and by the help from our partners in increasing our market share."

Towards the end of 2000, IFS initiated an action plan to strengthen the board, management, financing, profitability, and cash flow, which has been implemented. It is expected to have positive effects in the form of cost reduction in excess of ~$18 million during the current year compared with the cost level during the fourth quarter of 2000. However, the measures to reduce costs and improve cash flow have yet to produce their full effect and will be intensified and scrutinized during the remainder of the year. In its outlook for the rest of the year, IFS expects continued cost containment rationalization coupled with further growth to result in improved earnings for the rest of 2001. To that end, the product development will be more sharply focused on refining functionality, particularly within specific industry segments that are of strategic interest for IFS and its premium partners.

Market Impact

IFS' results should give hope to its embattled peers that it is possible to spar with the bigger players provided you have an appropriate approach. The company has realized and addressed the seriousness of its protracted poor financial performance, by focusing on profitability/positive cash flow, balanced growth through more reliance on growth and product enhancements through strategic partnerships, and product development costs tied to new sales. Sharp execution should continue be the name of the game. One should expect better financial performance in the future given the curbing of R&D expense and increased fiscal discipline, along with a healthy growth in the US and Latin America owing to IFS' expertise in certain vertical niches (see User Recommendations).

During 2000, IFS invested heavily in product development to complete the new version of its business applications, IFS Applications 2001. The product release should keep the company abreast with the latest market trends, as it boasts all the traditional ERP functionality and much more. In fall of 2000, when the product was launched, the 'hot items' were new e-procurement, customer relationship management (CRM), flow manufacturing, portal, and wireless capabilities. Furthermore, at the beginning of 2001, IFS announced an enhanced advanced planning & scheduling (APS) system featuring new Web-based "portlets" to provide improved demand forecasting visibility across the supply chain. In March, it launched its new eMarkets solution that should provide support for both private and public exchanges (marketplaces). Last but not least, in April, the company announced IFS Engage, a portal-based packaged solution for medium-size manufacturers. Engage helps manufacturers relatively quickly extend their existing ERP applications into e-Business, e-CRM, and extended SCM in a manageable, incremental fashion. The first modules currently available through IFS Engage are CRM, collaborative planning, vendor-managed inventory (VMI), collaborative project management, and subcontracting, with many others envisioned for the future.

While IFS has been well-known for providing ERP applications to medium-to-large organizations, that make complex, highly engineered products, with project-based manufacturing processes and asset intensive operations, it has long been trying to crack the U.S. Aerospace and Defense (A&D) industry. To that end, the GE contract might bear much more importance to IFS than a mere bruising of the bigger guys' egos (and even replacing an incumbent Tier 1 vendor in case). The intense scrutiny that the company of GE's stature has put IFS through in making its selection, should provide an increased confidence in IFS for the rest of high-profile prospects in all other IFS' target markets.

The magnitude of the deal can be seen in GE's decision to resell the software as a co-branded product to their commercial aircraft engine customers and prospects, where it has been considered the world's leading supplier. IFS thereby gets the chance to gain valuable exposure and to prove its ability to engage companies in a private trade exchange (PTX), possibly via IFS eMarkets solution. IFS' recognition should be bolstered with the GE deal as also seen in very recent wins at Derco Aerospace, UK Defence Logistics Organisation (DLO) and General Dynamics, in the great part owing to its strong MRO functionality. IFS has thereby encroached upon the stronghold of vendors like Western Data Systems (WDS), Epicor Software, Mincom, SAP, Oracle, Cincom Systems, MRO Software, and Ramco Systems. Moreover, deals from likes of GE could also allay many concerns regarding IFS Applications scalability, which has also plagued it in the past within the higher-end of the market.



SOURCE:
http://www.technologyevaluation.com/research/articles/ifs-glows-amidst-the-mid-market-gloom-16481/