MES

Plex Systems Hits the Acquisition Trail

Earlier this month Plex Systems announced its first (ever) acquisition. On August 9, 2016, Plex revealed it had acquired DemandCaster, essentially stretching the end points of its end-to-end cloud-based solution for manufacturers. Adding DemandCaster’s Supply Chain Planning (SCP) solutions to its enterprise resource planning (ERP) and manufacturing execution system (MES) means Plex now has the most complete suite of products of any independent cloud-native solution provider targeting manufacturing.

As I noted in a recent post, there are several reasons for one company to acquire another, one of which being to:

Fill a product gap: It can be far easier to acquire functionality than to develop it yourself. This can make the company more competitive, provide cross-sell and up-sell opportunity, or both. But don’t assume there is any M&A pixie dust that will magically integrate products overnight.

This is clearly Plex’s intent here, adding SCP to an already robust ERP and MES offering. But in this case, no M&A pixie dust is required. Plex and DemandCaster have been partnering together for about a year and already 10 out of DemandCaster’s 50 customers are also Plex customers. The integration is complete and bidirectional.

Partnering turned out to be a great way for the two companies to get to know each other and Plex was already positioning (and white labeling) DemandCaster as its answer to supply chain planning, sales and operation planning (S&OP), practical forecasting and demand planning, distribution requirements planning (DRP) and multi-site master production scheduling (MPS).

The solution, which is based on Microsoft technology, is highly graphical and was built from scratch as a multi-tenant SaaS solution. And the functionality is 100% complementary. The company is based in Chicago, but has a team of developers in Bulgaria, which could prove to be an additional plus in being a great entry point for Plex in attacking the eastern European market.

While acquisitions have a tendency to cause disruption, fear, uncertainty and doubt, if there ever was one immune to that disruption, this is the one. The entire staff of DemandCaster, including founder and CEO Ara Surenian, will come on board as Plex employees. Customers should only see a continuation (or perhaps strengthening) of their relationship. There is no sales staff to integrate. Previously DemandCaster was sold online with a “try before you buy” approach, with a little product evangelism thrown in. Plex intends to leave that channel open. Who knows, other (ERP and MES) sales efforts might even benefit.

Plex should also benefit from being able to natively satisfy the needs of larger, multi-national, multi-site manufacturing enterprises. The largest DemandCaster customer already handles over 300,000 individual SKUs. This could help Plex move up market and DemandCaster will also provide an additional entry point into Plex prospects.

Plex will also continue to make DemandCaster available as a “stand-alone” solution. We use the term loosely because DemandCaster alone is pretty useless unless it is tied back to an ERP. DemandCaster handles the integration by placing a very simple piece of software on the customer’s system. No APIs or web services required. Of the 40 nonPlex customers, DemandCaster already successfully interoperates with 18 different ERP solutions. So who knows, this might even be a “land and expand” opportunity for Plex to lead with SCP and eventually replace an incumbent ERP.

As acquisitions go, this one seems to be nice and neat and clean – adjectives rarely used in the same sentence as M&A. Kudos to Plex Systems for starting small but knocking one out of the park!

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Epicor Reevaluates Its Strategy

A year ago at Epicor Insights 2014 the Epicor community was introduced to some new management. The owners, private equity investment group Apax Partners, had brought in a new CEO (Joe Cowan), who in turn brought along a new Chief Product Officer (Janie West) and new General Managers (GMs) for the Americas for both its ERP and Retail businesses. But all in all, not much had really changed. And the promise of “Protect, Extend, Converge” was still center stage.

This has been Epicor’s mantra for many years: promising investment protection and continued innovation that would extend the footprint of its customers’ solutions, while also converging multiple product lines acquired through the years. As I wrote last year,

The “protect” and “extend” part isn’t unique. Many vendors promise the same, although some do a better job of delivering than others. However, Epicor is unique in having delivered on a convergence strategy. The result was Epicor ERP version 9, originally called Epicor 9, reflecting that it was the result of converged functionality of nine different ERP products. The “9” has now become “10,” but that is not because it has merged a 10th product, but is more reflective of a traditional “version” level.

However, even last year it appeared Epicor was diverging a bit from this convergence strategy, primarily as a result of the merger of (the original) Epicor and Activant, which focused exclusively on the wholesale distribution market.

A Little Background

The lion’s share of Epicor’s ERP products target manufacturing. While these products have some distribution, capabilities, this was largely due to the overlap of the two industries. Manufacturers often distribute their own products and more and more distributors might engage in some form of light manufacturing. But Epicor ERP is a multi-purpose ERP, focused primarily on manufacturing, and more specifically discrete manufacturing.

Activant brought multiple products to the party but each was focused squarely on distribution. Not only were Activant products purpose-built for distribution, but also over time each has become even more focused and fine-tuned to specific segments of wholesale distribution.

And then there was the SolarSoft, which Epicor acquired back in 2012. This acquisition brought along an ERP which focused on more process-oriented industries, and also a “best of breed” manufacturing execution system (MES).

And finally there is Epicor’s retail business, which has actually been kept quite separate.

Moving Forward: More Than A Few Changes

So given this state of affairs, Epicor’s CEO, Joe Cowan, has made some changes. The underlying message throughout is that the company is “totally focused on the customer.”

The company has undergone a major reorganization, including spinning off the retail business. This group tended to address a smaller number of larger customers that were very different from the rest of the Epicor customer base. This provided no real synergies and the timing was good given other changes Mr. Cowan wanted to make. Even spun off, it will remain an Apax company and as Paula Rosenblum (@paula_rosenblum) from independent research firm Retail Systems Research (RSR) notes, this is really a “win-win.”

In addition, Mr. Cowan has simplified the remaining organizational structure and centralized key functional areas. The “old” Epicor tended to be organized around products, resulting in silos within the company, along with some redundancies. For example, support systems across different products used different policies and processes. Under the new organization, they will all be moved to a common support structure headed by Ian Ashby who came to Epicor with the Solarsoft acquisition.. The reorg also consolidates more than 20 data centers down to 8. And it has brought in some new talent, including new CTO, Jeff Kissling, only 40 days into the job as of the event.

But the changes most relevant and important to customers are the changes in product strategy. While “converge” was the mantra before, Janie West told me that moving forward, Epicor will “not be a slave to consolidation.”

One slide up on the main stage seems to have summarized the new approach:

  • Converge where we can
  • Build where we should
  • Partner beyond our core
  • Acquire as required

Of course the advantage of convergence was to remove any redundancies in development. Despite serving different markets, there are core elements Epicor needs to deliver to all its customer bases. For these functions, Epicor will favor the development of external components, which can be used across different product lines. For those products using Epicor’s advanced technology architecture (ICE) this is simply a no-brainer… which is why there had been a push to get all product lines on this new architecture. But Epicor now realizes this may not be a requirement in order to share the results of development efforts to deliver web portals, dashboards, mobile apps and other new features. So it will only re-architect where necessary, and not just for the sake of re-architecting.

While I believe the convergence to Epicor 9 (which is now Epicor 10) was the right approach at the time, I would agree with this new strategy. Where future acquisitions might simply expand the customer base in markets where Epicor plays, convergence makes sense. Where acquisitions (like Activant and Solarsoft) bring Epicor into new markets, it doesn’t. Where products are limited by older technology, it makes sense to replace the underpinnings with new architecture (like ICE) but where they are already technology-enabled, it makes sense to leverage what already exists.

The prior convergence efforts, coupled with more recent acquisitions leaves Epicor in a good position, with a manageable number of product lines – enough to specialize, few enough to maintain focus…on the customer.

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Epicor to Acquire Solarsoft: Expanding its ERP Portfolio While Adding MES and EMI

Last month Epicor announced its agreement to acquire privately held Solarsoft Business Systems from Marlin Equity Partners. Solarsoft itself is a product of acquisitions, with a portfolio of enterprise resource planning (ERP) for manufacturing and distribution, as well as offerings that extend deeper into manufacturing execution. These include a Manufacturing Execution System (MES) and Enterprise Manufacturing Intelligence (EMI). While there is certainly some overlap with Epicor’s existing product offerings, Solarsoft will expand Epicor’s reach to include process manufacturing, push it deeper into manufacturing operations and strengthen its print, publishing and packaging offerings developed by Kodak.

OH NO! More ERP Solutions?

That might be the initial knee jerk reaction to this further consolidation of the ERP market. After all, Epicor already has a whole bevy of ERP solutions. However Epicor stands out in the field of acquisitive companies as the first major ERP solution provider to deliver on a promise of convergence, while also extending functionality and modernizing the underlying technical architecture.

That modern technical architecture is Epicor ICE, which combines a second-generation Service-Oriented Architecture (SOA) with Web 2.0 technologies. This technology provided a good framework for the convergence of nine different ERP solutions, (originally called Epicor 9, now known as Epicor ERP) but its continued evolution has also resulted in the evolution of Epicor’s product strategy.

With the acquisition of Activant last year, a company dedicated to serving wholesale distribution, the focus on converging multiple ERP solutions shifted slightly. In the short term it is now focused on convergence of technology and bringing the benefits of ICE to a broader portfolio of solutions, including the products acquired with Activant (including Prophet 21, Eclipse and Prelude and several other legacy applications). While Epicor ERP is a multi-purpose solution, these products will continue to serve more specific micro-verticals in the wholesale distribution industry, verticals such as distributors of fasteners, ceramic tile, electrical supplies, etc. as separate products for the near term.

However, Epicor didn’t just wake up one day and change its mind (and its strategy) with the acquisition of Activant last year. The evolution of ICE was also a significant factor in evolving the overall Epicor strategy. Over the past several years, ICE has been further strengthened to allow Epicor to build new features, functions and applications on a modular basis without touching the core of ERP. This means Epicor can continue to add new (converged) functionality or supplement or replace existing features without requiring its customers to implement an entirely new ERP.

ICE provides a bridge that connects the existing application with new, modular functionality. And it allows Epicor to “build once” and deploy across multiple solutions, freeing up resources that would otherwise be required to satisfy those requirements in each product line – freeing them up to work on more targeted functionality which has the potential of helping its customers in select industries achieve a measure of competitive differentiation.

So how do the Solarsoft products fit into this strategy? First of all, Tropos, its solution for process manufacturers, allows Epicor to address a whole new segment of the manufacturing market. While discrete manufacturers typically manage components and production in discrete, numeric quantities, process manufacturers often must handle ingredients and produce batches by weight or volume. Discrete manufacturers create bills of material. Process manufacturers deal with recipes and formulas and quite often have specific requirements for material traceability and regulatory reporting. These special requirements typically require special features and functions.

So the sequence of events that must occur to determine exactly how Tropos will fit into the convergence strategy is one of the decisions that will be required once the acquisition is complete. Yet even in the meantime, there are certain features and functions that are common across all sectors. Once the Tropos solution has been enhanced to work with ICE, the investments Epicor has made in evolving ICE should also ensure that Tropos customers have earlier access to much more innovation than Solarsoft itself could have delivered.

Other niche markets covered by Solarsoft such as retail packaging and corrugated manufacturing will reap the same type of benefits and further expand Epicor’s addressable markets. The addition of aVP and bVP, both serving the packaging industries will also further strengthen Epicor’s partnership with Kodak (announced in 2010) to better serve the print, publishing and packaging industry.

Manufacturing Operations

In addition to broadening its market, the Solarsoft acquisition also strengthens the depth of manufacturing operational functionality Epicor can bring to manufacturers in many different industries. Prior to the announced acquisition by Epicor, Solarsoft itself had made two strategic acquisitions: Mattec and Informance.

Mattec MES – Production Control

Mattec provides real-time production and process monitoring allowing manufacturers to gain control of their shop floor and achieve significant improvements in efficiency and product quality. It includes:

  • Real-time production monitoring
  • Process control
  • Dynamic Job Scheduling
  • Statistical Process Control
  • Scrap and downtime monitoring
  • Preventive maintenance management
  • Operator tracking
  • Real-time alarms and alerts
  • Open communications and machine interface

Because its primary role is to control the shop floor, there is of course some overlap and contention with the shop floor control (SFC) functionality already available in some of the ERP solutions Epicor (and even Solarsoft) offers. Yet this kind of overlap between MES and the SFC module within ERP is quite common. MES tends to provide an added level of “real-time” over SFC, as well as a higher degree of interoperability with machine and process automation. So each manufacturer (including Epicor and Solarsoft customers) must make its own decision as to its own specific requirements. And indeed Mattec may be quite a welcome addition to some existing customers, like those running Epicor iScala, which has nothing to compare or compete, or other customers for which SFC provides only a good start to a complete manufacturing operations solution.

Informance EMI – Enterprise Manufacturing Intelligence

The Informance product previously acquired by Solarsoft may in fact be more universally appealing across a broader spectrum of the Epicor and Solarsoft customer base.  The Informance product can be categorized either as EMI (Enterprise Manufacturing Intelligence) or MPM (manufacturing Performance Management). Whichever way you look at it, the overriding goal is to improve the performance of manufacturing operations. In fact, using the Informance software, along with the permission of its customers, Solarsoft has been able to benchmark performance of these operations and determine “best-of-class” standards. It publishes a number of benchmarking studies each year to demonstrate how best practices impact manufacturing performance.

Unlike MES, which adds a level of shop floor control, EMI serves to aggregate data from a variety of sources (man, machine and software applications) and provide a level of analytics and intelligence that cannot be gleaned from any single source.  As such, it does not replace any ERP functionality, but complements it. Today there is nothing in the Epicor product portfolio that competes in terms of this type of functionality, so this part of the acquisition should be entirely accretive.

Conclusions and Key Takeaways

What’s the bottom line here? Epicor expands its addressable market to include process manufacturers and strengthens its position in print, publishing and packaging. Epicor manufacturing customers benefit from added solutions that dive deeper into their operations. Solarsoft customers will benefit from ICE and the “Build once, deploy everywhere” philosophy behind it.

Yes, there is soon to be one less ERP solution provider, but the solutions themselves aren’t going anywhere except forward.

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