The glory days for ERP (enterprise resource planning) software vendors - when 50 to 60 per cent annual growth rates were commonplace - are certainly a thing of the past. Today, vendors are struggling as end users hold back on making new ERP purchases. As ERP vendor QAD announced its fourth loss-making quarter in a row, reporting a net loss of $US9.9 million on revenues of $53.3 million for the company's first quarter of fiscal 2000, IDG caught up with Pamela Lopker, QAD's founder, chairman and president to discuss the issues that are affecting the ERP market.
IDG: When do you expect business to pick up? Would you agree with this recent summation of the prospects for 1999 by Ed McVaney, chairman and co-founder of fellow ERP vendor J.D. Edwards & Co: "This is a dead year - just throw it away"?
Lopker: People think this year is going to be a difficult year because of Y2K, but it's also possible that the last few years were better than normal (for ERP vendors) because of Y2K. People bought and didn't have to do ROI (return on investment analysis) or get their purchases approved, there was no cost justification. The buying cycles are slowing down. My gut feeling is that the purchase cycle was three to four months, now it's five to six months.
What is your take on Y2K - are planes going to drop from the sky?
I think there'll be somewhat of a lockdown. In the first couple of weeks of January, no one'll fly. No one will fly on December 31, and then who wants to be first to fly on January 1, 2, and 3? Most people will stay home. The economy will take a hit, then people will start saying, "It's fine to drive, the stop lights are working." Maybe, we'll lose two to three weeks out of the gross world product.
Do you think there are some users that are not fixing their Y2K problems and are looking to coast through January 1, 2000?
I've been wondering what they will do; it's clear that some people are ignoring the Y2K problem. I guess they could set their computer to 1900, resort to man-ual systems or keep their computers on December 31, 1999. There will be people needing to buy Y2K-compliant software. It's an opportunity we won't know is really there until January 1, so we've made no marketing plans to address it.
How does your supply chain management product On/Q fit in with MFG/Pro and how long has On/Q been in development?
On/Q is an additional product, not a replacement for MFG/Pro. The first piece was APS (Advanced Planning and Scheduling), then the logistics piece is On/Q Outbound Logistics [due out in the second half of this year].
The business-to-business and consumer-to-business products on the market tend to be very simple, they don't represent the necessary sophistication of a real-time system that will allow a user to find out what the price is and what the discount is, getting rid of an over-the-phone buy. On/Q still needs an ERP backbone.
We started work on the object model for On/Q three years ago. It's very hard to model something as complex as consumer promotion and pricing in procedural code. We started off with Smalltalk, then Forte and then EJBs (Enterprise Java Beans). The Smalltalk model wasn't commercial, it was really a research step.
The commercial model was to be in Forte, but the Forte environment was really relational object modelling rather than true object modelling - it didn't support our persistence requirements. We never did everything in Forte, then the Market gave us a tool in EJB.
Is it worth QAD providing a financials product?
We sell our financials software to over 80 per cent of our customers. Half of our customers are tier one, and already have in place [financials from] SAP or Oracle. Lucent Technologies, for instance, runs our software in 150 sites, but has SAP Financials at its corporate HQ. We have never positioned our financials to run the corporate HQ for someone like Lucent. Our financials are very well suited for divisional and plant requirements worldwide. We joke that we're the best platform and distribution solution for SAP.
Are you looking at supporting Microsoft's SQL Server?
We are looking at supporting SQL Server, but the database is not important and the market will realise it pretty soon. Over the next five years, it's going to be more important how you get information off the Net, not the database. Now we can link MFG/Pro to say the FedEx Web site, the mechanism is in place to take information directly from the FedEx site via XML, but the speed is not there. We need more utilities and data access. Just as we've had JDBC (Java database connectivity) for all access, there's going to be a JIBC (Java Internet connectivity) or some very, very quick mechanism, something for accessing data off the Net.
What's your take on EDI (electronic data interchange)?
EDI is still extremely important. We probably have more EDI customers than other ERP vendors - some 1500 - due to our focus on automotive and industrial users. EDI will still remain very important; it's for high-volume periodic use, where you're using the Net as a transfer mechanism. The cost of EDI implementation and support has fallen to $1000 for every transaction partner down from $5000 to $10,000. We have one customer who set up EDI in two hours, the average time has dropped to two days from five to 10 days.
If you're dealing with 1000 orders from Wal-Mart, EDI is the right transport. Our APS supply chain software is good for real-time use when you have Dell receiving an order for a PC and then wanting to break it up and send it to its suppliers. Business-to-business order entry relates to low-volume transactions, where a user can place, modify and check their own orders and quotes using very simple HTML.
Do you or will you support Linux?
You will see us supporting it. I think Linux will continue to catch on as the major hardware vendors support it.
What do you see happening in the ERP market? More consolidation?
We've been in business for 20 years now, from a proprietary HP environment then to open systems, Unix, with client/server as an add-on to the open environment, now we're at the third or fourth cycle, the Web environment. We've seen a multitude of different companies come and go. At the start, there was ASK, Cullinet, Mapics, SSA - some of those have completely vanished. It's more to do with company founders, do I tough it out or give up? You either sell out or forge through. Companies really don't go away.
With Mary Coleman appointed last month as Baan's chief executive officer, there are now women in two of the top slots at ERP companies. Do you feel women are getting a fair shot at high-level IT management?
I don't really think about it. The IT world is genderless. I don't think about being a woman. To me, those people are my peers, the class I'm in. I think more about what someone's vision is and the direction they're going in.www.qad.com