The concept of 2 (or 3) Tier ERP is certainly not new. Platinum (now Epicor), J. D Edwards (now Oracle), and more recently NetSuite have for decades gone to large, typically multi-national companies and convinced them to adopt their software in plants and smaller subsidiaries while continuing with a D&B or SAP at HQ and larger geographies.
Plex Systems has offered this value proposition for a while now (it was born in 1995), but a large private equity capital infusion from Francisco Partners starting in 2012, a significant leadership, sales and R&D expansion in the last year combined with a manufacturing renaissance in the US all make for a much fresher story and its tagline of “it’s what’s next”.
Plex’s focus is on the shop floor, which it correctly believes was neglected in most recent ERP deployments. It also has a tight definition of “tiered” industries it is focused on – auto, aerospace, food and beverage. In each its ideal customer is not a GM or a Grumman or a General Foods, but a supplier to them or a presence at some of their plants.
During a visit last week, Plex arranged for Dennis Hodges, the CIO and Ben Stewart, Director of Enterprise Applications at Inteva Products, one of their customers to join us. Inteva provides sunroof and door panel assemblies to a number of automakers. It is a spinoff from Delphi, and Dennis and Ben painted a stark contrast of life with SAP there versus life now with Plex. The SAP implementation ran out of funds and never really made it to the shop floor. The modules which did get implemented needed a heavy dose of support from TCS, CSC and HP/EDS with all the associated issues when multiple outsourcers are involved. Budget, speed and flexibility wise, Plex has been a huge improvement. (btw, Dennis Howlett interviewed Dennis Hodges and you can watch it here. See also my notes here from a shop floor mockup Plex had us participate in)
Both also described trends in global manufacturing. Escalating labor costs in China, India, E. Europe compared to lowered US wages after recent union concessions, increased automation in plants (reducing the labor cost footprint even more) and energy cost improvement in US (from fracking generated new hydrocarbons) versus weeks of ocean shipping time and cost are all helping a renewed focus on US manufacturing that Plex hopes to capitalize on. Plex also eyes an aging generation of QAD, Infor and other manufacturing sites ready for a refresh with cloud technologies.
I had a chance to meet an executive from Caterpillar last year and she described a similar scenario with Plex across several plants in Texas with SAP as its corporate ERP backbone. Jeni’s which makes premium ice cream (and is a breed of new artisanal food and craft beverage makers) also described their experiences.
While it has the feel of a startup with all the new talent, we heard about the sophisticated marketing science and tight focus (Plex has identified 36% of its customers belong to a micro-vertical called Fabricated Metal Processing) of a mature company. Other indications of a mature company: presence at 1,100 production lines in 400 customers, 40+TB of managed storage, 20% of code deleted based on review of functionality few customers were utilizing.
As I heard from several German and Japanese companies during my interviews for The Digital Enterprise, next-gen manufacturing is about agile robotics, wearable computers, mass customization, virtual reality training, IP enabled components and other technology leverage. Plex will need to keep up with this fast changing shop floor. But so will its competitors and many of them still carry the burden of on-premise costs and lack of agility.
I get way too many PR pitches where I am offered to talk to an exec of a vendor or one of its partner firms. When I ask instead to speak to some customers the answer is some variation of “they are not willing to go public”. Not sure about other market analysts, but for me that is a conversation killer.
Five years ago, I was less emphatic. But in three books since I have written over 50 long case studies and over 200 short ones. Customers have opened up and told me stuff where I have sometimes had to stop and ask “You sure you want to go public with that?” And they discuss proprietary, strategic advantage technologies not just experiences with back office functionality.
I am also seeing much more vendor openness to allow conversations with customers. Last week, Plex Systems invited executives from Inteva to present to a few analysts. Beyond the presentation they stayed around for lunch and dinner and were available to comment on just about any topic with remarkable candor. In a previous meeting, Plex provided similar access to other customers like Caterpillar and Jeni’s Icecream.
At the Industry Connect event couple of weeks ago, Oracle invited me to join customers on a panel. There was plenty of interaction time before and after. And I went to industry breakouts where customers were openly discussing industry challenges as in the world of retail omni-channel.
Workday is confident enough to invite prospects to its customer events. Not only do they trust their customers to say appropriate things, they allow analysts to field questions like “How would you compare Workday to Vendor X and Y?”
I told someone recently the world has changed dramatically. At Gartner, 15 years ago, it was tough to get customers to talk. These days consumer tech companies like Apple and Amazon are the toughest ones to get on the record. Customers are far more willing to share their experiences. Let them do so.
My friend Phil Fersht laments outsourcers are poor marketers. Marketing is easy if you are delivering standout solutions to customers.
Amazon does not need brag too much because most customers have seen it has a track record of price reductions. It has averaged 2-3 reductions in AWS pricing – every year! So different from the typical outsourcer who locks customers at pricing for 5 years and makes every excuse in the book to not pass along productivity improvements.
Kaggle does not need to brag much because large companies like GE and Merck know they can challenge its crowds of highly qualified professionals to tackle complex analytical problems. So different from the typical outsourcer who hires young, trains them for months, then sells busloads of that as their alternative.
It’s tough to market when you are chasing after software vendors as your major value proposition. Lord knows how many outsourcers have asked me “Who will be the next SAP?” Then hate to hear me say Workday or Netsuite because they have commoditized application support and upgrade services.
It’s is tough to market when your customers are telling their peers they are cutting back on outsourcing. At the InformationWeek conference today, CapitalOne presented on how they have gone from 75% outsourced to 75% insourced. In one of his first moves, GM CIO Randy Mott asked for several hundred HP EDS staff to be rebadged back.
So, here’s a simple suggestion. Focus on customer value and differentiated services and continuous improvement and as a bonus, Phil will find even your marketing has also improved!
On Friday, I wrote about Suvir Mirchandani, a 14 year old who has analyzed how the government can save in printing costs. Tongue in cheek, I called him Deal Architect Jr, because of the $ 400 million savings potential his analysis showed. Readers have congratulated me thinking he is my son (he is not – we have two very accomplished kids of our own), and shared news coverage of him (including a CNN interview). I also learned his brother, Rishi and he are classical pianists and good at other fields.
This morning I got a tweet from an Australian TV reporter asking to interview Suvir. I reached out to his father, Prakash. It turns out we are related. No slouch himself, he teaches Operations Research at the Katz School at U. of Pittsburgh and has a Ph.D from MIT. He told me interview requests were coming in from around the world – BBC, Fox etc. Nice to see media cover a young prodigy but he is back to focus on school and not doing more interviews. That’s even more impressive
Given the boys interest in academic, musical and other pursuits, I told their dad they were “young Polymaths”. I asked him if I could ship them a copy of The New Polymath.
Hope it inspires them to continue to pursue excellence in a wide range of interests! May global media continue to write about their accomplishments as they grow.
Dr James Cash of Harvard Business School had a great talk last week at the Oracle Industry Connect event. Among other things he said IT should be involved in strategic planning at companies, not just try to be “aligned with business”. He said he was surprised so many retailers do not list Amazon as one of their primary competitors, still focused on their brick and mortar peers.
A CIO recently told me “with the primacy of tech as business driver, the traditional biz skillsets are increasingly irrelevant. I've been arguing for years that CIOs should be tapped to replace CEOs.”
Fighting words but good to see a feisty, more strategic CIO
Dr, Cash added he categorized IT spend as “that which allows companies to stay in business” versus “that which assumes we will continue to stay in business”
I think my colleagues in analyst/media world need to increasingly focus on that distinction. Most of us are focused on the latter and even worse take a tiny segment of that – storage, accounting software, BPO etc – and hype it up with Magic Quadrants and talk about doom and gloom if companies don’t have the latest and greatest in that narrow category. Seriously, each of us needs to use Dr Cash’s filter for systems “which allows companies to stay in business”
We had a power outage yesterday afternoon, so my wife and I escaped to a movie. And as we enjoyed The Grand Budapest Hotel, I thought about comments John Hofmeister, CEO of Citizens for Affordable Energy and former President of Shell Oil Company made at the Utilities industry track at Oracle Industry Connect last week.
He pointed out the oil and gas and the public utility industries rank dead last in popularity compared to Hollywood and Silicon Valley in particular. His question was “where would they be without our fuel and electrons?” He lamented politicians, public policy and even industry executives (for safety lapses and getting away from the common consumer by divesting retail operations) for a state where these critical industries get little respect.
His rant deserves public debate.
The energy sector is capital intensive and complex. It will always be high-risk. My time in the 80s in the oil patch in Texas, Saudi, Netherlands taught me that in spades. Interviewing Statoil for my recent book, it was fascinating to hear about the elaborate systems that support their operations in the hostile waters of the North Sea. And how complex it is to evolve those same high standards now to shale exploration in N. America, oil drilling off Brazil and CO2 injection in gas fields in Algeria.
When I wrote a case study about BP in The New Polymath, I took heat for being nice to an “evil company”. The case study had focused on a small innovative team with a decade of innovations in their refineries, pipelines, and tankers. This team had nothing to do with the Gulf Oil spill – in fact they had introduced satellite imagery, robotic wave runners and other technology to the salvage effort. But as John suggests it’s much easier to just blame folks relatively unpopular industry.
So, we shrug our shoulders at scenarios like BP lays out it in its recent ad below (click to enlarge). But that does not make it right. As we watched the movie in air conditioned comfort yesterday and came home to restored power, John’s words ran very true for me.
Suvir Mirchandani, clearly from the more gifted side of my family tree, is only 14 and has this $ 400 million savings proposal for the Feds. Thanks to Joe McKendrick for pointer.
“The printing-related expenditure that is budgeted in 2014 for U.S. Federal agencies is $1.8 billion. Even though printing expenditure has been decreasing in recent years, it continues to be high and a small percentage decrease in printing expenditure due to a font change could result in substantial monetary savings. A sample of five publically available documents produced by various federal agencies is analyzed and the cost savings arising from a change in font type are estimated. To make the comparison, fonts that were found to be efficient in a previous study and those recommended by the government are used. The results are then extrapolated to state and local governments. Assumptions are made based on public data to make these assessments. A sensitivity analysis is completed with respect to assumptions that have the most uncertainty. The analysis predicts that the Government’s annual savings by switching to Garamond are likely to be about $234 million with worst-case savings of $62 million and best-case savings of $394 million. Indirect benefits arising from a less detrimental impact on the environment due to lower ink production and disposal volumes are not included in these estimates. Times New Roman is not as efficient as Garamond, and the third federally-recommended font, Century Gothic, is actually worse on average than the fonts used in the sample documents.”