The Sweden-based enterprise resource planning (ERP) and supply chain management (SCM) provider International Business Systems (IBS) (XSSE IBS B), while currently not a uniformly well-known mid-market global vendor, seems to be poised to change that situation. As the ERP and SCM markets suffered throughout the dismal last several years, IBS also felt a pinch of flat revenues at nearly $350 million (USD), but remained mostly profitable. This was a notable feat, especially with its ambitious product development effort is combined with the difficult competitive sales situation. (See Part One)
Part Three of the IBS � Slow but Steady (and Demand-Driven) May Win the SCM Race series.
After "biting the bullet" a few years ago and committing a substantial investment in basically rewriting its flagship ASW ERP/SCM offering to make it both Web native and a web services amenable solution (XML and Java compliant), and to develop new Java 2 Enterprise Edition (J2EE)-based products like IBS Virtual Enterprise and IBS Integrator, IBS seems to be weathering the ongoing down economy quite well. IBS Virtual Enterprise, which integrates and coordinates different business systems in the supply chain, has been positively received by the market, and a number of projects have been conducted on behalf of large customers.
The market for integration solutions is likely to be an interesting growth area over the next few years, and IBS has an attractive offer for those companies with a complex and expensive business software at the group and headquarters level, wanting to lower their costs and speed up implementation in their operative subsidiaries by using IBS' business software for these companies.
Despite its resemblance in size, geographic coverage, and modesty, when compared to the flamboyancy of its North American peers to its Swedish peers IFS and Intentia (see IFS Continues Its Reinvention Through Pruning and Intentia's Movex for Food and Beverage: Gaining a Foothold in North America ), IBS has always paid close attention to its fiscal health. Accordingly, its balance sheet is relatively clean and strong, and the management team has largely been in place since the company's inception.
The vendor has a history that is characterized by growth and stable finances, and it has made a profit in a total of twenty-five of the twenty-seven years it has been on the market. Even in 2003, despite a continued weak IT market, IBS succeeded in meeting its established objective of making a profit after financial items. This was possible due to heavy cuts in operating costs accompanied competitive solutions and services. Combined these prevented revenue from decreasing by more than five percent, which is considerably lower than for many of its competitors.
An improvement in market potential and an increase in profit (after financial items) was seen in 2004. This was attributable to increased software licences by about six percent, higher billing per consultant which has lead to an improved professional fee margin growing from 20 percent to 22 percent, and to larger portion of self-developed products, which has increased the software licence margin from 90 percent to 92 percent. Also, the vendor has improved profits in the crucial Swedish operations.
During 2004, IBS also strengthened its position within a number of sectors, including the distribution of pharmaceuticals, electronics, industrial supplies, machinery and equipment, automotive aftermarket, property management, paper and packaging, and foodstuffs. Here, a number of new international customer agreements have been entered into within these sectors. The efficiency of IBS software development will continue to improve in other ways, through increased outsourcing to low-cost countries. IBS currently has some of its development in low-cost countries such as Portugal, Poland and India. China will also be considered since IBS has decided to increase its presence in this expansive region.
To the credit of IBS, the vendor has long been targeting its sales and development efforts at the medium and large enterprises seeking proven, low-risk technologies that have a low total cost of ownership (TCO), and are relatively easy to operate at low cost and risk. These technology- and cost-sensitive companies have till recently been overlooked by many enterprise vendors. After several years of declining investments in IT, there has again been a pent-up need among many companies and organizations to increase profitability and competitiveness with the aid of new or improved business software. Priority is, above all, being given to investments that can generate measurable improvements and rapid payback through lower costs, increased customer service, integrated supply chains, improved financial control and information to corporate management. Another of the more important changes in the IT market is the respective management of IBS' companies, which are considerably more involved in decisions concerning business systems and IT investments. This has led to a change in focus from often more technical evaluations to more financially- and business-oriented assessments, which requires both specialized business software, as well as skilled consultants for its implementation.
A growing number of companies, and in particular companies with operations in several countries, have discovered that it is not only business software functionality that is of decisive importance in guaranteeing profitable IT projects (see Easy ERP: A Challenge to Conventional Thinking). Of equal importance is the actual installation project, in combination with ongoing support and further development. To that end, IBS has for many years focused its attention on providing implementation support for its customers through a combination of business consultants (with experience from specific industrial sectors) and technical consultants. It is this combination of knowledge about customer business processes, technical competence and a highly developed project management system that is the key to the successful installatiion of business software.
Part Three of the IBS � Slow but Steady (and Demand-Driven) May Win the SCM Race series.
After "biting the bullet" a few years ago and committing a substantial investment in basically rewriting its flagship ASW ERP/SCM offering to make it both Web native and a web services amenable solution (XML and Java compliant), and to develop new Java 2 Enterprise Edition (J2EE)-based products like IBS Virtual Enterprise and IBS Integrator, IBS seems to be weathering the ongoing down economy quite well. IBS Virtual Enterprise, which integrates and coordinates different business systems in the supply chain, has been positively received by the market, and a number of projects have been conducted on behalf of large customers.
The market for integration solutions is likely to be an interesting growth area over the next few years, and IBS has an attractive offer for those companies with a complex and expensive business software at the group and headquarters level, wanting to lower their costs and speed up implementation in their operative subsidiaries by using IBS' business software for these companies.
Despite its resemblance in size, geographic coverage, and modesty, when compared to the flamboyancy of its North American peers to its Swedish peers IFS and Intentia (see IFS Continues Its Reinvention Through Pruning and Intentia's Movex for Food and Beverage: Gaining a Foothold in North America ), IBS has always paid close attention to its fiscal health. Accordingly, its balance sheet is relatively clean and strong, and the management team has largely been in place since the company's inception.
The vendor has a history that is characterized by growth and stable finances, and it has made a profit in a total of twenty-five of the twenty-seven years it has been on the market. Even in 2003, despite a continued weak IT market, IBS succeeded in meeting its established objective of making a profit after financial items. This was possible due to heavy cuts in operating costs accompanied competitive solutions and services. Combined these prevented revenue from decreasing by more than five percent, which is considerably lower than for many of its competitors.
An improvement in market potential and an increase in profit (after financial items) was seen in 2004. This was attributable to increased software licences by about six percent, higher billing per consultant which has lead to an improved professional fee margin growing from 20 percent to 22 percent, and to larger portion of self-developed products, which has increased the software licence margin from 90 percent to 92 percent. Also, the vendor has improved profits in the crucial Swedish operations.
During 2004, IBS also strengthened its position within a number of sectors, including the distribution of pharmaceuticals, electronics, industrial supplies, machinery and equipment, automotive aftermarket, property management, paper and packaging, and foodstuffs. Here, a number of new international customer agreements have been entered into within these sectors. The efficiency of IBS software development will continue to improve in other ways, through increased outsourcing to low-cost countries. IBS currently has some of its development in low-cost countries such as Portugal, Poland and India. China will also be considered since IBS has decided to increase its presence in this expansive region.
To the credit of IBS, the vendor has long been targeting its sales and development efforts at the medium and large enterprises seeking proven, low-risk technologies that have a low total cost of ownership (TCO), and are relatively easy to operate at low cost and risk. These technology- and cost-sensitive companies have till recently been overlooked by many enterprise vendors. After several years of declining investments in IT, there has again been a pent-up need among many companies and organizations to increase profitability and competitiveness with the aid of new or improved business software. Priority is, above all, being given to investments that can generate measurable improvements and rapid payback through lower costs, increased customer service, integrated supply chains, improved financial control and information to corporate management. Another of the more important changes in the IT market is the respective management of IBS' companies, which are considerably more involved in decisions concerning business systems and IT investments. This has led to a change in focus from often more technical evaluations to more financially- and business-oriented assessments, which requires both specialized business software, as well as skilled consultants for its implementation.
A growing number of companies, and in particular companies with operations in several countries, have discovered that it is not only business software functionality that is of decisive importance in guaranteeing profitable IT projects (see Easy ERP: A Challenge to Conventional Thinking). Of equal importance is the actual installation project, in combination with ongoing support and further development. To that end, IBS has for many years focused its attention on providing implementation support for its customers through a combination of business consultants (with experience from specific industrial sectors) and technical consultants. It is this combination of knowledge about customer business processes, technical competence and a highly developed project management system that is the key to the successful installatiion of business software.
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