COST ACCOUNTING

Exact Software, a Dutch-based provider of integrated accounting, payroll, customer relationship management (CRM), enterprise resource planning (ERP), and business process management (BPM) software solutions, and a division of Exact Holding N.V. (EURONEXT: EXACT) continues to expand its products' footprints and operations worldwide, lately with a particular emphasis on the expansion in North America. Two thousand and three was indeed a busy and transitional year for the vendor, with the acquisitions of certain resellers, the consequential openings of new US offices, and a launch of new products to the market.

Though doing things more tacitly than its bigger archrivals Sage Group/Best Software and Microsoft Business Solutions (MBS), Exact Software would nonetheless be a textbook example of a vendor maintaining a steadfast course of product, revenue, and geographic expansion, while concurrently achieving enviable profit margins of over 20 percent, and while reaching an eighteen years stretch of profitability. Figures 1 and 2 depicts Exact's stable and predictable, cash-flow generating business. As a matter of fact, nowadays, Exact Software is quite a different company compared to what it was only a few years ago, although its market approach, conservative business management, and attention to profitability have not since changed.

Figure 1

Figure 2

Exact is definitely not a stranger to the business applications market—quite the contrary. Considering its relatively long incumbent status (since 1984); its focus on small and medium businesses; its broad and well-attuned product portfolio (mainly developed internally and through a small number of sensibly acquired solutions that address the needs of the market segment); its large customer base (over 160,000 users in over 100 countries worldwide); and its far-reaching distribution channel of over 60 offices and 2,000 partners, Exact (in addition to Sage/Best Software) is a significant force in the market to reckoned with the likes of Microsoft, Oracle, PeopleSoft, and SAP.

Indeed, Exact Software, with the global headquarters in Delft, the Netherlands, is a publicly traded company with over fifty subsidiaries and twenty distributors in over sixty countries worldwide, and, with 214 million in revenues for fiscal 2002, it can be placed among the leaders within its target market, trailing Sage and Microsoft, and fighting with soon to be merged Epicor and Scala for the top number three position in the small to medium enterprises (SME) market.

Still, after nearly two decades of prominence (mainly within the mid-market of financial and accounting, HRM, project management, and logistics administration solutions with its flagship Exact Globe 2000 back-office product), Exact begun making big strides in the early 2000s to extend its reach into North America and into the manufacturing segments. It turned into a full-fledged comprehensive e-business software provider for SMEs. The first major step in that direction was the 2001acquisition of former Macola Technologies Inc., which almost instantly made Exact a $200 million (USD) player in the mid-market enterprise applications segment. While not really a household name in North America before the Macola acquisition, Exact has always been a force to reckon with in the lower end of the ERP mid-market in Europe, and occasionally, to a degree, elsewhere in the world.

This is Part Three of a six-part note.

Parts One and Two detailed the event summary.

Parts Four and Five will continue the market impact.

Part Six will cover challenges and make user recommendations.

The Macola Acquistion

The acquisition, which seemed a good match at the time, has indeed proven a success so far. Similarities in the former independent parties' corporate cultures and product development philosophies has certainly played its part. Even before the acquisition, Macola was striving for an expanded global presence, and to that end, its product had featured the multicurrency and some multilingual capabilities of an international product. Both companies' products' open architectures, flexibility, and adoptions of the contemporary Microsoft technology stack have also made it easier for products to be blended and for customers or consultants to localize the products further. (For example, both Exact Globe 2000 and Macola Progression have separately gone through their DOS-based versions via Windows client/server versions towards the so-called One-X [standing for One Exact] architecture convergence, which will be discussed later in this series.) Moreover, the as separate companies, Macola and Exact had rarely competed with one another because each company's distribution channel focused on its own continent. Macola's former Progression Series and its subsequent Exact Macola ES have become the bread-winning products for the North American market and Exact Globe 2000 being the European ERP and accounting counterpart. Exact's new web-based product e-Synergy was the overarching umbrella for e-business front-to-back office processes.

At the time of the acquisition, Macola had 16,000 installation sites for the Progression Series (over several thousand customers) and a distribution channel with over 400 resellers. The sweet spot for the Macola Progression Series product have been small discrete manufacturers with annual revenue up to $50 million (USD) and up to 500 employees. The current Exact's product release, which is still being actively sold, but will eventually become a legacy product, Macola Progression Series 7.6 is a horizontal manufacturing application based around the Manufacturing Planning and Control (MPC) module, which includes bills of material (BOM), production order processing, master scheduling, and materials requirements planning (MRP) components. It has financial accounting, distribution, integrated payroll, and a number of third-party original equipment manufacturer (OEM) add-ons including data collection, HRM, CRM applications, and the C-WAY Advanced Planning & Scheduling (APS) engine. Beside the MPC set of modules, the product suite indeed brings a wide array of accounting (general ledger, bank book, accounts receivable, accounts payable, currency manager, and assets depreciation), enterprise manufacturing (quoting and estimating, standard product routing, shop floor control, labor performance, capacity requirements planning [CRP], manufacturing cost accounting, standard product costing, and BOMLink for AutoCAD), distribution (inventory management, order entry, purchase order and receiving, and bar code for distribution), advanced materials management (returned material authorization [RMA], advanced distribution, serial lot, warehouse management system [WMS], shipping automation by Starship, EDI bar code sub module, RF data collection for distribution, and request for quotation [RFQ]) and progression human resource and payroll modules. Additionally, the product suite offers a number of handy tools like integration and customization tools (designer, flexibility, and progression workflow explorer), system manager, exact forms, and business intelligence tools.

Particularly in the past, but to a lesser part nowadays, some functionality has been furnished via a partnership approach that had allowed former Macola to take advantage of software from third-party specialist vendors, given an ERP vendor of its stature could not have possibly developed all the bits and pieces of extended-ERP on its own. Recognizing also that the one-size-fits all approach to software has often had many limitations, the former company had forged some strong ties with other best-of-breed companies to provide integrated add-ons that can share data to enhance the functions provided by its own modules. For example, Progression Series provides a fully integrated payroll and HR module for up to fifty employees, but, for more complex needs, one can integrate with Best Software's Abra Suite, a leading HRM software suite that includes payroll, HR, attendance, organization charting, applicant tracking, and employee training modules.

The core Progression Series' modules launch from a self-explanatory tree-structure menu system called the Progression Workflow Explorer, while on the right side of the screen is a multi-tab work area that can be user-defined with shortcuts to commonly used functions. Like its current parent Exact Software, former Macola had always provided functional but simple products that users would easily absorb and utilize without a terribly painful training and adoption cycle. Exact too realizes nowadays that its target market is not looking for cutting-edge technology but has a need for a functional application set that allows them to take advantage of new technologies and business processes. Knowing the market and providing an easy-to-use, broad functional footprint, and at a reasonably low price tag with low maintenance product set has been Exact's value proposition, which builds on former Macola's one too. To that end, Progression Series features built-in screen design tools, which allow the software to adjust to the customer's workflows and business processes without the need for programming. Where some customization is required though, the Flexibility module, a programming, scripting, and configuration tool, which encompasses Microsoft Visual Basic for Applications (VBA), Enterprise Reporting System (ERS) 5.0., and the Progression Developer Tools, facilitates the creation of bolt-on applications without touching the underlying source code.

"Software You Will Never Outgrow"

Exact, as well as former Macola, refers to itself as "software you will never outgrow," since smaller customers desire high-speed but low-cost database, Progression has supported the Pervasive SQL database since 1989. From a user standpoint, there is no difference in the data input screens, reports or other program functionality, but Pervasive SQL is more economical and requires less overhead maintenance than Microsoft SQL Server, the other supported database for Progression Series modules since 2000. While both databases are ODBC (open database connectivity) compliant, SQL Server offers tighter integration with the Microsoft Windows NT/2000 operating systems, and it offers better performance, scalability, and security and reliability features. The Progression Series also includes various options for producing reports via third-party products given that native reports and forms have not been its strongest spot. For each module, fully integrated reports can be either previewed or printed, whereby each report has numerous sorting and filtering options. For customized reporting, Progression Series offers Crystal Reports, Integrated Crystal Reports, and Synex Systems' F9 financial reporting and consolidation product.

Internet integration of web-enabled functions for users to communicate and transact with customers and suppliers had been a priority for Macola during the last couple of years of its independent operation. To that end, in 2000, well before being purchased, Macola introduced Web.Orders, a module that provides on-line product configuration capabilities and order management. Other integrated e-commerce modules include Web.Views and electronic data interchange (EDI). Both Web.Orders and Web.Views provide self-service functions that are tied into the back-office system, with the view towards reducing the ordering cycle time and improving customer service. Web.Views is a collection of browser-based tools that can provide customers, sales people, and internal employees with secure access to look up account, pricing, and product availability information. Web.Orders is a storefront that allows customers to submit orders via the web, and integrates that information into the other applicable accounting and distribution modules. It uses the back-office integration to provide total order costs to the customer in real time and lets them track the shipment of an order.

Enterprises that are quick-turn and material intensive discrete or batch process manufacturers or consumer packaged goods (CPG) manufacturers or importers, which are also Food and Drug Administration (FDA) compliant should benefit the most the from Progression Series' manufacturing modules. These enterprises are also operation intensive, work in progress (WIP) environments where both material and labor contribute significantly to the cost of goods sold (COGS), given the product's notable emphasis on data collection, labor performance, and tracking capabilities. Distribution side is possibly even a more differentiating trait of Progression Series, given the product goes beyond order entry, purchase order or inventory management to include more "distribution-centric" functionality like bar coding, radio frequency (RF), and WMS. Again, most of these have been delivered in the OEM fashion with best-of-breed players like Radio Beacon (for a feature-rich WMS), South Coast Computers (for its TrakWear software that allocates orders based on size/color/style attributes for the apparel industry), or Integrated Planning Systems (for its Shipping Automation System that includes receiving, pack verification, bill of lading, and other germane capabilities).

SOURCE :http://www.technologyevaluation.com/research/articles/exact-software-working-diligently-towards-the-one-exact-synergy-part-three-market-impact-17198/