Straight to the source: Intentia's Steve Ironside: Insight

Intentia Australia managing director, Steve Ironside, gives his frank views on the state of big software business in this region.

First of all, can you comment on PeopleSoft's move to acquire buy J.D. Edwards?
From our perspective, it is one less competitor if they become one entity. Clearly, there could be difficulties ahead with different cultures, different technologies, and different customer sets all competing for development dollars. And, now with Oracle's bid, all I can say is--thank you, Larry. From what I have read, a number of the industry analysts share a similar view in regard to the buyout. John Moore from ARC Advisory Group says that -tackling the issues of different technology platforms, culture, and different types of customers could prove quite formidable and be a distraction for both companies." I think in these situations there is a clear danger that the organisation becomes internally focused on their own changes and lose sight of the customer needs.

History does not provide many examples of successful mergers or acquisitions in the IT industry. There is an unbelievable trail of failures or, should I say, less-than-successful outcomes. The BAAN saga with Invensys, the Mapics and Marcam story, the Geac/JBA experience, the CA acquisitions. I think these adventures and others are proof of the difficulties that are encountered when attempting to align product offerings, technologies, and corporate cultures.

Lastly, to justify the merger, the two companies' very different product lines will surely have to become one. As a prospect, I would want to understand the upgrade path and the cost to get the consolidated solution. As a customer, I would wonder about the life span of my current solution. And now, with Larry possibly calling the tune, anything is possible but not always probable.

How can Intentia hope to compete with giants like these and SAP in a market as small as Australia?
We have successfully competed against SAP and Oracle in the past and see a new, larger entrant in the combined Peoplesoft/JDE entity (or should I say Oracle entity?) as no particular threat. It should also be remembered that Intentia has significant critical mass in the ANZ market and in Europe, all of which is focused on the ERP space and not diluted over various industries. Given this is the case, we are already considered a large player in this market space.

We are often described by our customers as -small enough to listen but large enough to act". Being a giant does not necessarily mean being the best--or for that matter, even good. It just means big. With big comes layer upon layer of structure and it is often difficult to get action when action is needed.

I think you also have to look at the buying behaviours and preferences of companies to see that they actually prefer to partner with an organisation where they are dealing directly with the people they need to. The degree to which a supplier can connect with customers and translate their needs into its offering is a more important factor than size.

What kind of growth has Intentia experienced over the past year?
Locally, Intentia has maintained a better-than-market growth rate. Since launching Movex in the ANZ market back in 1995 we have gone from a standing start of zero clients to over 120, across 200 sites. We have a broad range of clients in the ERP space, with some customers having well over 1,000 users and some as small as 10. I would say that the average customer is around 250 to 300 users.

Our business model has been consistent from day one. That is, we install and take responsibility for the solution we sell. We do not outsource our implementations and this affords the opportunity to develop a lasting long-term relationship with our clients. Repeat business for both new products and new services becomes an integral part of our overall revenue base and as such it lets us maintain a strong financial position going into each new year.

Even though we have been able to secure more that our fair share of new business opportunities to contribute to year-on-year revenue growth, it is not at the expense of our business model--to create long-term partnering with our clients. While it is not appropriate to quote numbers, I think that there are various external sources that would clearly position Intentia as a leading player in the pure ERP space, if it was measured on revenue alone. However, I can say that approximately 60 percent of our revenue is from our services business with 40 percent from product line. I think this is a healthy balance and I expect our business to continue to grow at about 30 percent year on year. I think this is a sustainable and achievable growth objective as more than that makes it difficult to maintain quality and customer satisfaction.

Why hasn't that been reflected in the company's share price?
What do the market analysts know? Nearly 40 percent of our stock is tightly held between our CEO, the original foundation employees, and key executives. I think that at the moment we are simply out of favour with various analysts. Maybe we should do more to pander to their whims but fundamentally we will just get on with doing what we do best. We have full control over our own destiny which means we have control over our product, our business model, our go-to-market plans and our financial management. We have made significant investment in our technology transition from RPG to Java. We have made huge investments in building a global footprint. We have also invested heavily in building our implementation models that minimise risk to the client.

The tide always turns and when it does ask me that question again. We are ready to catch the ball when the pent up demand starts to release.

You've indicated that Intentia can continue growing in Australia. Where will this growth come from?
We see most of our growth coming from the tier 2 and lower tier 1 organisations, primarily in the distribution and manufacturing space. We have a world-leading position in terms of technology and a proven integrated implementation product called Implex.

Having built the local business to a position of critical mass in the distribution and manufacturing space, we have started to extend our focus into the Maintenance, Service, and Rental industries (MSR). This opens a whole new sector, covering asset intensive industries like mining, utilities, and various government sectors such as defence. We have been successful in the past 12 months establishing some key references in the market space and hopefully we can build on this base.

What is the biggest lesson you've learned from the recent customer -backlash" against CRM?
The backlash against CRM is not a backlash to the vendors. As everyone now knows, CRM is beyond the software--it is a change to the way a business does business and manages processes. So the lessons the market has learned from CRM is that putting in a piece of software is not the answer--it is changing the whole approach to how organisations deal with customers.

We were always of the view that CRM needed to be a total solution, not just an add-on module. We spent a long time developing our CRM capability as an integral part of Movex. Consequently we haven't had an issue with -failed CRM projects" as we have never done a -CRM project". Intentia has always implemented a whole-of-business solution with a key objective being to improve customer facing interactions.

You've mentioned that there have been cases where Intentia has decided not to pursue business with a customer who has expressed interest in your solutions. Why would you turn down potential business?
Me turn down business? Never!

But seriously there are times when simply the business is not there. So rather than chase every opportunity and consume buckets of dollars doing so, we engage with the prospect to try and understand if there is really a case for action and if it has the appropriate support from within the organisation. Despite any other popular media theories or analyst assessments of the market and competition, our biggest competitor is DNC. That is -did not change". We sometimes find that when organisations are faced with the reality of the project, the costs, and justification for same, the option to stay as is and not do anything wins out.

You've put all your eggs in the Java basket. Why, and how has this worked out for you?
Intentia's development philosophy has always been to focus on delivering functionality to our customers. This has led us to always having a single code base for Movex. Java was selected because it enabled us to pursue that philosophy and provide our customers with freedom of choice regarding the hardware infrastructure that Movex was run on.

Java was also selected because we felt it was the best platform to build enterprise software that would enable our customers to collaborate over the Internet. When a software company changes its core technology as we have done, it is the biggest single risk that they can take. History is littered with companies that have failed to make such a transition. We are very pleased to have completed that transition successfully.

How has this worked out for us? We are now three years down the track since releasing our Java product. We have had many successful implementations including 20 live Java sites in Australia and around 120 worldwide. Intentia is the first collaborative application vendor to market with its solution completely written in Java. We see this as a distinct competitive advantage that gives us a lead of at least two years on our nearest competitor. Java gives customers security in the knowledge that this is the language of the future. Java not only provides outstanding technology and architecture, but also protects the customers investment and delivers improved cost of ownership, configurability and ease of future upgrades.