Application Software 5 Trends, 1 Key and 3 Themes

1
Application Software5 Trends, 1 Key and 3 Themes

• Richard Davis
• Needham Co.
• September 2001

2
Todays Topics

• Impact of the 11 September Attack
• Five Not Big Trends
• Things to do not to get funded
• One Key
• Successful firms realize its time to sell
  mortar, not buildings.
• Themes for the Next 3-5 years

3
Impact of Terrorist Attack

• Near-term business will be difficult
• Business will not close in September
• The economy will be discovered to have been in
  recession from June to December 2001
• Keep your powder drier
• No financings will be concluded until November
• Slight benefit to firms associated with defense

4
5 Not Big Trends

• ASP is not a business model
• Selling a solution via the Web as a service is a
  means of delivery, not a business model
• The customer does not care how the application is
  delivered they want you to solve their problems
• Ditto, wireless applications
• Its another distribution channel

5
Non-Trends

• Multi-million dollar thematic sales
• Buyers are purchasing the way they used to
  pre-bubble small test deployments that may,
  or may not, lead to follow-on orders.
• Get beachheads in companies, just be careful the
  island youve taken is not Atlantis.

6
Non-Trends

• Losing money at a 40 revenue run rate
• If you cant make money at that level (or less),
  the business model is flawed.
• The new world order will be slower revenue
  growth, but higher margins less competition.
• Companies that cannot scale to at least 100
  million in revenues.
• Large funds need large wins to move the needle

7
The Key to SuccessCustomer ROI

• All successful application software is designed
  to do one thing
• Deliver tangible ROI for enterprise buyers
• This means
• Automate activities
• Help a company generate better returns on
  existing assets
• Help an end user do his or her job better

8
Three Intriguing Themes

• Collaborative Manufacturing and Logistics
  Automation
• Supply chain visibility, exception management,
  etc.
• Leveraging Existing Assets
• Companies spent a lot on capital assets over the
  past few years, help them get an ROI on those
  assets, rather than sell them something entirely
  new.

9
Intriguing Trends

• Development Chain Management and Product
  Development Automation
• A new segment that legacy and new age firms are
  groping toward
• Question/hurdle Can an intensely creative and
  chaotic process be automated?

10
Collaborative Manufacturing and Logistics
Automation

• A very large corporate spend 1.0 trillion
  annually.
• Positives
• There is still a huge installed base of in-house
  developed solutions
• Savings from these efforts drop immediately to
  the bottom line
• Negatives
• Huge incumbent firms i2, SAP, Oracle, etc.
• Therefore, exit strategy is probably a sale to
  one of the giants

11
Interesting CM LA Companies

• Enigma (Burlington, MA www.enigma.com)
• Leading support chain solutions provider
• Tilion (Maynard, MA www.tilion.com)
• Easy to deploy supply chain visibility
• DataSweep (San Jose, CA www.datasweep.com)
• Plant level exception management
• Global Factory (San Jose, CA www.globalfactory.co
  m)
• Flexible collaborative manufacturing solutions

12
Leveraging Existing Assets

• Encompasses a large breadth of functionality,
  ranging from traditional EAM to EAI to knowledge
  management/analytics.
• Positives
• Good positioning can create a unique niche.
• Negatives
• Ill-defined space.
• This can lead to developers solutions that are
  great ideas that customers cannot understand why
  they need it and/or
• Slow adoption because it is difficult to identify
  constituencies that have intense demand for the
  solution

13
Asset Optimization Firms

• Dirig (Nashua, NH www.dirig.com)
• Systems and applications management (e.g.- IT
  automation)
• Granite Systems (Manchester, NH www.granite.com)
• Leading Service Resource Management solutions
  software for communication providers.

14
Development Chain Management

• DCM is a significant new frontier that has yet to
  be effectively automated.
• Positives
• Products are what determines the success of a
  company.
• Negative
• Still early days of the gold rush. Previously
  funded firms are getting follow-on financings.

15
DCM Companies

• IDe (Concord, MA www.ide.com)
• Leading DCM firm enables enterprises to optimize
  top down goals and bottoms up development efforts
• MS2 (Mountain View, CA www.ms2.com)
• Helps automate product development process
• Framework Technologies (Burlington, MA
  www.frametech.com)
• Provides an integrated framework to unify all
  aspects of product development