I want to take the opportunity to focus on what I consider is a very important piece of information in the Feb. 22nd, 2000 Press Release. In case you may have missed it, here it is again . . .
"The Technology Cross-Licensing Agreement with the Vanenburg Group of companies will give Net Shepherd access to the technology of Vanenburg and its affiliates. This will enable new applications for the use of Net Shepherd's technology, creating new revenue opportunities. One such opportunity will be the next generation of Enterprise Resource Planning (ERP) software. Current ERP programs deal with an enterprise's structured information, such as customer orders. The next generation will be Web-based and will additionally capture the unstructured information now available on the Web."
netshepherd.com
After reading this, and hearing Don Sandford mention it again during the Investors' Forum conference call, I immediately became very excited about the enormous potential of this strategic move. I also know that given my former career, I have an advantage over other investors in terms of understanding the ramifications of this announcement. I say this because in my former life, I was responsible for re-engineering my last company (over « billion in sales). Aside from the obvious efficiencies we were striving for, we were focused on the process of looking for, selecting, purchasing and then implementing an ERP system to support the new business processes we had designed.
It struck me that while in the process of reengineering our business processes, I was continually faced with blank stares from people (at all levels of the organization) when I told them that we were looking for an ERP system. After discussing the benefits and implications of it, and how it would make their professional lives that much easier, I was continually surprised that many of these same people were not as excited as I was. It did not take me long to realize that these people did not fully realize nor appreciate what an ERP system was, how it worked, or what the benefits were. After that realization, their ambivalent response began to make sense, after all how could they get excited about something that they did not fully understand?
Fast forward a few years, and I see the same glazed over eyes when I talk to some of my investor friends about the implications of what Don Sandford has just referred to. Net Shepherd is now positioning itself to be a key factor in the ERP field.
With that preamble, I want to help everyone who may not fully appreciate what an ERP system does, by including a few selected excerpts from some ERP related articles which I believe help to tell the story. To find these articles, I spent a few hours surfing through the ERPSupersite. This is an excellent site that provides an exhaustive source of information into this huge market.
- The first article explains what an ERP system does, and the benefits that companies can expect from it.
- The second article reviews the projected size of this market
- The third article explains what the "Next Generation" of ERP might be. During the teleconference, Don Sandford has referred to this as "Beyond ERP".
I am totally convinced that given Jan Baan's intimate knowledge, experience, and connections in the market he made his fortune in, supported by the cutting edge technology that NSI has developed - then it goes with out saying that Net Shepherd has a tremendous opportunity and future before it. When you consider the enormous size of this market, and the fact that NSI will be one of the first, if not the first to market with their "next generation" products, then I believe the opportunities are limitless.
Here is my simple attempt at explaining what an ERP system is. Enterprise Resource Planning (ERP) is an interconnected software application that acts as the neural center (brain) of the organization. In a fully implemented organization, all applications within the company feed into it. The data collected by each functional area of the organization is then stored centrally. Other applications will access this database to make intelligent decisions / recommendations based on what the data is telling them. There can be an almost endless number of report quieries that can be culled from it. A well implemented ERP system can exponentially enhance the information flow within an organization and between trading partners. The end result is that the organization can work more efficiently, while also anticipating, meeting or exceeding their customers' needs.
I also want to mention that for the past year, I had been sold on NSI's potential. This was well in advance of knowing that they were considering moving into the ERP arena as well. With this announcement, even I (who spends a lot of time speculating where they are headed) have had a hard time thinking through just where this could take them. The potential really is enormous!
Crazy Canuck
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Article 1 - discusses how an ERP system works.
Small Business Is Cashing In On ERP
By: Donald Moore, President - MOORE Advertising-Marketing. Communications and Albert Stirpe, President - Qube Connections From the February 22, 1999 Issue of The ERPNewsLetter erpsupersite.com
Moreover, the technology's attractiveness comes from scenarios like this: the sales force enters an order on a computer, and the transaction ripples through the entire company with inventory lists, parts supplies, and balance sheets updated immediately. All employees have the information necessary to do their job, feedback cycles are positive and fast, and management can gauge almost immediately the effects of decisions affecting inventory, supply-chain management, credit terms, and customer service. What appear to be staggering system acquisition costs on the front-end are justified by incredible near-term improvements in organization operating efficiency and cash flows.
The paradox of this situation is that small and mid-sized manufacturers trying to manage their company's growth face comparable pressures in the other direction: to expand their operations, while maintaining control of prohibitive inventory levels and cash flows. For them, the primary motivation is not compensating for the effects on the organization of radical workforce reductions. The above sales force to shop floor information flow scenario is desirable regardless of business size or product line, and there are ERP products specifically designed and priced for small and mid-size business.
ERP software solutions represent the technological leverage that a small producer can use to become very competitive in a big hurry.
The small and mid-sized manufacturing enterprise today requires a new breed of system that is more than just a repository for transactional data. This new generation solution must enable the manufacturing enterprise to optimize its assets to provide on-time delivery at the lowest possible cost. It must increase profits and simultaneously improve customer service. And, it must create an empowered workforce through which business processes can continuously be improved. The features and benefits promised by an ERP system must be flexible to adapt to changing business processes and evolving technologies in order to seize market opportunities and gain competitive advantage.
Basically, ERP is the integration of numerous key business functions into a single comprehensive system. Inventory control, lot and batch tracking, shop floor control, sales analysis tools, and accounting modules are but a few examples of ERP functionality. When all these functions are introduced into an ERP system, the result of everyone working with the same data that is available in real-time can be profound. Non-integration of business tools is the primary breeding ground of costly errors. In an ERP system, users enter data only once, and information is immediately available to authorized users throughout the enterprise. There's one set of numbers, one set of terminology to deal with, and the costly duplication of data entry is eliminated.
The major advantages of implementing an integrated system are based on providing management with visibility of business operations in real-time and providing control.
Industry research has shown that, just by implementing an integrated manufacturing resource planning (MRP-II) software system, inventory values can be reduced dramatically - by 25 - 40 percent. These savings are generated by such factors as improvements in purchasing practices and reduced carrying costs. Other key benefits include on-time shipments, reduced labor costs, reduced scrap levels, and better customer service.
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Article #2
ERP vendors will focus on services
By Tom Diederich - Online News, 04/21/99 05:23 PM
Enterprise resource planning (ERP) software vendors, feeling the pinch of an industrywide slump, are devoting more resources to the professional services sector, an area Dataquest analysts predict will explode from $25.4 billion in 1998 to $97 billion in 2003.
"Given that services represent 55% to 70% of the total cost of an ERP implementation, as compared to software licenses, which comprise 20%, this strategy appears at first view to be a viable one," Dataquest analyst Nicole France said in a report released today.
Note: This article makes reference to the industrywide slump. I believe that it is important to note that the slump in 1999 was largely a factor of the slowdown in corporate purchasing due to the Y2K fears. Now that this perceived threat has passed, there is an expectation that the demand will resume as corporations will strive to make up for lost time. Another theory is that the reduction in revenue was attributable to the fact that the ERP industry has moved through its first sales/installation cycle and must now rely on servicing those installations to make money.
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Article #3 - This article explains how NSI's distributed work force will be able to access the difficult to capture unstructured (yet essential) information which is not currently in a standard data base format.
E-Business - a revolution or evolution from ERP?
By: Jeff Wade, Director of Product Management, On Display ondisplay.com the February 8, 1999 Issue of The ERPNewsletter
erpsupersite.com
While including integration needs for E-Business solutions, the need to capture content from unstructured data is a requirement. . . . . Parsing and interpreting data from HTML web pages or legacy reports requires a next generation content integration product.
Also, integrating your ERP system with the E-Business solutions requires the ability to integrate multiple types of source information, including, but not limited to, HTML web pages, XML documents, EDI transactions, or a business partner's proprietary information. Once again the content integration solution will need to be able to parse and select the appropriate data required for the integration, and may be required to navigate through a complex web site to get to the specific location where the information exists.
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The last time I spoke with Peter Hunt, he mentioned something that has stayed with me. By the way, I happen to agree fully with him on this point. Please excuse the loose transcription of the comment, but here it is . . .
"The big prizes will go to the companies that are first to market with the next generation of 'beyond ERP' software that copes with the unstructured information now available on the Net and elsewhere. That's why the alliance between Jan Baan (with his ERP background) and Net Shepherd (with the ability the handle information from the Net) is so exciting."
Crazy Canuck |
