Agile Software Succeeds by Design
by Hal Plotkin
Silicon Valley Correspondent
From CNBC piece on Sept 3...
cnbc.com.
Product-design software maker Agile Software Corp.'s {AGIL} has
high hopes it can use its early success to become the dominant
player in an emerging new market.
"Agile has at least a couple of years lead," over would-be
competitors, says Bruce Richardson, vice president of research
strategy at AMR Research Inc., a software market-research firm
based in Boston. "The company created a new product category.
Right now, they have 100 percent mind share."
San Jose, Calif.-based Agile produces specialized software that taps
the power of the Internet to help companies better manage product
design and pre-production processes, as well as coordinate design
changes with outside suppliers.
The company's stock went public on Aug. 20 at $21 a share, higher
than the original price range of $15 to $17. Recently, the stock has
been changing hands at more than twice its original offering price.
AGIL stock performance chart since its IPO
Many companies sell enterprise resource planning software that
coordinates production processes within a single company. Agile's
products, on the other hand, are designed to help companies achieve
a similar level of real-time coordination with outside suppliers.
"They've taken the next step," says George Gilbert, an analyst at
Credit Suisse First Boston Corp. based in San Francisco. "They're
focused on product information, not taking or processing an order."
Two key trends are contributing to Agile's growth: outsourcing and
shorter product lifecycles.
Last year, 15 percent of all manufacturing in the United States was
outsourced, a figure that's projected to grow to 40 percent next year,
according to a recent study by Hambrecht & Quist, based in San
Francisco.
In recent weeks, for example, telecommunications supplier Ericsson
{ERICY} sold its Visby, Sweden, manufacturing facility to
Flextronics International Ltd. {FLEX}, a custom manufacturer with
headquarters in San Jose, Calif.
Likewise, IBM {IBM} announced it would outsource manufacturing
for its Netfinity servers to Milpitas, Calif.-based Solectron Corp.
{SLR}.
Cutting Wires with Ericsson by Frances Hong
Both Flextronics and Solectron are Agile Software customers. Other
Agile customers include Texas Instruments Inc. {TXN}, Lucent
Technologies Inc. {LU}, and GE Marquette Medical Systems. "The
move toward outsourcing is critical for us," says Bryan D. Stolle,
Agile's founder and CEO.
Check out Agile Software's Web site
Stolle says outsourcing requires close coordination of growing
supplier networks. "A lot of companies don't really make anything
anymore, they are design and marketing operations," he says.
While most large companies already have internal computer systems
that tie their different divisions together, Agile software helps
eliminate divisions between companies so the impact of changes to
designs or parts can be instantly assessed.
In essence, Agile is creating a kind of nervous system for companies
involved in a design process.
"One of their real strengths is the way they're creating a supplier
daisy-chain," Richardson says. "Once they get one company, say
Solectron, they move down the chain to sign up Solectron's
suppliers, and then the companies who supply those companies, and
so on."
Solectron Shines in Outsourcing Sector by Hal Plotkin
Ever-shortening product lifecycles are also helping spur demand for
Agile's real-time design-coordination software, Richardson says.
"We're in the very early stages of what will be a huge market.
Product lifecycles will only get shorter."
Customers using Agile's software, for example, change designs on
the fly whenever less-expensive parts become available, or for any
other reason. All companies involved are then immediately notified
of the change to make sure no problems are inadvertently created.
"Our average customer makes 600 changes per week," Stolle says.
Although some of those changes can be quite minor, such as a
change to the documentation for a product, "It's important that
everyone have the most current information," he adds.
Right now, Agile is facing very little in the way of direct
competition, Richardson says. Motiva Software Corp., a privately
held firm based in San Diego, is targeting some of the same
customers in partnership with San Rafael, Calif.-based Autodesk
Inc. {ADSK}.
Meanwhile, the traditional ERP vendors, who might have been
Agile's most formidable competition, were slow to recognize the
need to coordinate pre-production design processes. Several of the
leading ERP suppliers, including Oracle Corp. {ORCL}, SAP AG
{SAP}, and J.D. Edwards & Co. {JDEC}, are now working in
partnership with Agile to link the company's pre-production
software to their own ERP products.
Microsoft and SAP in Mobile-Devices Pact by Erich Luening
Checking The Pulse On ERP by Frances Hong
"We expect more competition." Stolle says. "Our visibility is too
high, and this is too interesting an opportunity for others not to want
to get in. But we've put over $50 million in the last five years into
what we've got, and it will be hard for anyone to compete with that
kind of hands-on experience."
At least some investors are betting that Agile's early success will
open up additional opportunities for the company.
"Brian Stolle is exploiting all the chains," Richardson says. "ERP
vendors might become alarmed when they realize how deeply he is
getting into the DNA of their key industries."
Eric Upin, an analyst at BancBoston Robertson Stephens, based in
San Francisco, says he thinks Agile probably deserves its already
high valuation.
"Technology companies are often richly valued," he says. "But when
you look at this company's management team, customers, and
market, I'd say emphatically yes, it's worth its valuation. This is a
very strong company going forward."
Agile Software posted a loss of $4.1 million on revenue of $5.9
million for the fiscal first quarter ended July 31, compared with a
loss of $2.6 million on revenue of $3.2 million for the same period
last year. |
