Recently, ROI Systems, Inc. (www.roisystems.com), a privately held provider of extended ERP software systems, with its headquarters in Minneapolis, MN, reported profitability for the year 2002. ROI's revenue and number of employees reportedly grew over 6%, while a significant increase in profitability (i.e., a whopping 212% net profit growth) was achieved over 2001. The company also reported record software sales in December 2002, making the last quarter of 2002 the best sales quarter in ROI Systems' history. New site licenses for the company's flagship MANAGE 2000 extended-ERP software suite have combined with service revenues to continue the company's 24-year history of sustained growth through fiscal year 2002, which ended December 31. Being privately held, the company does not publish a breakdown of its revenue figures.
�Love thy customer' would be the ROI Systems' open secret of success. The company, founded in 1978, has a strong history of working closely with its long-time customers, whose needs have mostly driven the vendor's corporate and product strategy. �Trustworthy', �credibility, �integrity', �delivery on promises' and so on would have been other key tenets of ROI Systems' corporate strategy, with continually positive results going far back. While no more detailed numbers are publicly available, we believe that the company has long been consistently profitable. It also has a tendency to reinvest generously in itself. Its offering's functional breadth and depth is the result of the vendor's unrelenting commitment to R&D, where ROI typically spends 20% or more of total revenue, which is well above our assessment of the industry average of 14%.
Although ROI Systems might be sometimes considered as a conservatively risk averse, its deliberate decision making style for the past quarter of a century of its operation have kept it profitable, debt-free, and without any restructuring and disruptions. That is in a sharp contrast with the IT industry trends where �flash in the pan' competitors and their �killer' applications and hype have often been the name of the game. The company is owned by four of its executives, and it has never sought venture capital. While it also has a significant credit line, it has never borrowed money, which may sound astonishing during this era of the investment capital scarcity cash-strapped vendors, and the market's disgust with Enron and WorldCom fraud scandals.
Thus, its very delighted customer base has become much more to the vendor than a pool of excellent references. Namely, without any unusual, �fine print' contractual terms, ROI's typical days of sales outstanding (DSO) figure is at most the half of the industry average (i.e. 50 vs. 100 days), which indicates happy customers gladly paying their dues. Key to ROI's customer satisfaction success could likely lie in the fact that it has hardly ever launched any product enhancement and support directions that would eventually leave any of its customers in the dead-end street or feeling blackmailed. Instead, for more than two decades, ROI Systems has stuck to its core competencies rather than impetuously venturing into uncharted territory with dubious benefits for its customers.
The company has never abandoned its discrete manufacturing ERP roots even during the Internet infatuation days of the late 90s when anything associated with core ERP was considered outmoded. This does not imply that the company has not enhanced its product in the meantime � therefore earning the �extended ERP' connotation. By adhering to an incremental, performance proven approach, ROI Systems has managed to deliver strong discrete manufacturing functionality for a gamut of industries (e.g., electronics, industrial machinery, fabricated metals, medical products, transportation product suppliers, durable consumer goods, etc.) and immaculate customer support.
Thus, ROI has largely ensured that its customers had no reason to change the vendor. Furthermore, while this steadfast approach might have been at the expense of slower-than-market growth during the halcyon 1990s, that is not the case any more. A 6% organic total revenue growth, whereby new license revenue growth was at enviable 14.5% in 2002, and ~30 new accounts in the year, cannot easily be touted by the mightiest competitors, let alone by the peers. Rather than being on the defensive to protect its customer base from openly aggressive competitors, ROI has instead replaced solutions at disillusioned customer sites from nearly every ERP competitor (see Baan Defectors - Is This Only Tip of an Iceberg?).
As a result of incremental new technology enhancements, its sole product, called MANAGE 2000, today provides applications for production, planning, engineering, finance, sales order management, supply chain management (SCM), customer relationship management (CRM), field service, supplier relationship management (SRM), collaboration, human resources (HR) and business intelligence (BI), which is far beyond the traditional realm of ERP and what most of midsize manufacturers need now and in a foreseeable future. It runs on Microsoft Windows 2000 and UNIX platforms and integrates more than 45 applications for the above-mentioned functional areas.
MANAGE 2000 includes a very solid product configurator that enables prompt communication and decision making between front-office and back-office, and which is quite abreast of the exacting needs of leading product configurator solutions in the market (see CRM For Complex Manufacturers Revolves Around Configuration Software). The product also addresses well multi-plant (multiple facilities) functions such as enterprise-wide visibility and access to information for process consolidation and adjustments to suit changing business requirements (e.g., a new acquired division). It also handles repetitive manufacturing requirements well through backflushing � the ability to automatically reconcile inventory and make paperless transactions right after the products have been built.
The advanced planning & scheduling (APS) capability with support for both infinite and finite capacity planning, as well as hard allocation in a lot-controlled regulated environment that requires strict product genealogy are also cited as strong features by many customers. Further, ROI Systems was one of the first mid-market vendors to have an integrated external service management capability in a market that has increasingly been focused on customer management, and well before the term CRM was coined per se.
ROI also began delivering the pieces of decision support/Executive Information System (EIS)/business intelligence (BI) functionality (via partnership with Cognos for its PowerPlay reporting and Impromptu On-Line Analytical Processing (OLAP) tools), again, long before most of its mid-market peers. The product also has its own, albeit basic, HR and Payroll modules and interfaces to more powerful third-party HR/Payroll systems, while transportation (e.g., truck scheduling and shipping interfaces to UPS, FedEx, Airborne Express and other shipping systems) and sales force automation (SFA) capabilities have also recently been bolstered.
ROI's approach has always been to offer proven but not necessarily leading-edge product technology, which has allowed the vendor to provide its customers with easy migration paths to updated technology. Another technological advantage for ROI was its early ability to run MANAGE 2000 on Microsoft Windows platform, which has been the major choice of its customers (over 90% of install base). Also, for its target market, the product scales very effectively as it may be required over time. The best example that ROI will not adopt new teechnology until it is confident that its customers can migrate relatively painlessly to a new technological platform could be its use of the IBM UniData nested relational database management system (RDBMS), and Unibasic development tool - which, although not leading edge, are not drawbacks in ROI's target market, where the database and tool are still not the order winners. However, it is a much easier database to administer, albeit not as functionally robust as popular relational databases like Microsoft SQL Server. Again, the customers' convenience has taken precedence over the opportunity that a trendier database could bring.
�Love thy customer' would be the ROI Systems' open secret of success. The company, founded in 1978, has a strong history of working closely with its long-time customers, whose needs have mostly driven the vendor's corporate and product strategy. �Trustworthy', �credibility, �integrity', �delivery on promises' and so on would have been other key tenets of ROI Systems' corporate strategy, with continually positive results going far back. While no more detailed numbers are publicly available, we believe that the company has long been consistently profitable. It also has a tendency to reinvest generously in itself. Its offering's functional breadth and depth is the result of the vendor's unrelenting commitment to R&D, where ROI typically spends 20% or more of total revenue, which is well above our assessment of the industry average of 14%.
Although ROI Systems might be sometimes considered as a conservatively risk averse, its deliberate decision making style for the past quarter of a century of its operation have kept it profitable, debt-free, and without any restructuring and disruptions. That is in a sharp contrast with the IT industry trends where �flash in the pan' competitors and their �killer' applications and hype have often been the name of the game. The company is owned by four of its executives, and it has never sought venture capital. While it also has a significant credit line, it has never borrowed money, which may sound astonishing during this era of the investment capital scarcity cash-strapped vendors, and the market's disgust with Enron and WorldCom fraud scandals.
Thus, its very delighted customer base has become much more to the vendor than a pool of excellent references. Namely, without any unusual, �fine print' contractual terms, ROI's typical days of sales outstanding (DSO) figure is at most the half of the industry average (i.e. 50 vs. 100 days), which indicates happy customers gladly paying their dues. Key to ROI's customer satisfaction success could likely lie in the fact that it has hardly ever launched any product enhancement and support directions that would eventually leave any of its customers in the dead-end street or feeling blackmailed. Instead, for more than two decades, ROI Systems has stuck to its core competencies rather than impetuously venturing into uncharted territory with dubious benefits for its customers.
The company has never abandoned its discrete manufacturing ERP roots even during the Internet infatuation days of the late 90s when anything associated with core ERP was considered outmoded. This does not imply that the company has not enhanced its product in the meantime � therefore earning the �extended ERP' connotation. By adhering to an incremental, performance proven approach, ROI Systems has managed to deliver strong discrete manufacturing functionality for a gamut of industries (e.g., electronics, industrial machinery, fabricated metals, medical products, transportation product suppliers, durable consumer goods, etc.) and immaculate customer support.
Thus, ROI has largely ensured that its customers had no reason to change the vendor. Furthermore, while this steadfast approach might have been at the expense of slower-than-market growth during the halcyon 1990s, that is not the case any more. A 6% organic total revenue growth, whereby new license revenue growth was at enviable 14.5% in 2002, and ~30 new accounts in the year, cannot easily be touted by the mightiest competitors, let alone by the peers. Rather than being on the defensive to protect its customer base from openly aggressive competitors, ROI has instead replaced solutions at disillusioned customer sites from nearly every ERP competitor (see Baan Defectors - Is This Only Tip of an Iceberg?).
As a result of incremental new technology enhancements, its sole product, called MANAGE 2000, today provides applications for production, planning, engineering, finance, sales order management, supply chain management (SCM), customer relationship management (CRM), field service, supplier relationship management (SRM), collaboration, human resources (HR) and business intelligence (BI), which is far beyond the traditional realm of ERP and what most of midsize manufacturers need now and in a foreseeable future. It runs on Microsoft Windows 2000 and UNIX platforms and integrates more than 45 applications for the above-mentioned functional areas.
MANAGE 2000 includes a very solid product configurator that enables prompt communication and decision making between front-office and back-office, and which is quite abreast of the exacting needs of leading product configurator solutions in the market (see CRM For Complex Manufacturers Revolves Around Configuration Software). The product also addresses well multi-plant (multiple facilities) functions such as enterprise-wide visibility and access to information for process consolidation and adjustments to suit changing business requirements (e.g., a new acquired division). It also handles repetitive manufacturing requirements well through backflushing � the ability to automatically reconcile inventory and make paperless transactions right after the products have been built.
The advanced planning & scheduling (APS) capability with support for both infinite and finite capacity planning, as well as hard allocation in a lot-controlled regulated environment that requires strict product genealogy are also cited as strong features by many customers. Further, ROI Systems was one of the first mid-market vendors to have an integrated external service management capability in a market that has increasingly been focused on customer management, and well before the term CRM was coined per se.
ROI also began delivering the pieces of decision support/Executive Information System (EIS)/business intelligence (BI) functionality (via partnership with Cognos for its PowerPlay reporting and Impromptu On-Line Analytical Processing (OLAP) tools), again, long before most of its mid-market peers. The product also has its own, albeit basic, HR and Payroll modules and interfaces to more powerful third-party HR/Payroll systems, while transportation (e.g., truck scheduling and shipping interfaces to UPS, FedEx, Airborne Express and other shipping systems) and sales force automation (SFA) capabilities have also recently been bolstered.
ROI's approach has always been to offer proven but not necessarily leading-edge product technology, which has allowed the vendor to provide its customers with easy migration paths to updated technology. Another technological advantage for ROI was its early ability to run MANAGE 2000 on Microsoft Windows platform, which has been the major choice of its customers (over 90% of install base). Also, for its target market, the product scales very effectively as it may be required over time. The best example that ROI will not adopt new teechnology until it is confident that its customers can migrate relatively painlessly to a new technological platform could be its use of the IBM UniData nested relational database management system (RDBMS), and Unibasic development tool - which, although not leading edge, are not drawbacks in ROI's target market, where the database and tool are still not the order winners. However, it is a much easier database to administer, albeit not as functionally robust as popular relational databases like Microsoft SQL Server. Again, the customers' convenience has taken precedence over the opportunity that a trendier database could bring.
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