Epicor: help global manufacturer get opportunity in economic down turn
On Dec 12, 2011, I interviewed Mr. Pervez Qureshi, the President and CEO of Epicor at Epicor Shanghai office during his first trip to mainland China. Mr. Vincent Tang, the Senior Regional Sales Director of North Asia, also joined the interview. As the global leader of mid-sized management software, Epicor was acquired by Apax Partners, and merged with Activant, another well known US software vendor. Pervez was the CEO of Activant and became the President and CEO of new Epicor in May 2011.
Mr. Pervez Qureshi, the President and CEO of Epicor
Pei Huang: Being acquired by Apax Partners, what will be changed for Epicor, and what will not be changed? What's the benefit for your customers with this acquisition and the merging with Activant?
Pervez Qureshi: Well,the mission and goal, and the strategy of Epicor are not changed. The strategy of Epicor has been to be the leader of mid-market ERP worldwide, so be the top 3 player of the mid-market, and generally performed No 1 or No 2 player in all the key markets we serve geographically. We are not trying to serve the biggest companies, nor do we go after the smallest companies. That's the goal. We do it through a very innovative and flexible product. It builds on the latest architecture. So we have the right technology foundation, and we have people who know the industry and we marry them together. So what we provide to customers is latest technology and very good understanding of their business and process. That's our strategy.
And what’s different with Epicor and Activant? Activant is a U.S. company, very focus on some vertical markets, such as distribution. In the US, Activant has 4,000 customers just in distribution industry, and very specifically in electrical, heating ventilation and air controlling, plumbing, fastener, janitorial and medical supply distribution, etc. Being very focused, we do understand the industry very well and then take that replicated. So Activant serves eleven industries, with industrial distribution as the biggest one. In the retail side, hardware stores, lumber yard stores, paint stores, wall paper stores, pharmacies, arts and craft stores, sporting goods, electronics and footwear. That's on the retail side of Activant. So, Activant is very focused, we get into market really well, and have very high market share. We just replicate what we do to the next market and hire people from the industry.
Now, two companies have been merged together. Epicor has great technology, growth focus, and very entrepreneur. Activant is very focused in a few areas, with the idea to do something is extremely well and then replicated. Activant is also more process focused. For example, in our distribution business unit, which is at Pennsylvania, United States, we have about five hundred people, about hundred of which are green belts of 6 Sigma. They understand the process and try to reduce variance and improve the efficiency.
So, the strategy is the same, but you will see more process, more methodology, more focus, and you'll see getting better as we do. So what Activant bring to Epicor is efficiency, process and improved execution, and what Epicor bring to Activant is great technology, great growth, great creativity and great entrepreneurship. What you will see immediately is process improvement, so that we can be more efficient with our customers. In the longer term, we will take our distribution products and low end retail products and bring them together with Epicor E9 product.
Pei:What's your view about the global manufacturing, is it mature? In your view, what's the impact of global economic uncertainty to ERP vendors?
Pervez: I don't think manufacturing is mature at all, particularly in China. Because definition of mature market in my mind is there is a lot of consolidation because the vendors could not grow organically, so they started to buy each other, and the fragmented market become less fragmented. On Chinese market, there are hundreds of thousands manufactures. So although you may see mature around, I think manufacturing is still a very fragmented market, and still at its early stages. I think it will still need decades to be really mature. ERP software is interesting because it runs your business, no matter what type of business you have. It is there for a long time, people don't change their software that often. It's hard to change and people don't like to change. If the marketplace is changing, you have to adapt, and the Chinese marketplace is changing. It's strong and fast, people are doing multiple things. So my experience is, in down turns of economics, people focus on efficiency, on cost savings, on gross margin attainment, on return of investment. In up turns, people focus on how to get more customers, how to get more revenue, how to branch out, how to add more capability. The ERP software can do both. In down turns, certain companies go down and other companies go up, and sometimes you see the biggest change in the market shares during down turns. Some weak companies may disappear, and some strong companies will less strong, so it's huge opportunity. For those companies which want to be stronger during the down turns, they should run faster than their competitors. They have to worry about being big, but they need to be better than their competitors. ERP software is an important enabler of being more efficient during the down turn, so there are still many chances for ERP vendors, especially in fast growing countries like China.
Pei:On Chinese management software market, there are fierce competitions. There are some local vendors, some other vendors also focus on mid-market, and there are high-end players. So how could Epicor realize sustainable growth?
Pervez: The big vendors have advantages in certain areas and disadvantages in some other areas. There're really good for large customers, especially the biggest 100 for 200 fortune companies. That's a nice thing for us. There are many multinational companies using our software at their tier 2 sites. They may have 30 or 40 operating sites throughout the world. They are happy with SAP or Oracle, but they can’t afford to install at all locations, so they choose our solutions and integrate with their corporate ERP.
For the companies that are fast growing, the good thing about what we do is nothing fundamentally that E9 can't do, that Oracle or SAP can does. The only thing we cannot do is to have a hundred thousand users, but functionally we can do the same thing as the large ERP vendors, and we can do it better.
Vincent Tang: Sure, there will be some customers moving from mid-market to large enterprise, and they will from mid-size ERP to the tier 1 ERP, such as SAP or Oracle, but the number of small company moving up mid-market, which is our focus, is much larger than mid-sized company moving up to larges sized company. The other key thing is, we do have a lot of customers which use SAP or Oracle at their headquarters, but in Asia, not because of pricing, but because they are looking for good software implementation solution. For example, Johnson and Johnson use SAP at headquarter, but they need to go live 6 sites in 18 months,so it is not matter of investment in terms of ERP software pricing, but because they need to go live every single site in 3 months, there is no way SAP and Oracle can do that, and that’s why they choose Epicor as mid-size player to offer this solution. So actually we are playing different market.
Pei:When manufacturing enterprises want to deploy ERP, they have many choices. In your view, how could they make the right choice?
Pervez: It is important to educate the public about ERP systems. How to make the choice in a right way? What they should look for? What should they think when they upgrade the management software? We are expanding our presence in China. We have about 400 customers in China, but our presence is not as much as some other companies. So, with more and more Chinese companies being educated with the right way of choosing ERP systems, and we have more and more fantastic references to analyze the business value of our products, Epicor will grow faster in China, because our products are incredibly powerful.
In my mind, most of the manufactures, particularly in their early cycle of technology adoption, they don't think software as the tool in the best way. They think about inventory, they think about the products they produce, or they think about the employees. What's new is that ERP is an asset, and they should think it as a strategic asset. With this strategic asset, they can transform their business. Not just do what the old system used to do, and what the old technology used to do, but it can actually transform the business.
Vincent:Our brand is not as popular as some other vendors, and we can't change that very quickly, but what we could do is promote our brand in vertical industries which we are very strong. For example, we identify that we are very strong in machinery equipment, die-casting and metal fabrication. So, although some of companies do not know Epicor, they may know our customers. We need to focus in the coming 2 or 3 years. What we have done, for example, we have sponsored the die-casting association in Chongqing. We got the deal, which is the No.6 largest die-casting company in Chongqing and the boss of the company is actually the committee member of the die-casting association. What we did was that we sponsored their annual meeting, and over 40 bosses of the die-casting company attending the meeting, and we were allowed to give a 40 minutes presentation, so we could dress the business challenge of the die-casting and why Epicor is the right choice. So now, if any prospect customers in die-casting industry in Chongqing want to deploy ERP, and when project manager submit the report to the boss, the boss will know Epicor. So that's what we play in tier 2 city now. We do this on other part of China. Since we have limited resources, we only have offices in Shanghai, Beijing and Guangzhou, what we will do in the coming 2 years, we will expand our channel partnership. We'll identify the partners in the tier 2 and tier 3 cities and let them to represent Epicor. So, we have virtual teams, not just our own team, but also the partners who can cover all the prospects that we don't reach there. So I think that would be some of the ideas we are going to execute.
Pervez:In Activant, pick any industry we focus, we have very similar strategy. We would know the association, and we would know all the board members of the association. We would go to all the association meetings. When somebody thinks they need to upgrade their ERP system, they would call the association, and the board members will recommend us. So, the strategy is very similar.
Pei:Right now, more and more ERP vendors build a suiteincluding PLM, MES, CRM, and SCM, etc. Do you think it's the trend of ERP vendors to provide the whole management solution instead of just ERP?
Pervez:That is for sure. The software vendor starts from one area and then looks for growth. Let's say it has five or ten thousand customers, the same customer needs CRM and SCM. ERP is such a core part, and it is easy to add those solutions, and it is much easier to sell add on solutions to the old customers of ERP system. So, that's a way for software vendors to penetrate their customers. For example, our ERP, BI and CRM solutions are very tightly integrated, so it’s very natural for vendors like us to expand. So when I think of ERP, I will think of the all suite. I don't think ERP is just a traditional enterprise resource planning software, and it can be broader.
Pei:Do you have any lead users in China using your whole suite, not only your ERP solution?
Vincent:There are quite a lot of customer references in China which actually not just use our core ERP system, but also use our CRM and MES solution. I think that is actually our differentiation. Some of our main competitors, either the big vendors or the local players acquire MES software or CRM modules, and then do the integration. As you known, when the new version comes out, they have to maintain the upgrade and the integration of CRM, ERP and MES, etc. It's very difficult to maintain the integration with this way. In fact, Epicor do it with the different way. We don’t call it's an integration solution, we call it embedded solution. We have an embedded CRM, MES, which is part of our suite solution. So when we upgrade our version, we don’t have to concern about the integration.
Pei:Besides Epicor, there are also some other international vendors focus on mid-market. Please summarize the competitive differentiation of Epicor?
Pervez:I think we have the best business management software product. It is a new product we built it from scratch, and we built it in the time frame when web 2.0 technology is available. However, other mid-market vendors are taking their technology which was written in old languages and old style, and put something around it, so to the customers may looks new, but it’s hard to develop and maintain. When we put Activant and Epicor together back in May, 2011, in June, we had a channel partner conference in the US, and about 150 people were there. Some of them are the resellers of other well known management software. They told me that we are 4 to 5 years ahead over our competitors in what technology we can do. I have no doubt about it, and I think the best technology is out there. Some other mid-market vendors are focused in a few verticals doing very well. But because of their kernel technology is so old that it's very hard for them to take the next big step. Some bigger vendors become bigger and bigger just rely on acquisitions. Their products may have the same UI, but the kernel is totally different. So, I think we can win in the long term with our better technology, but we have to be better execution, such as improving our brand name, building more references and having more partners, so that the potential customer can know more about us, know what we can actually do and do it very well. We will just serve the industries we are really good at. We want to bring value for our customer much quicker, which means we need hire people from the industry that can learn our product and then teach it. So that is what I mean better execution. We know what we want to do and we have the asset.
Vincent: I can give you a real example. I just recruit a reseller sold in China. It has been the reseller of another mid-market ERP vendor for a long time. After we showed our Epicor 9, the president of the company said, "Wow, you have everything". He mentioned that we have APS, MES and BI, which was not existed inside the ERP he sold. So, eventually they made the decision that except automotive industry, they would follow us at all the other industries.
Epicor has very clear vision and we can execute. We understand that in the long run, ERP will reply on technology platform, so we have the product strategy called Protect, Extend and Converge, which means we'll protect the investment of the customers on our existing system and then, extend the application through common component that work across product lines, such as new generation BI and e-business solution to enhance existing solutions, and finally converge to our Epicor 9. We are the only ERP vendor that has that vision and execute the vision successfully. We invest a lot in R&D to make Epicor 9 to be very competitive.
Pei: Have you offered cloud solution to your customers?
Pervez:Yes. E9 was started to develop in December 2008 with new generation Microsoft .NET technology from scratch. The same product can be on the cloud or on premise. So for us, it is not a product issue. In the US, we have about a hundred customers using SAAS model. So, our cloud technology is available, and we are learning at how we can operate our SAAS model worldwide effectively.
About Mr. Pervez Qureshi
Pervez Qureshi brings more than 20 years of management experience in Silicon Valley's hi-tech industry to his role as president and chief executive officer of Epicor Software Corporation. Qureshi came to Epicor in May 2011 following the merger with Activant Solutions Inc., where he also served as the president and CEO.
Prior to joining Activant, Qureshi was president of a management consulting company he founded. Previously, Qureshi held management positions at Harvest Software, Metaphor Computer Systems, Hewlett-Packard and IBM.
Qureshi holds an MBA from the Darden Graduate School of Business at the University of Virginia and a B.S.E.E degree from the University of Lowell in Lowell, Massachusetts.
The picture of Pei Huang, Pervez Qureshi and Vincent Tang
For Chinese version, please visit: http://www.e-works.net.cn/interview/leader_354.htm