Friday, February 11, 2011

Plex Systems grows while others stall

I’ve been watching Plex Systems now for about 5 years. It is one of the bigger small ERP solution providers. Not being one of “the big guys” you might not have heard of them. But if you are a manufacturing company in search of an ERP solution, the company is one you might want to get to know – that is if you are either in active search for or are at least willing to consider SaaS ERP. Because that is all they offer. Unlike some of the new entrants into the SaaS ERP market, “as a service” is the only way Plex delivers its solution. But also unlike these new entrants, Plex has been serving up SaaS ERP for more than 10 years.
How and why they began offering a SaaS deployment model for ERP long before it was “hot” is an interesting aside. Plex’s founder didn’t go looking for SaaS. He was an advocate and a pioneer of rapid application development and he was looking for a way to deliver new enhancements at an equally rapid pace. SaaS was his answer. But SaaS presented an obstacle to selling in its early days, particularly in selling ERP. When I was at Aberdeen and first started following the SaaS ERP market I called ERP “the last bastion of resistance” to SaaS and openly questioned whether it was a chicken or egg kind of problem. Were companies unwilling to consider SaaS ERP because there weren’t many options back then or were there not many options because people weren’t willing to consider it?
That’s a moot point today because the barriers are starting to break down and there are more options to choose from. But interestingly enough, one of the reasons software vendors were unwilling to offer SaaS models was because of the subscription-based pricing that now seems so appealing to both software suppliers and consumers of software. In an era when budgets were cut and credit was tight, accounting for the purchase as an operating expense instead of a capital expense was (and still is) very appealing.
However, making a move from selling on-premise solutions to SaaS has some immediate impact on fiscal reporting. When you sell an on-premise license, you get a bunch of money up front. The on-going maintenance is of course a recurring revenue stream, but that nice chunk up front was pretty hard to give up and if the software supplier gave up too much of that too quickly, revenues would also take a hit. If you were a public company that could very well be a hit you couldn’t afford to take.
You might think that Plex System dodged that bullet by offering a SaaS solution throughout the last 10 years. But in reality, the company didn’t always price their solution as SaaS. In the early days, prospects bought Plex in spite of its being SaaS, not because of it. In order to counter this and remove one obstacle, Plex priced it just like an on-premise solution. In fact it was quite a creative answer to a problem, but it did leave money on the table. That revenue leakage was something they knew they would eventually have to plug up. And they did. Several years ago they made the switch to more traditional (for SaaS) subscription-based pricing but they were smart enough to do it while they were (and are) still a private company and didn’t have Wall Street breathing down their necks.
They not only survived and thrived through that transition, but they are now very actively growing. During a year when most ERP solution providers struggled with a downturn during the first half of the year (some started to see growth in the second half), Plex saw substantial growth. They not only added 54 new employees (they now have 175 so the percentage growth is even more impressive) but they grew revenues by 27% and software sales subscriptions by 26%.
How did they do that? While they may still be a relatively small ERP solution provider, their solution is anything BUT small. I lost count of the number of modules they offered long ago – suffice to say it is a lot and quite complete. It also dives deeper into the shop floor than the typical ERP solution and they have particular strength in automotive. Not surprising because in their early days much of their selling was done locally in and around Auburn Hills, Michigan.  But today their strength pushes well beyond automotive to food processing, medical devices, aerospace/defense, industrial and consumer products. Part of the reason for the impressive footprint is the approach to rapid application development that drove them to SaaS in the first place.
The other significant factor is their very engaged installed base of customers. Enhancement of the product is driven entirely by customer and prospect requests and innovation is delivered every day. So in one way, everything is customized. But in another way, nothing is customized, because all enhancements are added to the product in such a way that the customer opts in to turning them on.
Mark Symonds, CEO of Plex Systems sees this growth continuing through 2011, with specific opportunity arising within the food-and-beverage industry because of the new federal food safety laws. Compliance and traceability has been part of the Plex DNA from the beginning and should position the company well in this new era of requirements and regulations.

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