First Thing Monday

Our Johnathan Yarmis was looking at the $5-billion market cap requirement for S&P 500 membership, and found forex market that there are currently 126 companies in the S&P 500 (25.2% of the index), which don’t fit the requirement if they were to be added today.

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Our interview with Kronos CEO Aron Ain ventured into numerous areas. This week’s column in the First Thing Monday newsletter (subscribe here) explores how Mr. Ain took his company private and the benefits from doing so. We now continue that conversation, moving to a broader reflection on the workforce management and enterprise software markets.

Here’s the second part of my interview:

Read the rest of this entry »

Since joining Oco 18 months ago, CEO Bill Copacino has been developing a strategy for expanding the company’s presence in the business intelligence (BI) market. The best bet seemed to be to team with one of the market leaders.

That’s exactly what he did. On May 27, Oco signed an agreement with SAP’s Business Objects unit to jointly sell, market, service, and develop software to support the burgeoning business intelligence-as-a-service market. The partnership is expected to be announced July 14.

While Business Objects already had an on-demand product, the teaming with Oco allows the company to more easily integrate and manage multi-source data, and to do so faster than competitive offerings. Oco’s claim to fame has always been its ability to complete projects in six weeks or less. The two companies are looking to maintain that speed by offering a combo of Business Objects and Oco software than can be operational in 10 weeks or less.

In addition to the large Business Objects and SAP customer bases, Oco was attracted by Business Object’s Xcelsius’ interactive dashboards and its Web Intelligence for ad hoc queries and analysis.

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Now that Mr. Copacino has landed its first major partnership, his next challenge is to see how many deals they can land together. It’s not always easy for smaller companies to effectively partner with giants. Then again, Mr. Copacino is known for his persistence and attention to detail.

Kevin O’Marah, who writes our sister blog Complexity Tamed.”

The past few weeks I’ve had several discussions with founders of software companies. The mood seems to have changed from “we’re building a business to last” to “could you set up a meeting with Oracle (or SAP) to explore potential relationships.” It’s clear that “founder fatigue” has struck. The most likely causes include elongating sales cycles, smaller deals, increase quarterly pressure, and higher operating costs. It doesn’t help that the IPO window has been sealed shut.

Xconomy, a local online publication, featured an interesting piece based on data from the National Venture Capital Association. Did you realize that there wasn’t a single tech IPO in Q2?  The last time that happened was 1978. Based on the NCVA data, the years 1991-1996, and 1999 market the golden age of IPOs. More companies went public than were acquired. This changed in 2000. Now it’s far more likely that your exit strategy will be via acquisition. .

Oh, and let me know if you want me to set up that meeting with Oracle … or IBM, Infor, Microsoft, Oracle, Progress, SAP …. And leave your comments here about this or about this week’s column, where we predict who might buy who in 2H08.

You may already be one of the million people who own a Flip Camcorder, a sleek $149 device introduced by Pure Digital that removes a lot of the features and complexity favored by higher end competitors. In its review, The New York Times (June 4) said that Pure Digital “has shown the world’s consumer electronics companies how to build a camcorder that regular people actually use.”

While ClearOrbit pre-dates Pure Digital by 13 years, the two firms have a similar approach to product design: building products that are simple to use. Since its formation in 1994, ClearOrbit has developed innovative software for use by employees in manufacturing plants and warehouses.

We update what ClearOrbit is up to and how it is revolutionizing its corner of the market in this week’s column (subscribe here). Let us know your thoughts here.

In this week’s column (subscribe here) we look at RedPrairie, catching up after a few years. Among the discussions were the financials. While the privately held firm doesn’t publicly disclose more than the revenue number, from a not-for-publication discussion we are allowed to share that its overall results compare favorably with JDA Software and Manhattan Associates, two publicly traded rivals that RedPrairie management tracks closely.

Head count has grown to nearly 1,200 employees, with the customer count topping 950 organizations and more than 32,000 sites. While the bulk of the revenue comes from its warehouse management product line, this is changing with greater adoption of the company’s software for transportation management, workforce management, retail operations, and other functions.

A discussion of 2007 bookings revealed RedPrairie generated nearly two-thirds from sales to retailers, food and beverage companies, and consumer goods manufacturers. Another 19% came from logistics service providers and third-party logistics firms. The remaining 16% was split among wholesalers and industrial firms, pharmaceuticals, food service, high tech, paper and building products, automotive, and others.

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Read the rest of the column in First Thing Monday and let us know your thoughts here.

RedPrairie showed us a video that they had created for their recent user group meeting. It’s Amityville Horror meets The Office. Enjoy:

Not every CEO would pick Friday the 13^th for their company’s first investment analyst briefing. But that’s exactly what NetSuite CEO Zach Nelson did, last week, when he hosted 100 attendees at a briefing at the New York Stock Exchange. The date seems to have been a lucky one for his company; by the time NetSuite rang the closing bell at the exchange, the stock was up 92 cents, or 4.6%, and closed at $21.09.

After opening with a story of his throwing out the first pitch at the Oakland A’s game against the Yankees earlier last week, Mr. Nelson was all business. What impressed me most was how efficient the company had become the past few years.

For example, running NetSuite’s large data center operations consumed 35% of revenues in FY03. From there, it dropped to 15%, 10%, 7.5%, and 5% over the next four years. Meanwhile, performance has been strong enough that he can promise a 99.5% uptime guarantee.

Likewise, the cost of sales represented 180% of NetSuite’s revenue in FY02. This has been trimmed to 40% today.

The average implementation project required more than 300 days in 2Q06. Since then, the services team has expanded to 150 people. Full-suite implementations now take three months. During that same period, it took call center operators 18 minutes to answer the phone in 2Q06. That time has been cut to less than three minutes.

In 2002, the average annual deal size was $149. Now, it’s just above $20,000. Mr. Nelson outlined a plan to get it up to $50,000 by offering industry-specific versions and NetSuite OneWorld (allows companies to support global operations on a single instance).

After his presentation, NetSuite invited three customers to share their experiences. For many in the audience, the most interesting presentation was made by the CFO of a textile company that moved from SAP R/3 to NetSuite in 90 days. The executive had been frustrated by his inability to attract SAP consultants to his site. By switching to NetSuite, he was able to eliminate 11 topical consultants and 2 dedicated consultants. His NetSuite implementation requires no IT staff. Along the way, he took usage down from 90 SAP users to 32 NetSuite users. His spend went from 3% of revenues to “one-tenth of 1%.” He was able to move people to more customer-facing activities.

Oh, and in case you’re curious, Mr. Nelson said that he fired a strike to the A’s catcher.

We met with NetSuite, this week, about a new release of their software-as-a-service product for manufacturers. The company has been offering vertical suites for the wholesale/distribution industry for a while with a proven track record. Manufacturers have been longing for SaaS products to build better overall total cost-of-ownership. Until this release, there haven’t been any broad SaaS products that include financials, CRM, e-commerce, and manufacturing. The on-demand suite approach that NetSuite has pioneered could prove to be a major market accelerator and it’s a direct attack on Goliath subscribe here), we explore how much. As always, we welcome your comments.

Bloomberg.com (June 11) recently published a disturbing story on the $3B counterfeit prescription drug market.

Here are some of the notable statistics:

• In 2007, there were 1,513 confiscations of counterfeit prescription medicines, up 24% from 2006. These included generic copies that violated patent laws and products that lacked active chemical ingredients or contain improper dosages.
• Illicit versions of 403 different prescription drugs were seized in 99 countries.
• Industry security, customs agents, and police seized counterfeit versions of 19 of the top 25 best-selling global prescription drugs. While Pfizer Inc.’s Viagra is a popular target, counterfeiters are also selling fakes to treat heart disease, arthritis, malaria, diabetes, asthma, AIDS, and cancer.
• Speaking of Viagra, this is the most counterfeited drug with seizures in 45 countries. Pfizer estimates that it may lose sales of $2B each year in this drug alone. That’s more than the $1.8B worth Pfizer sold last year. It made this estimate based on how much of the drug’s active ingredient is produced in India and sold abroad.
• In all, Pfizer found counterfeits of its nine best-selling drugs, including fakes of Lipitor, the cholesterol pill that accounts for one-quarter of Pfizer’s $48 billion in sales.
• Likewise, Lilly’s uncovered counterfeits of its top seven products in 800 raids last year. Seizures included the anti-psychotic drug Zyprexa, and more than two million tablets of Cialis.
• One U.S. congressman predicts counterfeit drugs will be a $100 billion global business in five years.
• The World Health Organization says 10% of the drugs worldwide may be counterfeit, with more than half of the medicines that are shipped to some countries not containing the proper ingredients.

Pretty frightening statistics.