From Computer Business Review, a sister publication.
When will QAD Inc go public? Karl Lopker, the chief executive, founder and major shareholder of the manufacturing software supplier is often asked the question? Admirers of the low-key company believe that QAD, based in Carpenteria, California, has outstanding technology and vision in ERP (enterprise resource planning) software, but that public companies such as SAP, Baan and Peoplesoft are getting all the publicity, and hence a disproportionate amount of business. Such talk is not uncommon among smaller suppliers of software and their partners – many of whom find that their plans to float could not withstand the scrutiny of the underwriters. But in QAD’s case, such talk is not unrealistic: it reported revenues of $114 million in 1995, and is expecting 1996 to be up 40%; it also has a long track record of profits.
But even more impressively, QAD is earning the applause of a growing number of customers and analysts. In its ERP charts, Gartner has repeatedly put QAD in the top quartile for function and technology alongside more famous names such as Baan, Oracle and SAP. In specialist sectors, such as the midrange market, QAD shared Gartner’s top rating for completeness of vision and ability to execute with just one vendor, System Software Associates. QAD’s emergence as a major force in ERP can in part be attributed to its highly rated technology and its heavy investment in R&D. Its MFG/PRO ERP system consists of more than 30 modules, all written in the Progress fourth generation language and tailored for certain types of applications. Equally important, QAD has managed to avoid too much head-to-head competition from companies such as SAP and Baan, by specializing in vertical markets and by staying out of the high-end, tier one $1 billion plus revenue multinationals. This strategy has yielded MFG/PRO some 2,300 users, mainlyrunning on Unix and high-end PC servers.
All of this sounds healthy enough – but there are some worrying clouds on the horizon for QAD which might suggest that its growth beyond its existing customer base will be limited. One is the decision of the giants such as SAP and Baan to start targeting small companies; another is the growing fashion for so-called integrated software – where one vendor supplies tightly integrated financials, human resources, manufacturing and other key functions. QAD admits it struggles to offer complete across the board function for larger companies. A third concern is the poor performance of Progress Software, on which MFG/PRO is based. Progress appears to have all but given up in the race for a respectable share of the database market and its 4GL tool set is struggling to win market share among developers.
Lopker has an answer to all these concerns, and most of it rests on a total commitment to comprehensive, leading edge object technology. By rebuilding its package at the object level with the help of a company called Enterprise Engine, QAD aims to sidestep many of the current debates about which is the best approach for users and suppliers: to build their systems up from ‘best of breed’ but only loosely integrated components, or to buy one tightly integrated application. QAD’s goal is to build up functions by assembling groups of objects, or frameworks, for use both within the manufacturing sector and outside.
The use of frameworks should also mean that other non MFG/PRO components can be integrated at an object level with the core application using de facto standards, and it means that new tools can be used in place of Progress, should users require this – although QAD remains committed to Progress at present. Gartner warns users that QAD’s strategy will take several years to develop, and its success is not guaranteed. Nevertheless, it also believes that it could help to liberate QAD from its niche and enable it to recover the technical leadership that it was in danger of losing. QAD has one of the most aggressive visions of any ERP vendor for dynamic implementation and f
unctionality.
The plan also involves a heavy investment in R&D. So what of the IPO? Lopker remains unimpressed; he says a flotation is just one financial strategy.
