Last year, System Software Associates Inc chief executive Roger Covey was confident, following what he called the most amazing and successful year in the history of the firm, to predict that the outlook in 1996 was brilliant. But, reports Computer Business Review, while his prediction may have held true for the first two quarters of 1996, since then SSA, for the second time in less than three years, has been plunged into controversy. First, in the third quarter to July 31 this year, the company hit a sudden, unexpected revenue slowdown. After posting healthy results in the two preceding quarters, it plunged into the red, announcing net losses of $19.1m on revenues down 28% to $75.3m. The downturn, said Covey was temporary, relating to a number of postponed, but not canceled, purchase decisions in Europe and a general lengthening of the sales cycle. The fourth quarter, he promised analysts, would be back on track. Then, in early November, SSA announced that it was sacking its auditor, Price Waterhouse, following a disagreement over the company’s accounting practices (CI No 3,035, 3051). Price Waterhouse, it said, was demanding that the company restate all its financial results for 1994 and 1995 due to ‘material mis-statements’, a move which SSA was resisting. The argument centered on whether or not revenues from one North American contract and two Latin America contracts, all related to one customer and subsequently the subject of a litigation suit, should have been recognized. Price Waterhouse may now have gone, but the suggestion of financial irregularity clearly has not. The company’s new auditor, KPMG, is now in the process of restating all of SSA’s accounts for the last three years.
On the same day that SSA announced its rift with Price Waterhouse, it also announced the retirement of Terry Osborne, the company’s chief operating officer and president. Although SSA says that the two events were unrelated and that Osborne, at 57, had been planning to retire for some time, the inopportune timing led to speculation that his departure was forced. Covey is now trying to prevent further damage to SSA’s tattered image, promising users and analysts that the current financial condition of the company will not be affected by the restatement process and that, in the fourth quarter, which closed at the end of October, the company was back on the growth track. We believe we have had our best quarter ever in our North America operation, as well as greatly improved international results, he said, citing strong acceptance of the new open systems, object-oriented version of the company’s flagship BPCS manufacturing suite, version 6.0, which began shipping at the end of August. By the end of the fourth quarter in October, more than 300 copies of BPCS 6.0 had shipped worldwide, claims SSA, up from 160 at the end of the third quarter. But analysts and customers will have to wait until next year to find out whether or not Covey’s assurances are valid. As a result of the restatement process, SSA has been forced to delay its fourth quarter and fiscal 1996 results until mid-January. Meanwhile, few others in the industry are predicting a rosy year for SSA in 1997, and analysts say that there is a growing discontent among the SSA user base relating to product functionality, product performance and delivery delays. We have got six of their major customers talking to us because they are scared about SSA, says Nick Gomersall of rival supplier J D Edwards. A number of the company’s major clients, he says, are already migrating or are thinking of doing so. Research by one small, British independent consultancy, Tate Bramald, backs up this claim. It says that many SSA users are unhappy and that, in a recent report, SSA was rated as below industry average in a number of areas including features, reliability and support. Part of the problem with BPCS 6.0, say analysts, is that its object-oriented design, although technically advanced, is complex and suffers from performance problems. The company is als
o rumored to be struggling with Year 2000 compatibility issues which is deterring a number of users from upgrading. SSA brushes off these claims, saying that it expects at least 30 clients to go live with full-enterprise 6.0 systems within the next six months. But competitors clearly sense that the company is weak and are approaching its user base. Oracle Corp is rumored to have put in a bid to buy the company, although SSA says it has no knowledge of any such approach. London, Tuesday January 7 1997 Issue Number 3072