The worldwide ERP market is still in a slump, but those at QAD don`t seemed to notice. The company posted another outstanding quarter, with strong growth in revenue and net income. This is the fourth consecutive profitable quarter for QAD, which indicates the dramatic improvements that the company has made in strategy and execution. It is not easy to build momentum in the middle of a global recession, but QAD has managed to do it.
The bottom line: Manufacturers thinking about a new business system should consider QAD - if only to expose their users to a markedly different approach and value proposition.
What it means: Strong financials, combined with a message that resonates well with mid-market manufacturers, have made QAD a success story in an otherwise lacklustre market. Here are some of the reasons for its success and why it is worth a look:
* The numbers for 2Q04 (ending 31 July), QAD reported a 24% increase in revenue to $56 million. Even more impressive is the $15.8 million in licence revenue, which represents an amazing 41% growth from last year`s Q2 licence numbers. Net income for the quarter was $1.9 million, which is at the high end of management`s projections and a major improvement over the net loss of $4 million just one year ago.
* Commitment to manufacturing - The company has reaffirmed its commitment to manufacturing and its focus on a limited set of industries: automotive, consumer products, industrial, electronics, food and beverage and medical. It has established itself as a thought leader for the concept of lean enterprise, by developing applications to support lean production and lean supply chain environments. But most importantly, it has carved out a niche below what it calls the mega-suite vendors mega-suite vendors (SAP, Oracle, and PeopleSoft), where it can offer comprehensive functionality at significantly lower implementation and operating costs.
* Plant-level system of choice - Within QAD`s customer base of more than 5 000 manufacturers are many large, global companies that have (mostly) standardised on standardised on SAP or Oracle for ERP, but are still running QAD in their plants and divisions. Why? QAD`s excellent vertical market functionality, ease of use, and low cost of ownership have made it extremely popular as a plant-level or tier-two ERP system. Over time, QAD has become more comfortable and adept at coexisting in accounts with the giant ERP vendors, and many of its customers are happy to have a low-cost, low-key alternative.
* Strong market position - QAD is in an interesting market position within ERP. It has market presence and brand equity based on its nearly 25 years in the industry and more than 5 200 customers. It has legitimate global coverage, with presence and references in every major geographic market and unusually good language and localisation support. It is able to sell successfully into companies ranging in size from 50 employees to the Fortune 50. Finally, it has financial viability that is now good enough to reassure even quite conservative buyers.
* Solid market opportunity - Perhaps what is most surprising about QAD`s recovery in the past several quarters is that is has occurred without any real improvement in the midrange ERP market. Most manufacturing companies worth less than $1 billion in annual revenue have still not begun to replace their aging business systems. There are tens of thousands of midrange manufacturers that are anxious to put in modern ERP systems, but they are not willing to spend the money quite yet. This is a natural opportunity for QAD, given its broad functionality and relatively low cost of ownership, but it will not materialise until smaller companies begin to see real top-line revenue growth.
Conclusion: As this middle market recovers, QAD should benefit from the disappearance of JD Edwards (now part of PeopleSoft) and the continuing rollup of smaller mid-range ERP vendors. A highly consolidated ERP market should allow QAD to offer an interesting alternative to the huge vendors attempting to come down into the midrange and the small business players like Microsoft and Sage Group trying to move up-market.
In today`s market full of companies that look and sound the same, QAD has a business model and product that suggests that it spends more time listening to customers than competitors or industry pundits. Given QAD`s results the past 12 months, many companies seem to like the alternative.
Share
Editorial contacts