3-2010 Cloud Computing, Integration
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It's a Buyer's Market for Software

By Tim Triplett, Editor-in-Chief

Though the economy is still challenging, now may be a good time to invest in a new computer system.

Software vendors anticipate renewed capital spending by service centers later this year—and for most of them it cannot come too soon. The past year has been a difficult one for providers of enterprise management systems, who say they have spent the slow period enhancing the capabilities of their products.

Much of that work has focused on integrating additional functions into the software, such as freight management and logistics, automated imaging, e-mailing and faxing, customer relationship management and commission tracking. Some software products now include features specifically for managing multiplant operations. The majority of vendors now offer, or plan to offer, software as a service, as “cloud computing” gains more acceptance among users.

“The economy has just killed the metals market. Service centers are still holding on to their money,” says Tim Holman, director of marketing at Bayern Software Inc., Phoenix, Ariz., maker of STEEL PLUS.

“We are concentrating on emerging markets right now because there is not much happening in North America,” adds Daniel Brody, managing director of STEELMAN Software Solutions Inc., Toronto.

Yet, software vendors agree this is the best time in years for service centers to upgrade computer systems. Prices and payment plans are very attractive right now. And since business activity is slow, service centers have the time to implement new systems and train employees.

“It’s definitely a buyer’s market [for IT systems],” Holman notes.

Most software providers expect a turnaround in technology spending later this year. “People are not as negative as they have been at points in the past two years. There is more of a positive spirit,” says Brian David, national sales manager for Compusource Corp., La Palma, Calif., which markets the Metal Center Management System.

“We are seeing inquiries from various companies. They are basically saying it is time to begin looking at software again,” says David Sexton, sector manager for Paragon Consulting Services Inc., York, Pa., maker of Metalware and MetalNet software.

“Six months ago it was all doom and gloom. Today, it feels like people are more optimistic about the third and fourth quarters of this year,” says George Walton, president of 4GL Solutions, Markham, Ontario, which offers the Steel Manager III system.

“Our customers are telling us they see some level of stabilization in volumes right now. Their order books are a bit more solid. I think everyone is waiting for the second half for things to turn around,” adds Peter Doucet, vice president of consulting for Invera, Newtown Square, Pa., which offers STRATIX ERP software.

Some service centers bought systems last year to take advantage of the Section 179 tax deduction, which expired at the end of the year. But most have put capital investments, such as computer hardware and software, on hold until the market improves. It remains to be seen if this has caused pent-up demand for systems in 2010, says Alan Goniwich, president of Verticent, Tampa, Fla.

The market cycle may be at a tipping point, notes Sexton. Many companies upgraded their systems ahead of the Y2K scare. Now, a decade later and with much advancement in technology, it is time for another upgrade. Most companies are on their second or third generation of computer systems; few service centers are still nursing a homegrown system. Paying to staff an IT department while trying to keep a legacy system up to date just does not make sense for companies striving to cut costs and operate lean, he notes.

“The downturn in the economy has really forced people to analyze their operations. That has made them realize how business systems can help them reduce costs. Instead of viewing software as an expense, some see it as a tool that can help them be more efficient and improve their bottom lines,” says Walton. By increasing automation, service centers may be able to reduce headcount long-term by not replacing positions cut during the downturn.

Those service centers faring the best in today’s market seem to be the ones emphasizing their value-added processing capabilities, says Doucet. “Some Invera customers are major players in their market segments and have managed to take significant business from weaker competitors during the downturn.” Adds Ray Vasson, manager of product consulting at Invera, “We have found some of these major players moving into new markets, where our software has helped to take them.”

Invera markets its systems internationally. Over 20 percent of its current business is in Europe, where the economic situation is much the same as in the U.S. “The large service center consolidation trend has slowed, but well-funded companies remain opportunistic. We have seen a lot of our customers grow through acquisition, moving into new, even foreign markets. We tend to follow our customers, who are great forecasters of what our product should be doing,” Doucet adds.

Invera, and other software vendors, are working on features to address the specific needs of service centers that acquire or open multiple locations. “They need to be able to take advantage of the assets, inventory and processing across the different holdings. It’s much better to buy from a sister company than to buy from a competitor,” Doucet notes.

Such multi-company functionality can streamline the buyout process, for example. When one company inputs a purchase order, the system automatically initiates the sale by the sister company, prices it, produces the necessary documents and mill certifications, and updates the inventory in both locations. “It completes that full cycle in a very automated and seamless way. It makes it easy and fast to deal with the other companies in your enterprise,” Doucet says.

Verticent has also improved features to help operations with multiple plants communicate across divisions, buy and sell from one another, share equipment and manpower, consolidate purchasing and track costs and profits. “Different divisions may sell common materials or even sell to a common customer. You need good multi-plant fundamentals so you can make sure the revenue hits the right division without doing a standard buy/sell, which just adds more transactional activity,” Goniwich says.

One definite growth area is cloud computing or software as a service. Rather than having their own hardware and software on site, users log onto an off-site server maintained by the software provider. This approach offers numerous advantages, say software vendors. It’s economical because IT infrastructure costs are shared. Users don’t have to employ IT experts to maintain their own systems. They are always using the most up-to-date version of the software. And servers are redundant, offering the highest level of data backup and security.

“This allows service center management to focus on running their business rather than running their computer system,” says Doucet, who estimates that 30 to 40 percent of Invera’s customers now access their software remotely. “It’s a black box. Just like the Internet, it’s always there.”

“People are starting to look at software as a service as a real cost-benefit alternative to maintaining IT infrastructures in-house. It was a hard sell before. We often ran into IT people who had some turf issues with it. But when you have a shakeout like this and an economy where companies really have to think of creative ways to survive, people start looking for better ways of doing things,” says Gary Marzec, program manager for supply chain management at Northrop Grumman Information Systems, Canonsburg, Pa.

All of Northrop Grumman’s 150 users tap into the software via the Internet. “From our perspective it is easier to maintain. We are constantly keeping up to date with the latest versions of the Oracle database. We have invested in things like disaster recovery that no individual user could ever afford,” notes Marzec.

Recent product enhancements
Software vendors say they have been busy upgrading their products in the following areas:

      n     Bayern Software—Bayern now offers its Steel Plus Commission Tracker program, which includes several enhancements for calculating sales commissions for outside and inside reps. It can be used to set variable commission schedules based on margin or revenue breaks; calculate commissions on invoices, items or even at the individual tag or lot level; help capture additional costs from the warehouse or third-party vendors; export data directly to Excel for easy reporting; and filter data by sales rep, transaction date, payment date, etc. “Customers are getting creative in incentivizing salespeople in this down market. Commission Tracker can help service centers offer strong commission incentives to all types of salespeople,” Holman says.

      n     Compusource—David says development at his company has focused on three primary areas: document imaging and document management, which reduces paper flow; bar coding, which saves time and adds accuracy to inventory management and other functions; and the integration of companies’ websites with their ERP systems for e-commerce. “Our customers are seeing that investment in these three areas really provides cost benefits.” Compusource also has a major new product release in the works, he adds.

      n     Enmark Systems—This Ann Arbor, Mich., software vendor has completely redesigned its Eniteo ERP system for service centers. Based on Microsoft Windows, Eniteo is an intuitive system that makes important data easily available wirelessly using various portable digital devices. “As real world users adopt this Windows protocol, they now report dramatic work efficiency gains in almost all areas of the traditional service center workflow,” says John Bilek, Enmark president.

      n     4GL Solutions—Recent enhancements to 4GL’s Steel Manager III system have improved bar coding functionality and automated e-mail and faxing of documents such as order confirmations and invoices. Also of note is work 4GL did to integrate its software with one customer’s Kasto automated storage and retrieval system. Once the order is entered into the SM3 system, it can be sent directly to the automated racking system, which then retrieves the desired material. “That saves time and provides accuracy. It keeps the two systems in sync. The inventory in the Kasto and the inventory in SM3 are now always equal,” Walton explains.

      n     Invera—Invera has been enhancing the multi-company functionality of its STRATIX system. When acquiring a new division, some companies want to roll it into the same system, while others want to maintain some separation. For example, the company may want one division to be able to see another’s inventory, but not its cost. As part of its ongoing effort to capture the nuances of managing information in various submarkets, Invera has added modules for marketers of steel building products such as roofing and composite panels. “The industry that produces panels and profiles has requirements that are slightly different from the typical service center,” Doucet notes.

      n     Northrop Grumman—Northrop Grumman’s focus is on software as a service and e-communications between trading partners. Its Steel Partner portal provides web-based transaction management capabilities for steel producers, service centers, distribution centers and processors, connecting the supply chain community via EDI. Its OpenTrac suite of ERP solutions is designed to handle supply chain management requirements and communications links between metals trading partners, including service centers and their suppliers and customers. New to OpenTrac is the ability for users to access their data using smartphones. “We think that’s the next innovation for IT, and we are introducing it as a new module,” says Marzec.

      n     Paragon Consulting—Paragon now offers a PC-based version of Metalware aimed at smaller users, as well as on-demand hosting or software as a service. Other enhancements include further integration of CRM (customer relationship management) functions, and automated imaging, e-mailing and faxing of documents in electronic rather than paper form.

      n     STEELMAN—STEELMAN Software’s Steel Enterprise Management System is now available in an on-demand hosted version. The company has launched websites for the Chinese, South American and Mexican markets; it has upgraded its functionality for demand planning to help users make better purchasing decisions; and it has enhanced its MRP manufacturing module, which will benefit the growing number of service centers moving into parts fabrication. STEELMAN is set up for multiple currencies, multiple units of measure and multiple languages so it can be used by people all over the world. “Some service centers have changed their businesses from just being distributors to being more intimate with customers by fabricating parts and assembling them. I think we will see more get into fabrication as part of the survival game,” Brody says.

      n     Verticent—Goniwich says his company worked during the slow period to increase the depth and breadth of Verticent’s functionality, taking advantage of the open technology capabilities of its Microsoft-based product. Much was accomplished in terms of integrating various functions, such as logistics, freight management, CAD, controllers and tariffs. “Customers have requested help with freight, so they can search and see what the carriers are going to charge. These guys are all running on thin margins, so we want to help them squeeze out that extra fraction of a percent,” he says.

  
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Wednesday, July 23, 2014