Strategic Planning for Companies

Strategic Planning for Companies

Strategic Planning for Cincom Systems

Creating transformational change in companies by automating their most challenging processes, strategies and systems is what Cincom Systems excels at today. The company has five different product divisions, each selling enterprise software into various segments of the Customer Relationship Management (CRM) marketplace. Privately held with 700 employees employed across five continents, Cincom is also profitable and has had many customers on maintenance contracts for over two decades. The future of Cincom is predicated on how well strategic plans can be defined and executed with its major partners including IBM, Microsoft and SAP. Of these three, Microsoft offers the greatest potential for accelerating the product development plans of the Cincom Manufacturing Business Solution (CMBS) business unit. CMBS generates between $7M to $10M a year in revenue, both on maintenance contracts in addition to new software sales, and has created a line of CRM and Enterprise Resource Planning (ERP) systems that are designed for complex manufacturers. In order to stay competitive, Cincom must move these systems to the Software-as-a-Service (SaaS) platform, which is how they can be migrated quickly and easily to Cloud computing platforms Microsoft has including the well-known Azure platform. This migration from being purely a licensed application to being on the SaaS platform also needs to include greater support for analytics and business intelligence (BI) within the applications as well. With these new features, the CMBS enterprise suite would be able to generate 30 -- 40% more sales. In addition, the costs of supporting customers would drastically be reduced as the SaaS platform would make it possible to streamline new product releases on a central application platform. At present Cincom CMBS struggles with getting its enterprise customers to upgrade their existing CRM and ERP systems as well. With a SaaS-based system the company could roll out entire versions without having to deal with timing and costly delay issues as customers procrastinate on releases. This approach will help to alleviate one of the greatest hidden costs of enterprise software development, having to support multiple versions of legacy applications (Lindley, Topping, Lindley, 2008). It is anticipated this strategy will save nearly $7M over the next five years in development costs alone. Moving to a SaaS-based CRM and ERP systems will also significantly open up the opportunity to integrate these systems to legacy applications customers have neglected to integrate with their existing on-premise applications. The greater the level of integration between legacy systems and CRM and ERP software suites, the higher the Return on Investment (ROI) and more effective analytics and financial reporting (Borch, Hartvigsen, 1991). Cincom sees the potential in their three-year strategic plan to solve long-standing problems that their on-premise software strategies have slowed down sales of their highest-end and most profitable enterprise software. The intent of this analysis is to provide a description of the Cincom Manufacturing Business Solutions (CMBS) business unit, perform a SWOT analysis, define how the Web Services plan created with Microsoft will impact their business in the next three years and how this plan will be measured and analyzed for effectiveness.

Description of Cincom Manufacturing Business Solutions

The CMBS business unit of Cincom Systems was founded in 1981 when the company created its own CRM and ERP systems specifically for the complex manufacturers in the Kentucky, Indiana, Michigan, Ohio and Pennsylvania regions. The focus of these initial CRM and ERP systems concentrated on accelerating the six stage buying process for enterprise software by providing initial pilots showing the impact of using these applications to streamline and simplify complex business processes (Verville, Halingten, 2003). This included creating advanced Return on Investment (ROI) assessments for prospects, showing potential costs savings of the applications and how effectively manufacturers could meet their customers' specific needs. As the companies Cincom CMBS sells to are all in the Business-to-Business (B2B) market, ROI Assessments are essential for getting funding for key programs. Cincom used the ROI Assessments as a means to create a more effective approach to creating and closing sales opportunities, quickly growing from 15 staff in the CMBS business unit to over 60 in just three years.

Over time sales began to plateau and the needs of companies accelerated quickly to more advanced forms of analytics and Business Intelligence (BI) software. These modules that competitors had could also be used for cost-justifying the maintenance costs of the software itself. Cincom has struggled to continually selling their CRM and ERP systems at the pace they had attained during launch, which is the primary factor in partnering with Microsoft to create advanced analytics, BI and distributed order management modules for their applications. These three years are where Microsoft has expertise, in addition to the development tools to deliver the CRM and ERP systems for complex manufacturers on the Microsoft Azure Cloud-based platform.

One of the most powerful differentiators that Cincom has is the ability to implement their CRM and ERP systems within ninety days or less. As the median level of time take to implement enterprise software systems is nearly seven months (Peslak, Subramanian, Clayton, 2007), this is a very significant competitive advantage. The speed of delivering systems also translates into more reliable revenue streams over time, as customers are more satisfied that their enterprise-wide software systems are working. The ability to transform maintenance into a competitive advantage for a software vendors is key to their long-term profitability (Ng, Gable, 2010). The following is an analysis of the strengths, weaknesses, opportunities and threats (SWOT) of Cincom's CMBS business unit.

SWOT Analysis

Strengths

The CMBS business unit has a deep expertise in the areas of applying enterprise software to complex manufacturing requirements. The depth of expertise in meeting complex manufacturers' needs is evident in how effectively companies are using their software to streamline project-based manufacturing workflows. This depth of complex manufacturing expertise is the greatest strength CMBS has today. The second most significant strength is the ability to tailor their ERP systems to project-based manufacturing workflows throughout Aerospace and Defense (A&D) companies including ATK, Boeing, Cubic Corporation, Grumman Aerospace, Honeywell and many others. Customer referencability is the second greatest strength of the company today, as the CMBS business unit has nearly twenty-five different customers who can be contacted for feedback on their overall experiences using the software. The third greatest strength is the strong reputation the company has with industry analysts and independent rating services including Gartner, Forrester, IDC and others. The ability to generate sales activity based on the reputation a company has earned through solid efforts with independent analysts is critical to being included in ERP evaluations by enterprises (Fisher, Fisher, Kiang, Chi, 2004). Cincom has done this exceptionally well, and continues to work with industry analysts to provide details on their current strategic plans. The fourth core strength of the company is its ability to partner with IBM, Microsoft, SAP and others. This strength is shown in how the proposed strategic plan integrates to Microsoft platform for Cloud computing, SaaS application development, analytics and Business Intelligence.

Weaknesses

Cincom in general lacks the engineering expertise to create more advanced Cloud computing-based platforms to the level of Microsoft Azure, in addition to lacking the expertise to create its own analytics and BI applications. This is a major strategic weakness that over time will hinder their ability to grow quickly. Another weakness is the inability to work completely with Oracle databases, which has slowed down the adoption of their software in more of the mainstream manufacturing companies who have standardized on this database type. The extent of system integration an enterprise company can provide is directly related to the level of ROI they generate for customers who standardize on their applications (Borch, Hartvigsen, 1991). CMBS however is very strong in the areas of IBM, Microsoft and SAP Integration, which were the three partners the company considered when first implementing their next-generation ERP system. The strengths Microsoft have in SaaS architecture, cloud computing, analytics and BI made them the best possible fit to overcome Cincom's limitations in these areas. The Cincom weaknesses in these areas however are significant and if not addressed, will leave a very significant gap in their overall suite of solutions they can offer customers.

Opportunities

Cincom has several opportunities in the aerospace and defense and project-based manufacturing industries of heaving ventilation and air conditioning (HVAC) where production processes are comparable to aerospace industries. These opportunities however require SaaS-based implementations capable of being delivered over broad geographic distances, all behind protected firewalls and within organizations' security boundaries. The need for greater levels of analytics and BI is evident in customer visits throughout the aerospace and defense market as well. CMBS could also be more successful if they had greater levels of integration support for Microsoft's own systems as well. Finally their core aerospace and defense customers are asking for a distributed order management system capable of functioning as a Web Service, so suppliers can be more easily managed. All of these opportunities are hinging on the ability of Cincom to make the partnership with Microsoft work.

Threats

Obsolescence of their applications is the biggest threat there is, followed by the lack of support for cloud-based platforms, analytics, BI and distributed order management. The licensing approaches that are in large part predicated on the on-premises delivery model is also difficult for many customers to accept as more and more companies are moving towards more flexibility in their contract management applications. All of these factors are significant threats to Cincom today.

Microsoft Strategic Plan Analysis and Assessment

At present CMBS is generating between $7M to $10M a year in revenue. CMBS senior management has been working through various forecasting scenarios with customers, and has devised the following strategic plan assessment of the revenue contributions from each Microsoft software components.

Microsoft Strategic Plan Revenue Assessment

Software Component

Incremental Revenue Gain

Incremental Risks

Cloud Computing Platform and SaaS Support from Microsoft

$2M to $3.5M

$4M of contracts renewing in FY2012-2013

Analytics and Business Intelligence

$7M - $15M

$2M due to not having these features

Distributed Order Management Module

$25M - $50M

$7M if not done within three years

As the core ERP systems that Cincom sells are based on a distributed order management core set of features, the majority of customers contacted are focused on this module first. Second in importance is the ability to integrate analytics and BI into their manufacturing operations. Based on discussions with customers, Cincom believes this has the potential to add $15M of their businesses in effect growing it by over 100% relatively quickly. The third category of the Cloud computing platform and SaaS is driven primarily by the need for greater control over costs. Cincom customers want cloud-based applications to be focused on security, entirely within their organizations' IT networks.