Plex, one of a few but growing number of cloud ERP vendors, has spent the last two years rebuilding its leadership, plotting its software direction, altering its capital structure and more. The unstated but obvious goal of this effort has been to:
- identify a clear direction and path for the company
- aggressively ramp up sales
- expand its addressable markets, and,
- deliver an enhanced technological and user experience to its customers.
These recent efforts were shared with analysts this week at Plex’s headquarters near Detroit.
Plex was one of the first software companies to build a suite of applications for the cloud. The firm was founded around 2001 and created a cloud ERP suite initially targeted for the automotive sector. The product line is multi-tenant.
Since then, the company has expanded the number of applications offered, vertical industries served and countries in which its software operates. Simultaneously, the company has attracted ever larger customers, many of which are multi-billion dollar revenue multi-national firms.
Plex has changed hands a couple of times in recent years. In 2006, Apax Partners, a private equity firm, took majority control of the firm and brought in new leadership. In June 2012, private equity company Francisco Partners bought Plex. With the last ownership change, Plex got a new CEO and a substantial number of new management team members.
In December 2012, Accel Partners, a major Silicon Valley venture capital firm, led a capital funding round of approximately $30 million. Proceeds for this capital round were earmarked for product enhancements that would beef up the software vendor’s ability to win larger deals in two-tier and hybrid ERP environments.
In June 2014, Plex closed a Series B capital financing round that netted the company approximately $50 million (USD). According to one source, this money is to be used for additional sales and marketing expansion. This capital financing was led by major Wall Street firm, T Rowe Price.
In a conversation with Plex’s CFO, he related that he has restructured and/or refinanced some of the company's pre-existing borrowings to take advantage of lower interest rates and better terms. The net effect of these changes should be reflected in improved working capital and lower debt service cost for the company.
Many of the key executive positions within Plex have changed in the last two years. Jason Blessing is the new CEO. Jason has a Silicon Valley (i.e., Oracle and Taleo) background. I've met a new CFO who comes from Eloqua. I've also met a new channel partner executive who comes from Accenture and Silicon Valley. There are several new executives in the sales and marketing area. Many of them possess experience from firms such as PeopleSoft, Workday and other organizations.
In addition to the personnel changes in existing roles, the company is just now ramping up a significant number of new additions to its sales organization. Why did they wait to add additional sales professionals until now? According to Blessing, the team needed time to perfect the product roadmap, to complete some technology changes/upgrades and to gain clarity as to the methods and messages it would use as it continued to broaden its product and geographic footprint.
That development time is now complete and now Plex is beginning the execution phase of its new strategy.
Historically, Plex has been a force in the automotive sector particularly within the Midwest United States. Its word-of-mouth reputation among small to midsize manufacturers was so great that the company began to get growing numbers of sales inquiries from ever larger automotive parts manufacturers. As a result, the company has seen its product move upmarket and beyond a North American boundary with scant marketing effort.
In the new Plex, the company has identified a number of additional manufacturing sub-verticals that it intends to address vigorously. While the company already has a strong presence in a few of these sub-verticals today (e.g., metal forming), it was clear that the company will continue to add more functionality specific to these new markets. For example, the company already has a number of food manufacturers in its customer list
The analysts were even 'treated' to a tour of one of these food manufacturers at the end of the day. I describe it as a treat is this plant made salted caramel and chocolate candies. And in the spirit of full disclosure, I tried several of those treats. ;)
These firms, in the food manufacturing space, have spurred the creation of additional process manufacturing functionality in the Plex products suite – a suite most considered oriented around discrete manufacturing only.
The technology team at Plex has been working on a number of technical and infrastructural changes the last few years.
Users will notice a marked improvement in the user interface and user experience of the software. Approximately 24,000 screens are being updated to a HTML 5, mobile–first, look and feel. The company also demonstrated for us other user interaction capabilities through a sort of factory floor of the future demonstration in their headquarters facility. This technology utilized Google class technology as well as other wearable technology.
Interestingly, the company has been able to eliminate 30% of the application code in the current products. It was able to achieve this in a way that on-premises ERP vendors cannot. Since all of Plex’s application software is cloud-based and multi-tenant, Plex can monitor the software to identify which sections of code are being used, used a lot or not used at all by customers. Functionality that may have been used by one or a limited number of customers years ago may have been superseded by a better function that was introduced at a later time.
Eliminating the bulk of this nonproductive code makes for a more streamlined application that is more easily debugged, operates faster and is much more straightforward to maintain. Additionally, users do not have to be burdened by systems full of cluttered screens rife with functionality that no one needs or wants. As Jim Sphepherd who runs startegy for Plex said:
"We're in the business of getting rid of code."
How many times do you hear that from a software vendor?
If there ever was a point that Plex should be emphasizing to customers still insistent on retaining or buying on-premises software, this is it.
We were also treated to a presentation involving a number of expensive but necessary changes Plex is making with regard to its data center. Currently, Plex application software is hosted out of Plex’s own facility in Auburn Hills, Michigan. Plex is now facing a challenge that all SaaS companies dream of: their rapid success in the market is straining the physical infrastructure of their existing hosting environment.
As stated in this article’s headline, the next chapter for Plex will be about execution. It is abundantly clear that the company has been quietly building for the future these last 24 months or so. Its products can stand on their own in multiple kinds of ERP deployment models. The products can be sold into a larger number of industries, geographies and sizes of businesses. The look of the products has been improved and the company's changing its data center capabilities to scale with this new growth. All the pieces appear to be coming together for a major push.
Now is a very good time for Plex to grab market share. By many measures, the company has as much as a 10-year lead over some of its competitors. Sadly, some of its competition is only now beginning to re-platform their on-premises software products.
This is the time for Plex to aggressively grab as much of the available market share that it can. The challenges that it will face are common with other pure SaaS vendors: how to cash-efficiently drive high-growth without incurring an even higher cost of sales. Plex will need to do the following well:
- grow sales, cash flow and margins simultaneously
- manage cash flow wisely
- studiously review its sales leads so as to avoid spending scarce sales pursuit dollars on low probability deals
- build out its channels carefully and choose integrators who have pre-existing, dedicated cloud practices
- develop outstanding customer implementation services that emphasize in equal parts quality and speed of value delivered
In time, we should expect to see Plex open dedicated sales offices in other parts of the world. While the company currently supports customers from a number of locations globally today, creating a physical sales presence in other markets will be a turning point in its history.
Next year’s analyst meeting should be very interesting….
Disclosure: Plex is a diginomica premier partner and funded my T&E for the analyst event