Last week,Phil Wainewright, Den Howlett and I were briefed by Plex Software in what all of us took as a teaser for an upcoming analyst event. The briefing flowed along three major themes:
- Continuing Plex Growth
- Plex expansion strategies
- Common cloud ERP deployment strategies
I'll examine each of these in turn and Den will add his thoughts at the end of each section. Phil decided to wait until he's had a fuller briefing before committing to comment.
Continuing Plex Growth
Plex shared with us a number of statistics highlighting their continuing growth. Plex reported growth in net-new customer acquisitions and expansion of existing customer relationships. The company has also added to its workforce and the number of total customer facilities using Plex software has also increased. While the exact values are not available for public consumption yet, the direction was universally positive on all factors.
When placed in context of new customer acquisition, growth and other measurements from other cloud ERP vendors (e.g., Kenandy, Rootstock, FinancialForce, NetSuite, etc.), the data points from Plex seem to land in the middle of the pack with other vendors doing somewhat better or worse than Plex.
Given Plex’s long tenure in the cloud ERP space, I was hoping for somewhat larger numbers. After all, Plex has been in this market since the late 1990s. The company has promised to update me further re: Plex’s marketing efforts. What was particularly encouraging though, was the discussion we had late in the call concerning a number of new, massive accounts and implementations by Plex. It's very clear that the product is now repeatedly penetrating large billion-dollar plus corporations. For old-school, on-premises ERP vendors who have maintained that cloud ERP is not suitable for large firms (and therefore must be relegated to the SMB market), Plex’s proof points stand in marked contrast to that FUD/smack talk. By themselves, Plex can dispute that misinformed opinion of cloud ERP.
Den: It's frustrating at times being privy to exciting information. I believe that going public with the numbers provides the best validation for a story that has significant depth. As Brian says, some of the big names they can field, the most well known of which is probably Caterpillar, demonstrate clearly how forward thinking businesses are able to take advantage of cloud based technologies. But there's much more. Plex gets into accounts large and small which in turn gives it a huge addressable market.
Plex Expansion Strategies
Plex believes they have many opportunities to expand their products and address the market needs. The company intends to expand the number of industries it serves. While many firms know of Plex’s strength in the automotive and automotive supplier sectors, the company is moving forward into other manufacturing verticals such as process manufacturing.
Plex also sees opportunities to continue to move more and more upmarket into ever larger firms. Not only that, how the software is utilized by large firms is changing (see below) and these different use cases open up additional market opportunities for Plex to exploit.
Plex has realized that almost all of its customers are multinational or global firms. These customers have already triggered Plex implementations in approximately 20 countries today. Management at Plex is taking a deliberate, conscious strategy in expanding its international footprint though. The company will make the Americas a continuing high priority market space and will add sales and marketing efforts beyond its core rustbelt stronghold. However, one should not expect to see material Plex operations established in Europe or Asia in the near term.
During the briefing, Plex executives shared with us a number of things the company has done to enhance the software's ability to serve ever larger customers. Functionality in the financial modules and other back-office functions has been expanded significantly. This is consistent with Plex’s strategy to penetrate more than one kind of ERP market. Furthermore, more robust back-office solutions allow the company to sell into larger firms as well as firms with diverse corporate entity structures, global manufacturing operations and other environments.
While Plex's core strengths for years were around the execution layer of manufacturing software, these enhancements to the back-office bode well for the company's ability to serve large diverse multinationals.
Plex continues to enhance its core technology as a means of attracting new customers to the fold. Three particular areas were highlighted to us: improved user experience, process manufacturing functionality, and, something Plex describes as its elastic platform.
Like many application software vendors, new, mobile first, modern user interfaces and input experiences have become table stakes. Software that looks like it was designed for the old client/server era or prior eras is just not marketable anymore. I look forward to seeing more of this new user experience (UX) in subsequent Plex briefings.
Plex representatives spoke a fair bit about their platform. However, this platform will not be comparable to that of say Salesforce’s Force.com environment. Plex has been cultivating relationships with other technology providers who offer component solutions that are highly valued by specific manufacturing customers.
Plex has focused its efforts on making the integration between these other solutions into the Plex products to be simple, quick and painless. While Plex does have a proprietary platform from which its applications are constructed, there are no plans at this time for Plex to open this platform up to third-parties to use to develop unique applications in the Plex space.
Den: Plex is being drawn into many international scenarios but has no plans to put feet on the street in those other countries - yet. I believe that's a mistake. The company has good reasons for not doing so that are understandable given the potential on its doorstep. But the world won't wait on them. One topic that popped up briefly that caught my attention - wearables on the plant floor. While little was said on this outing I look forward to hearing more about what that means beyond the kind of sensor technology that's common in manufacturing and which Plex already covers. One question remains open in my mind: how will Plex address the emerging services market inside the manufacturing verticals it serves? That could represent a rich seam, where Plex could bring a freshness of thought we don't see elsewhere.
Common Cloud ERP Deployment Strategies
Plex executives also shared with us three common cloud ERP deployment strategies they see customers utilizing today. They specifically identified these deployments and their opportunity within each:
- Enterprise ERP
- Two-tier ERP
- Hybrid ERP
The first of these, enterprise ERP, describes a deployment where Plex is used at all levels of the organization. All plants, divisions and headquarters are utilizing the same ERP software.
Plex sees a number of smaller, simpler customers utilizing the strategy. That said, this does not mean that large enterprises may not adopt an enterprise ERP approach as well. The SAP installed base is full of large manufacturers who have adopted an enterprise ERP deployment strategy globally. The key advantage behind this deployment method is that all parts of the firm are working from the same playbook, applications and data. Users from one part of the enterprise can access information from other parts of the firm with no additional effort or integration work.
Moreover, employees in one piece of the business can be easily relocated to another location without any new learning curve associated with the technology they will utilize. The key observation in Plex's case is that the more homogeneous the manufacturing firm is, the more likely they will adopt an enterprise ERP deployment method.
The two-tier ERP world describes an existence where individual plants or divisions may utilize a full ERP suite from someone like Plex while corporate headquarters may utilize some other systems altogether. Two-tier systems, commonly referred to as divisional or plant ERP systems, are popular in more diversified manufacturers where different types of manufacturing disciplines (e.g., process manufacturing techniques used in one plant versus discrete manufacturing methods used in another) coexist within the same firm. Also, conglomerates with wide diversity in the products and services they take to market may adopt this deployment method as well.
Finally, hybrid ERP environments represent the most challenged IT environment and are usually in firms very diverse operations, systems and processes.
Plex intends to compete in all three deployment scenarios. This is why it enhanced its core back office applications. What this also means is that Plex intends to go head-to-head with all manner of ERP software firms no matter what size customer they serve. As a result, we should hear of more competitive wins (or displacements) by Plex against the likes of SAP, Oracle, Infor and others soon. Those displacements will serve as proof that Plex has the product functionality to win in all of these markets and that it has the enterprise sales professionals who can out sell their sales teams at old school ERP firms. That latter point could go either way as many firms today may be looking for an alternative to the ERP vendor they’ve had for decades. Yet, those same ERP competitors have top level connections in those customers that may be hard for Plex to dislodge. Time will tell if Plex will succeed here.
Den: I totally get why Plex is taking this approach. Whether it works is another matter but then I have to admire the company's willingness to take on all comers. It's not something we see too often.
It appears that Plex is executing its sales strategy to both new and existing customers well. The numbers we saw support this. More momentum, though, may be appropriate as new market entrants and re-platformed old competitors are poised to become much fiercer adversaries in the near-term. This is the time to acquire lots of market share while the pickings are easier.
Plex’s product portfolio strategy seems correct and appropriate for the firm particularly with how it intends to expand its addressable market and to expand its customer relationships. For me specifically, I still believe a more open and aggressive platform strategy might yield greater long-term benefit for the company.
Den: Like Brian, I'd prefer to see more happening on the platform and to that extent, this may solely end up being a matter of short and long term emphasis. With so many segments in manufacturing, Plex has to be careful it doesn't spread itself too thin, but on the other hand it cannot expect to cover all the bases. Picking the right white spaces will be key and on that I'd like to meet with implemented customers who can talk the game for the company .
All images via Plex
Disclosure: Plex, Salesforce, SAP, Infor, NetSuite and FinancialForce are all premier partners at time of writing.