Everest Software and Versata – Software Vendors or Portfolio Companies?

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SMB Research has been hearing some interesting things from the Everest Software end-user community.  So we decided it was time to take a closer look.  What we find is a software company that seems to like to do things its own way – and perhaps a bit differently than some of the software and technology companies you are more familiar with.  Everest Software has been around for quite a long time, and continues to make an impression on customers – either quite positive or very negative.

Everest Software’s current strategy is to “focus our investment and energy on our existing customer base”, which Everest Software acknowledges is “a radically different approach than that used by most software companies”.

Given this: If you are a company undertaking an evaluation for a new ERP system, and you are not currently an Everest Software customer, SMB Research would not recommend that you include Everest Software on your list of vendors to evaluate.

Everest Software (not to be confused with Everest Software international, or the Everest Group) started out in 1994 as iCode, offering a solution known as Accware.   The company was known at one time to have had as many as a few hundred employees.  By 2001, iCode was developing a new system, Everest, based on Microsoft’s SQL server technology, and by November 2001, had reportedly sold the new system to as many as 500 customers at prices thought to be well below those of Tier 1 systems.   Since then, Everest Software has gone through a series of transitions – multiple CEOs and multiple strategies – before being acquired by Versata Enterprises, a wholly-owned subsidiary of Trilogy, in 2009.

Versata Enterprises has, in fact, acquired quite a few companies: In the past 5 years, Versata Enterprises has acquired, by our count, some 20 companies, including Everest Software.  Joe Liemandt’s (CEO, Trilogy) stated goal for 2011 is, in fact, for $100M of acquisitions.  There have been two acquisitions thusfar this year (Ravenflow, and geoVUE), and so there are likely to be more before the year is out.

Versata is, it seems to us, as much of a portfolio company as it is a software company.

Versata’s acquisitions follow, in general, a cookie-cutter approach: announcement of the acquisition made jointly by the CEO and Versata, departure of the former CEO almost immediately (and quietly), after which a member of the Versata team is named CEO of the unit (or units) they are overseeing.

The acquisitions almost invariably emphasize the critical role of Versata’s 100% Customer Success program, and all units, with few, if any, exceptions, are brought under Versata’s Cloud9 support umbrella.  (As far as we can tell, it is the Versata Cloud9 program that is the link to Trilogy’s outsourced support subsidiary, gDev.)   Some of the Versata units (AlterPoint, Everest Software, Gensym, geoVUE PurchasingNet, and Ravenflow ) have had their websites washed with a uniform look-and-feel (“A Cloud9 Company“) which seems intended to simplify the maintenance of the website, scrub the site of any direct contact information, and to direct all support inquiries to the central Cloud9 support portal.

The CEOs of the various acquired units are often CEOs of multiple Versata units, and they are clearly not just CEOs – but portfolio CEOS.  It seems evident – and this makes sense – that the CEOs are chosen not so much for their expertise in the software industry or another industry, as for their executive management experience or experience within the Trilogy way of doing business.  In the Versata environment, it is arguable that the more valuable knowledge is not so much about how to run a software company as to how to manage a newly acquired business which will have its costs severely cut; most, if not all, of its software development and support outsourced through the Trilogy gDEV subsidiary; and placed under the Customer Success program run directly by each units’ CEO.

What does this mean for Everest Software end-users?

SMB Research has been hearing and fielding questions from the end-user community about Everest Software.  There seems to be an over- abundance of discontent among the Everest Software end-user base, even after you filter for the usual expected amount of ambient, low-grade end-user restiveness in any software vendor’s customer base.

The discontent is, so far as we can tell, somewhat generalized, and, in any event, not specific to the software.   One end-user told us that they were very happy with the product (albeit due in part to the price that they paid).   This end-user said they find the solution to be the best system they have ever seen, to be very user-friendly, and allowing them to find in the system anything that they need.  Another user told us that they loved the software for a lot of different reasons.  We would not be surprised to hear more of the same from many end-users (although you do not have to look very hard on the Internet to also find negative reports on the software.)

Much of the discontent that we hear has to do, therefore, with end-users’ expectations that they will be treated like other software end-users by a software vendor that is very little like any other software vendor.   We believe that some of this results from a fundamental misunderstanding of Versata and Everest Software, and their apparent approaches to the business.

Versata makes no secret about the “foundation” of its strategy: “Business Results with Total Cost Takeout“.  The three pillars of this strategy are in this order:

  • Partner with corporate Information Technology departments to reduce spending
  • Deliver comprehensive business solutions that produce results
  • Focus on 100% customer success

The first focus is on cutting costs, and then delivering the business solutions that produce results, the measurement of which is the purpose, it seems to us, of the (100%) Customer Success program.

This is a much different strategy than most other software vendors where controlling costs, while important, is subsidiary to building new capabilities to grow revenues.  This is not the message delivered by Everest Software or by Versata.

Everest Software is focusing on its existing customer base, which will not grow to any substantial degree.  The opportunities for revenue growth here are limited, which means the resources to build new innovation are limited.  The main objective, it seems, would be to deliver sufficient innovation to sustain the existing customer base, which will be the main source of any add-on revenues for Everest Software.

Everest Software announced general delivery of Everest Version 6 (“Faster. Easier. In the Cloud”) on May 17, 2011, providing “improvements” in:

    - Accounting
    - Extensibility
    - Point of Sale
    - Return Processing
    - Stock Transfers

The announcement is not at all clear about this being a new cloud version of Everest, but reports from the end-user are that this is indeed what it is, and that this, plus the incremental improvements in several capabilities and a number of bug fixes are what constitute this as a new release.  (Everest Software has unfortunately declined our several repeated requests over the past 2 months for a closer look at the solution and for a briefing on company and product strategy.)

A Funny Thing Happened On the Way to the Everest Software Forum

Among the more interesting undercurrents from the customer community is the persistent suspicion that Everest Software is not at all anxious to provide opportunities for end-users to talk to each other.  Thus, there is apparently no Everest Software end-user summit, and Everest Software is one of the very few units without its own forum on the Versata Cloud9 support portal.  (End-users were told that the forum that existed was taken down for maintenance, and the forum has not been seen again since.)  End-users have had to be ever-more enterprising to find ways to get together to compare their experiences, issues – and prices.  Given the futility of trying to prevent end-users from talking to one another, the sorry admission that taking down an end-user forum represents, let’s hope that the Everest Software Forum resurfaces on the Versata Cloud9 portal.

The Portfolio Approach

The software industry has had more than a few examples of software companies that have been bought up and put into a portfolio of companies, where the focus shifted to collecting maintenance revenues.  With enough companies in a portfolio, it can become difficult to maintain the R&D going on so many different fronts – even if the software solution is still competitively viable.  The flow of maintenance revenues becomes more attractive and more lucrative than incurring the expense to try to keep developing new functionality to sell to a new and growing customer base.   The monopoly over the source code and some incremental improvements can keep the support revenue flowing for some time, and of course, if there is a shared support organization, the savings from the shared-services model can result in a very good revenue flow for a company.

Support and maintenance revenue has always been a lightening rod in the software industry (see “Thoughts and Readings on The Software Maintenance Fee Model“, on the Netting IT Out Blog), and this becomes even more of a contentious issue when the vendor’s revenue model becomes primarily focused on the collection of maintenance revenues.

With a shift in focus to the current revenue base, new revenues stabilize or decline, and the resource base for new development in R&D likewise contracts.  It is almost inevitable that there has to be a calculation made about how much investment needs to be made to sustain the flow of maintenance and support revenues, and that is pretty much what gets spent.   There are also often efforts made to increase revenues from the existing customer base, through changes in programs, new support programs, program price increases, custom work, or increased penetration of the existing customers.

To the extent that any given customer is of a similar mindset – stability, rather than growth – and the support provided is satisfactory for them, this is a tenable arrangement for both parties.  Many customers, however, begin to look closely at what they are getting for their maintenance dollars, and question why they are paying maintenance at all.  Other customers in such a scenario will need to be thinking longer-term about eventually moving to another platform for any significant new technology-enabled capability.

General recommendations:

  • Maintain frequent contact with support.
  • Look at your support contract closely to understand what you are entitled to.
  • Ask the vendor for a road map for future minor and major releases.
  • Specifically look for how the vendor defines ‘update”, “maintenance release”, “minor release” and “major release”.
  • Ask the vendor to provide specific commitments to response times, and resolution times
  • Make sure that you have price lists in writing.
  • Maintain strict documentation of your communications with the vendor and the vendor’s support team.
  • Develop  a champion in the company—keep a rolodex of everyone you talk to –for future reference—  employment can sometimes be like a turnstile.
  • Conduct negotiations for more favorable maintenance terms—sometimes that can cut costs in half.

Everest Software end-users are right in the center of several opposing forces: they are a relatively small (we believe) community of end-users, in a large portfolio of a portfolio-minded parent company, who has a strong focus on cost-cutting, who is focusing on the existing customer base for revenues, and who keeps most news and information very closely held – and would be just as happy if its customers did the same.

 

SMB Research’s Recommendations for Everest Software End-users

SMB Research is providing recommendations for three general scenarios:

  • Small, stable business, satisfied with the solution and support, or self-supporting
  • Growing business, and/or soon to be out-growing the Everest Software solution or the support provided
  • Rapidly growing business, and/or have out-grown the solution or support provided

 

What type of end-user are you?

We would be glad to discuss your specific situation with you to provide specific recommendations on the best strategy for you.

If you are a small, stable business, not growing terribly quickly, the Everest Software solution provides you every capability your company needs for the foreseeable future, and you are self-supporting, or able to get whatever support you need:

  • We consider Everest Software to be a medium near-term risk for you.
  • You may not need to do anything the immediate future.
  • Given that the software is stable for you, and you are not growing rapidly, and have adequate support, there are no burning reasons for you to move off of the platform.
  • Look out 3-5 years, and anticipate what your business might look like, and what new (technology-enabled) capabilities you might need.
  • Establish relationships with other Everest Software end-users, and stay in touch to assist one another.
  • Lock in support prices where it makes sense over the time frame that you expect to be on Everest Software.
  • Establish a relationship with a trusted IT service / support firm who can add necessary customizations that could extend the life of your system.
  • Establish a relationships with a trusted consultant / VAR / technology analyst who can provide you tactical and strategic assistance.
  • Participate actively on both independent Everest Software forums, as well as the Versata’s Cloud9 Everest Software forum.

If you are a growing business, and/or are out-growing the capabilities of Everest Software, or are not able to get the support that you need:

  • We consider Everest Software to be a medium-high near-term risk for you.
  • Start evaluating your options.
  • Your evaluation should include:
    • Assessment of your relationship with Everest Software
    • How much of their go-forward company and product strategy Everest Software has shared with you
    • Fit of the Everest Software solution roadmap to your requirements over the next 6 – 12 months.
    • Whether / how Everest Software has committed to incorporate your specific requirements, as a customer, into upcoming releases
    • Your satisfaction with Everest Software as a company, their solution, and their support
    • A competitive evaluation against competing solutions
  • Commit some time to learning about the technologies available and appropriate for your needs.
  • Establish a relationships with a trusted consultant / VAR / technology analyst who can provide you tactical and strategic assistance.

If you are a rapidly growing business (and/or are making acquisitions), or have outgrown the capabilities of Everest Software:

  • We consider Everest Software to be a high near-term risk for you.
  • Prioritize your evaluation of your alternatives.
  • You should assess what the “Time Critical” is for you – the time by which you need to be on a system with capabilities that scale more for your needs.
  • How does this align with your company’s busy times and low seasons?
  • Establish a relationships with a trusted consultant / VAR / technology analyst who can provide you tactical and strategic assistance.
  • Begin an evaluation of your options:
    • What are your business’ requirements?
    • How are these requirements (and number of users) likely to change over the next 5-7 years?
    • What specific capabilities do you need that your present system cannot provide to you?
    • What budget can you set aside for a new technology investment?
    • What questions do you have about the systems that might be appropriate for your needs?
    • You should plan on doing a competitive evaluation of the systems that could align with your needs.

We would enjoy hearing from you, hearing how what sort of company you are, how you are using Everest Software, and how we can help you with your ERP or software strategy. In the meantime, here are some resources that you may find useful.

 

Resources:

Google Everest (Icode/Versata) ERP Users Group

Everest/Icode/Versata Customers Meetup Group

Support Everest

Everest Software User Forum

 

Recommended reads:

Case Study: gDev Leverages the Cloud
Cloud Computing Journal
By Ravi Gururaj
March 3, 2010 09:15 AM EST

WHITHER EVEREST SOFTWARE? (subscription required)
March 18, 2011
Bob Scott, at Bob Scott’s Insights

VERSATA BUYS EVEREST(subscription required)
September 3, 2009
Bob Scott, at Bob Scott’s Insights

Everest Software CEO Named to Top 40 Under 40
January 11, 2007 10:03 AM
Everest Software Press Release

Everest Software Names Edwin Miller President and Chief Executive Officer
November 27, 2006 02:03 PM
Everest Software Press release

Everest Software Expands Channel Partner Program; Company Adds 18 Channel Partners, Dramatically Broadens Market Reach
April 25, 2006
BusinessWire

iCode Changes Name to Everest Software, Inc.
October 11, 2005
theSoftwareNetwork.com

iCode Appoints ERP Software Executive James McGowan as Chief Executive Officer
March 9, 2004
2020SOftware.com

Icode Revamps Small-Biz ERP Package
June 12, 2003
PC Magazine, a publication of Ziff Davis

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