I recently updated my research on the company because I'm advising a greater number of small to mid-sized Canadian companies on ERP selection. So, I interviewed Syspro Canada's president, John Fahey, participated in a software demonstration, conducted a client reference check, and undertook secondary research.
Syspro's story checks out. It's highly focused. Fahey told me that it has to be. He said, "We can't be all things to all people. And, relatively speaking, compared to our peers, we are a smaller player. I think focus is important."
You know what? I agree with him. Unlike SAP and Oracle, Syspro doesn't have access to the same pool of capital to develop and market multiple software lines. So, it's decided to do one thing well. And, because it's highly focused, it has a really good understanding of what's important to its market.
Fahey explained how focus helps Syspro shape its software. He said: "One of our philosophies in terms of development and design of the product is [our recognition] that our market doesn't necessarily have sophisticated IT skills in-house. So, what we try to do is to take away much of the technical complexity."
For example, Syspro's business intelligence module comes loaded with more than 120 pre-packaged reports. This means that smaller businesses with constrained IT resources won't need to rely on expensive outside technical consultants to build out a library of reports (more on software functionality below).
Gartner Inc., a well-known IT research firm, recognizes the value that Syspro offers its target market. In a report titled 2010 Magic Quadrant for ERP for Product-Centric Mid-Market Companies, Gartner rated the company a niche player with a better ability to execute than many of its significantly larger competitors.
Now, before I move on, I'd like to issue a brief warning to prospective ERP buyers. I'm not advocating Syspro for your company. All I'm doing is giving you a bit of background information and analysis that you can use in your ERP evaluation process. Each and every company should do its own homework to find the vendor and software that best match its needs.
Syspro Worldwide - Corporate background and risk profile
Syspro is a South African company that was founded in 1978 by brothers Phil and Chris Duff. To this day, Phil Duff remains Syspro Worldwide's CEO and key shareholder. Syspro has offices in Canada and the U.S., as well as in Europe, Asia Pacific and Africa.
Prospective ERP buyers should take comfort in the fact that Syspro doesn't bring significant corporate risk baggage to the table. It's a stable company with a long history.
And, unlike many of its competitors, Syspro hasn't been swept up in the recent M&A craze. According to Fahey, Syspro has shunned opportunities to go public. He told me: "We develop our product for the benefit of our customers. We think that being a public company forces companies to consider, in some ways, shareholders before customers. Public companies face a lot more scrutiny, particularly around financial performance. Sometimes, this forces companies to take a short-term view, a quarterly view. The other factor is that any company that has gone public is ultimately at risk of being acquired. We're not interested in being acquired. We're doing quite well, thank you very much."
There is a downside to Syspro's corporate structure, though. It's a private firm whose control is highly concentrated in one key shareholder. It's important for prospects to consider these types of corporate risks in their ERP selection process.
In the short-term, my research suggests that the corporate governance risks aren't significant. For more than three decades, Syspro has been governed with relative consistency and stability.
Things become a bit more complicated in the mid- to long-term. For all intents and purposes, Duff represents Syspro's vision and strategy. His eventual retirement will create a leadership void. Since ERP is typically viewed as a 10-year investment, companies should understand how this governance risk could impact their business and systems. Among other things, they'll want to get some clarity on Duff's expected tenure, Syspro's succession plans and how any future organizational changes might affect the software and related services.
Syspro Canada - Key background information
Syspro operates in Canada through a wholly-owned subsidiary named Syspro Software Ltd., a.k.a. Syspro Canada. The Canadian company was incorporated in 1996 and reportedly employs about 30 people.
Syspro Canada's operations appear to be relatively stable and an important part of the company's global business. The Canadian subsidiary boasts roughly 1,400 clients, representing almost 10 percent of Syspro's worldwide client base. It's fair to assume that the company will probably have a presence in Canada for a long time.
It's easy to understand why Syspro is so successful north of the 44th Parallel: Almost 95 percent of all Canadian manufacturing companies are small businesses that employ fewer than 100 people. This type of company fits right into Syspro's breadbasket. And, the proof is in the pudding. A full 98 percent of the vendor's Canadian clients fall into this demographic.
Like many ERP vendors, Syspro Canada primarily serves the market through channel partners, or value-added resellers (VARs). Its network of seven VARs manages software sales, implementation and support. The corporate office jumps in to provide backup when necessary.
I participated in a demonstration of the current software release, version 6.1. I also interviewed George Foleanu, the vice-president and general manager at Dupar Controls. Foleanu told me that Dupar has been using the software since 2005 and is a very satisfied customer. This isn't surprising, since Syspro has among the highest customer retention rates in the industry.
By way of brief background, Dupar is a Canadian company that manufactures electrical controls and fixtures for elevators on a make-to-order basis. It's part of Dewhurst plc, an international group of nine companies headquartered in the U.K. Each of the nine companies uses Syspro.
Dupar is a quintessential custom manufacturer. All sales are engineered to order. The software has been a key enabler of efficiencies. Before migrating to Syspro, the company spent between five and 10 days pushing an order from engineering to production. Now, it completes these processes within one hour.
So, how has Dupar used the system to make such significant improvements? In part, it designed a workflow in the system (which it reports as being easy to do) that creates production orders directly from engineering drawings. It has also restructured its departments to work cross-functionally. Not only does Dupar push orders to production much more quickly, it does so with fewer resources. Perhaps more importantly, from a client perspective, Dupar has significantly improved product quality and reduced error rates. The automation of processes and tight integration of departments has also allowed Dupar to reduce its labour burden.
As another plus, over the last three years, Dupar has nearly doubled its output while reducing inventory by almost 61 percent. The obvious benefit is significantly lower inventory carrying costs. And, since Dupar has started turning over its inventory more quickly, it has become much more nimble and responsive to market shifts. It's in a much better position to ramp up production or scale it down on demand.
In terms of criticisms, Foleanu would like navigation through the software to become more fluid and efficient. In his view, some areas of the system require the users to click through too many screens to get to the intended destination. He would like to see fewer steps and screen options or, alternatively, opportunities to automate some of those processes.
With respect to the software's short-term future, Syspro is set to release v.7 by the end of this year. In that offering, it's planning to roll out more goodies for manufacturers. For example, there will be enhanced warehouse management functionality, and built-in quality control and assurance functionality.
However, conspicuously absent is any intention to add functionality that would help companies manage their human resources. Although, Syspro can interface with third-party HR management applications, this avenue introduces incremental risks and costs relating to integration, maintenance and training. We'd like to see Syspro build out a native HR module. This would respond to the ever-increasing importance of human capital management. More than ever, Canadian companies need tools to help them manage their aging workforces and shifting job requirements.
It's worth making a final note about Dupar's excellent progress. Its improvements are the result of an organizational and cultural commitment to lean production and innovation. Software is the enabler, not the cause. In other words, it represents a piece of a much larger puzzle. And, Dupar made sure to find the piece that fit.
Every company's puzzle is unique. Before making an ERP selection decision, your business should take the time to study its puzzle and understand what the missing pieces should look like.