AN EVALUATION OF THE BUSINESS PERFORMANCE OF XYZ BETWEEN 1ST JANUARY 2007 AND 31 DECEMBER 2009
PART 1 – Project objectives and overall research approach.
Introduction
With its headquarters in Walldorf, Germany, XYZ is one of the leading international providers of business software, and the world's third- largest independent software manufacturer. On December 31, 2009, XYZ employs more than 47,500 people in over 50 countries. XYZ has over 95,000 customers from more than 120 countries. With more than 1200 partners worldwide that offer complementary software, services and hardware, the company has established a wide-ranging partner ecosystem. The company operates business in three principle geographic regions, namely European, Middle East, and Africa (EMEA) region; the Americas region, which comprises North and Latin America; and Asia-Pacific Japan (APJ) region, which comprises Japan, Australia, and other parts of Asia.
The XYZ product portfolio consists of software and service portfolio delivered through multiple deployment and consumption options. Software portfolio include the following key software application: XYZ Business Suite software targeting large and international organization; solutions comprising of XYZ Business All-in-One solution, the XYZ Business ByDesign (Adaptable, on-demand business solution) and the XYZ Business One application for small businesses and midsize companies; the XYZ BusinessObjects portfolio with solutions for business users who need to analyze information and make strategic decisions, XYZ solutions for sustainability and the XYZ Net Weaver technology platform, which integrates information and business processes across diverse technologies and organizations structures. The XYZ services portfolio includes consulting, education, support services, custom development, and management services.
XYZ was founded in June 1972 by five former IBM engineers in Mannheim, Germany as System Analysis and Program Development. The acronym was later changed to stand for Systems, Applications and Products in Data Processing. In 1976, "XYZ GmbH" was founded, and moved its headquarters to Walldorf in following year t. In August 1988, XYZ GmbH transferred into XYZ AG (a corporation by German law). XYZ AG became the company's official name after the 2005 annual general meeting.
PART 3 – Results, analysis, conclusions and recommendations.
Balanced scorecard
In the following, four main areas of concerns to XYZ: financial perspectives, customer perspective, internal business processes, learn and growth are analyzed in order to define recommendation to stay market leader as well as increase market share.
3.2.2.1 Financial perspectives
Financial perspective has already been examined under finance performance part (3.1).
3.2.2.2 Customer perspective
The metrics that can be evaluated under this category are market share, customer satisfaction and customer acquisition.
3.2.2.2.1 Market Share
The software industry is very dynamic around the globe and there is a continuous fierce battle for market share. In addition to tier I vendors such as XYZ, BY and XZ, many tier II solutions such as Ba, Ep, Exa, IFS, In, Lawson, and others are competing for midmarket at cheaper price.
Panorama’s benchmark study in chart 4 provides the market share statistics based on the frequency each vendor was selected by companies for the time period from 2005 to 2009. XYZ ranks highest by capturing 32% of the market share, followed by BY with 23% of total market share. The strong branding and a wide range of products offered by XYZ make it undoubtedly the top one ERP vendor.
3.2.2.2.2 Customer satisfaction
Panorama’s benchmark study (chart 5) also shows that both XYZ and BY have very high satisfaction levels. Nearly 72% of companies are satisfied with their XYZ software; and a very close percentage, 74%, of Oracle users are satisfied with their Oracle software. ERP users achieve high satisfaction levels through advanced operational processes and robust functionalities, of which both XYZ and Oracle are very capable.
3.2.2.2.3 Customer acquisition
There are more than 95,000 customers in over 120 countries until 31 December 2009, and 13, 000 are new customers when compared with 2008 figures. It was a good achievement at the time when global economy was in recession and IT spending was impact.
3.2.2.3 Internal processes
This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements. Metrics for internal processes involves three aspects: innovation, operations and post-sale services.
3.2.2.3.1 Innovation
Innovation literally, means the introduction of something new. XYZ is the policy of investing in partnerships with customers and technology provider to invent new software. In 2009, XYZ R&D expense slightly decreased by 2% to 1,591 million (2008: 1,627 million), but spent 14.9% of its total revenue on R&D in spite of the cost-saving measures implemented in 2009 (2008:14.06%). This increase reflected its engagement in development. The importance of R&D was also reflected in the breakdown of employee profiles. At the end of 2009, its total full-time employees in development was 14,813 (2008: 15,547) and it accounted for 31% (2008:30%) of all XYZ headcount worldwide.
3.2.2.3.2 Operations
‘This process can start with the customer order and finishes with delivery of the product/service to the customers’. (ACCA Paper 3.5, 2003, P.135). XYZ need to identify the internal processes (rapid innovation, reduce cost of software delivered, and software release strategy) that have the greatest impact on what customer values ((e.g. fast implementation and lower total cost of ownership (TCO)).
There was increasing appreciation of importance in delivering innovation faster, reduce cost of software delivery, make adoption by customers easier and lower customers’ TCO by XYZ’s top management team.
3.2.2.3.3 Post sales services
Post sales services or maintenance and support are critical to the successes of any software companies. It not only keeps customer’s IT landscapes up to date and running, but also brings an important source of recurrent income (support revenue) to the business. XYZ has explicit strategies to offer a wide-ranging of value-adding support services that helps customers operate its IT system more efficiently.
XYZ provoked frustration and controversy among its install based customers in 2008 by raising the cost of its maintenance contracts, and the issue was the subject of intense discussion among its user groups. Although support revenue has increased by 15% on 2008 figures (Appendix 2), this policy approved to be unwise and cause huge customers dissatisfaction. In order to demonstrate its commitment to customer satisfaction, XYZ (Mike Simons, 2010) has revised its approach announced on 15 January 2010 that a tiered support model was introduced allowing all customers worldwide the flexibility to choose the maintenance and support options that best meets their requirements.
3.2.2.4 Learning/growth
‘It is agreed that to continue to be successful, organizations must invest in their people, their systems and procedures’. (ACCA Paper 3.5, 2003, P.136) In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization such as XYZ. Metrics under this category can be number of training hours per employee or employee satisfaction.