Gores injects new life into SSA husk

By ADAM GIFFORD

Businesses running on software from System Software Associates (SSA) are breathing easier after a turnaround in the company's fortunes under the management of corporate scavenger Gores Technology Group.

Gores stepped in last August when SSA slid into bankruptcy, putting the assets into a new company, SSA Global Technologies, and injecting $US65 million ($149.3 million) in working capital.

Gores has 20 per cent of SSA GT, investment fund Cerberus Capital has 60 per cent, and the remaining 20 per cent was set aside for SSA bondholders.

SSA chief executive Vic Shepherd, a Gores appointee, said Gores went into struggling companies, built a new business model and worked with current executives to bring costs under control.

"The business model we built for SSA is to get $US200 million annual revenue, from which we could drive a $20 million operating profit," Mr Shepherd said in Australia last week.

For the first six months ended January, revenues were just shy of $80 million, with a $3 million operating profit, and the firm was %cashflow-positive for the first time.

%Mr Shepherd said the key had been global guidance groups, involving customers who were brought in to indicate what should be done with the company's software.

The way software is implemented and serviced has changed to cut down on infrastructure costs, and accounting practices modified. More than 100 people were laid off from the Chicago headquarters.

"Being an American company, it believed in growing corporate staff. The regions were making money, but they had to support an $US87 million corporate infrastructure. We took $57 million in costs from corporate, and moved some of that to the regions."

Mr Shepherd said the previous company had been paying salaries to people who no longer worked there, and there were "a lot of excessively generous exit packages for executives."

SSA's flagship product, Business Planning and Control System (BPCS), was one of the earliest and most successful midrange ERP (enterprise resource planning) packages, with more than 6500 customers, 100 of them in New Zealand.

But while Versions 3 and 4, which ran on IBM AS/400 servers, were stable and reliable, Version 5 was a mess, leading to non-performance, lawsuits and chaos within the company. Version 6, designed to run on other platforms, came out only after huge cost and time overruns.

Mr Shepherd said despite the problems that led to the bankruptcy, most customers stayed loyal. "We lost very few customers, and many customers are returning," he said. "They're saying it's a new company, a new strategy, it's making money and they believe it has a future."

SSA now had a policy of understating objectives and overachieving. In January, it finally released a version of BPCS V6.1.01 for Windows NT and Windows 2000, a web browser interface for BPCS, which means companies no longer need to load software onto each client Machine, and a business process modelling tool, iFramework.

Mr Shepherd said iFramework would help companies upgrade to new versions, including Version 8, which is due in July, as well as incorporate electronic commerce solutions into their systems.

SSA's strength is in industrial manufacturing, particularly in consumer goods, food and beverage, pharmaceuticals, general manufacturing, automotive supply and electronics.

Australia and New Zealand manager Graeme Cooksley said sales in the Asia Pacific region were forecast to rise 25 per cent a year for the next few years.

He said Christchurch farm equipment manufacturer the Clough Group, the first BPCS site outside the US, had just signed for an upgrade after 16 years using the product. There is also new business from Signalmaster, which manufactures satellite dishes.

Mr Cooksley said SSA staff in New Zealand were often used in jobs in Southeast Asia and Indonesia because of their skills.

"From an Asia Pacific perspective, our revenues have held up compared with the previous year, despite big currency drops, so we're growing the business," Mr Cooksley said.

Links:

www.ssax.com

www.gores.com