Working mostly behind the scenes, Epicor has become a driving force for a whole swath of essential industries from retail to manufacturing that need to muster all their resources to tackle the pandemic.
As hardware store clerks and distributors of safety supplies have been turned into front-line defense against the public health crisis, Epicor revels in its role as the go-to ERP and Cloud applications provider for these essential workers. Dealing with crises is not new to Epicor, which has its own share of upheavals in its decades-long history of developing software solutions for industry-specific financial accounting, made-to-order manufacturing, and EDI systems for eCommerce.
In 2008 Epicor was publicly-traded and its revenues – mostly on-premise – were drifting around $400 million in the midst of the financial crisis. Then Apax Partners took Epicor private in 2011 after merging it with Activant and proceeded with a series of restructuring moves including the spinoff of Epicor Retail to Aptos in 2015. Three years later, Apax sold Epicor for $3.3 billion to KKR, which then registered a quick profit by selling it to CD&R for $4.8 billion in 2020. Over the past few years, Epicor’s revenues have been growing steadily again to approach the $1-billion mark in fiscal 2021.
At a recent in-person event in Boston for industry analysts, Epicor painted a bullish outlook of scaling out its Cloud ERP applications to capture double-digit growth, transforming itself into a full-fledged SaaS player that derives 50% of its recurring revenues from online applications, and profiting from its thriving relationships with midmarket companies that are experiencing the same momentum amid the rebounding economy.
In its fiscal 2021, Epicor posted nearly $1 billion in total revenues chalking up a double-digit rise in its core ERP business. Himanshu Palsule, president and CTO of Epicor, said it was not surprising that its sturdy back-office applications business was able to ride the pandemic-induced growth curve with increased demands for eCommerce, supply chain innovations and overall efficiency gains from an array of new and existing customers.
Case in point is Ace Hardware, one of its long-standing customers that have standardized on Epicor for POS store operations and mobile commerce, accelerated its adoption of eCommerce across its stores as the result of the pandemic. The same applies to the lumber industry where Epicor has served well with hundreds of customers that are going through double-digit growth because of the construction boom and the work-from-home phenomenon that spawns a wave of home improvement projects. One of Epicor’s customers is Lumbermens Merchandising Corporation, a buying group owned by independent lumberyard locations across the country.
Following the purchase by CD&R, the midmarket ERP vendor appears to be on the upward trajectory. In July 2021 Epicor hosted nearly 2,000 customers and partners in Las Vegas for its Insights conference, one of the first in-person events held by a major software vendor since March 2020.
For years, Epicor has gone through a spate of mergers, acquisitions and spinoffs to get to its current state after acquiring brands like Activant, Eagle, iScala and others. Its latest purchase of KDMax enables Epicor to expand into Cloud-based Configuration, Pricing and Quotation by picking up an estimated 50 customers.
Steve Murphy, CEO of Epicor, said it paid a premium to acquire KDMax because a host of bidders found its dynamic mobile configuration capabilities particularly appealing, adding that Epicor ultimately prevailed with the support of its new owner CD&R, something that probably would not have happened under KKR because of the limited operating history of KDMax and its size.
Lisa Pope, executive vice president of Americas of Epicor, attributes the reenergized tempo to the backing of its new parent along with Epicor’s setting its sights on seven-figure deals, a rare occurrence in the past. Currently, its team of 300+ salespeople handle 80% of its business with its partners making up the rest. Average deal size has gone up starting at around $5,000 for its eCommerce transactions to hundreds of thousands of dollars for its ERP deals.
After taking over the CEO position four years ago, Murphy said during the Boston event that Epicor will ramp up its acquisition strategy perhaps at a pace of one purchase every quarter – compared with four in two years under KKR – as he doubles down his commitment to expand globally with plans to challenge incumbents in markets like Australia and others with a raft of Cloud products.
Its desire to rebrand Epicor ERP as Kinetic is another example of the Cloud-first approach. The latest release of the Epicor’s Cloud-based ERP includes improved user experience, EDI integration for eCommerce, Quality Management for life sciences and other verticals as well as enhanced features for better reporting for account payables and invoice management. Furthermore, Advanced Unit of Measure within Kinetic for metal and fabrication vertical will be extended to other verticals.
In 2021, Epicor has secured more than 890 Cloud ERP customers, compared with 600 in 2020. It has about 3,000 mostly on-premise ERP customers and a few thousand more running its Cloud applications like EDI, DocStar for document management, Majure Data for warehouse management.
Chris Brackett, general manager of CW Hayden, an Auburn, Maine, distributor of safety supplies like N95 masks and other products for 3M who attended both events in Boston and Las Vegas, said he was intrigued enough by the vendor’s recent Cloud development efforts that he attended Insights 2021 for the first time after years of running Prophet 21. Despite the Delta variant surge, Brackett made his first trip ever to Las Vegas and even managed to visit tourist attractions like the Hoover Dam with his wife.
Brackett said for an extended period of time, he saw little progress from Epicor to bulk up Cloud functionality of Prophet 21. However, a discernible difference came about over the past couple of years with Epicor’s Cloud-first priority reinforced by the vendor’s decision to invest 11% of its revenues on R&D by building a growing army of 1,200 developers worldwide. That prompted CW Hayden to start migrating to Cloud-based Prophet 21, a major and necessary investment for the company, one of the 300 distributors of 3M in the United States. It embraced the Cloud because it has only 26 employees and little resources to spare to maintain its legacy on-premise Prophet 21 system in a small town that struggles to rejuvenate its workforce. Now Brackett aims to rely more on Epicor for such added capabilities like built-in analytics to help identify trends and savings opportunities.
Midmarket organizations like CW Hayden and others are now shifting more to Epicor the task of running their internal systems and their enthusiasm is keenly felt among the Epicor installed base of more than 21,000 customers.
Nicholas Mueller, Director of ERP Systems at Enjet Aero, said it chose to upgrade to the Cloud-based Epicor Kinetic ERP systems in order to accommodate the growth trajectory of the aerospace parts maker. Since March 2019, the Overland Park, Kansas, fabrication and machinery manufacturer, has grown to hundreds of employees in nine facilities after completing four acquisitions including two this year. In addition to Kinetic for ERP, Cloud-based add-ons like Epicor DocStar have been implemented to help boost standardization and collaboration across these Enjet Aero sites for enterprise-wide document management.
Tessa Kalarickal, director of business systems at Coghlin Companies, a Westborough, MA, contract manufacturer for medical device makers, said she is enthusiastic about Epicor’s new-found energy following her company’s recent addition of Epicor Quality Management modules to complement its on-premise Epicor ERP systems. Coghlin is expected to upgrade to Epicor ERP Cloud once the product is capable of meeting its regulatory and compliance requirements.
The future looks promising for Epicor as all three customers at the Boston event said they are increasing their IT budget this year in order to accelerate their digital transformation initiatives. However, Epicor’s ability to capture more growth will be met with its own set of challenges.
For one, the earlier plans to deliver an integrated ERP platform for its manufacturing and distribution customers have been shelved, thus calling into questions about the benefits of economy of scale, especially in Cloud development, which demands continuous innovation across a common platform. Epicor said it is forging ahead with plans to effectively integrate best practices from each industry platform that it serves.
Moreover, Epicor is now cozying up with Salesforce, which is expected to resell KD Max to its customers. That raises a dilemma for its customers, which traditionally rely heavily on the Microsoft stack.
Those are relatively small issues, compared with the commitment question as Epicor is the only software company in the CD&R portfolio. Whether CD&R uses Epicor as the springboard to pursue its technology vision or just a convenient tool to capitalize on the current Cloud boom is a matter that could make a big difference on how Epicor supports its customers for the long haul, something that is deemed unequivocally essential by many of its midmarket customers now banking their future on its evolving Cloud services.
List of Epicor Customers
Source: Apps Run The World, October 2021