IBS Sales Decline in Q4, Windows ERP Suite Ramps Up

February 16, 2009 Timothy Prickett Morgan

Like many application software sellers, IBS, the Swedish ERP software maker that sells RPG and Java variants on the i platform and that is working to port its Java-based ERP suite to Microsoft‘s Windows server stack, is struggling in this tough economic environment. But the company is also hanging in there despite the challenging environment.

In the fourth quarter ended in December, IBS reported sales of SEK 612.4 million, a decline of 14 percent from the year-ago period. (That’s Swedish krona, which at current exchange rates trades at 8.6 to the U.S. dollar.) Software license sales fell by 25 percent to SEK 136.3 million, and professional services sales were down 1 percent to SEK 305.2. Hardware sales at IBS, which includes Power System i and related storage and features at this point, fell by 22 percent to SEK 170.9 million. The company was able to pull out SEK 207.2 million in gross profits, down 23 percent, and after booking SEK 169.6 million in restructuring costs had an operating loss of SEK 109.7 million. The company posted a loss in the quarter of SEK 92.7 million, compared to an SEK 20 million gain in 2007’s fourth quarter.

For the full 2008 year, IBS had SEK 2.03 billion in sales, with SEK 420 million in software license sales (down 14 percent), SEK 1.15 billion in services sales (down 3 percent), and SEK 464.1 million in hardware and other revenue (down 20 percent). The convergence of the System i into the Power Systems platform and the consequent price/performance increases on hardware have compressed IBS’ sales of IBM iron. That’s one of the reasons why IBS wants to move to Wintel iron with its IBS Enterprise 6.0 ERP software. If it isn’t going to make cash on hardware, it might as well make it up in volume on software. (That’s not my thinking, but my interpretation of the IBS strategy, which I went into at length last year in a story entitled IBS Picks Windows Instead of i as Strategic ERP Platform.)

IBS said in its report that the first live installation of the Windows version of IBS Enterprise 6.0 “continues to run well,” and added that its second test site is being installed. The first phase of the Enterprise 6.0 testing is done, and the company will be doing some pilot installations to make sure the full system works well. The company said it was putting together a plan to launch the software on Wintel iron on a global basis. The Enterprise 6.0 suite was fully converted to Java in 2008 from RPG, and started its pilots late in the year. In the meantime, the bulk of IBS’ customers are still using the older RPG versions. It seems likely that no matter what IBS does to try to move these shops to Java, so long as they can run RPG on an i box, many of them will do just that. New customers, however, may want to do the Windows-Java combo for the Enterprise 6.0 suite, which is why IBS is doing the port. It needs to add customers, even if that means de-emphasizing the i box and pitching Wintel iron.

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