May 1996 € Volume 6 € Number 5
Real World
Wall Street eyes manufacturing software
In all the excitement over the Internet, new media and PC companies, investors
may be overlooking one of the best-performing high-tech industries -- manufacturing
software. A new stock index assembled by the Boston firm Advanced Manufacturing
Research (AMR) reveals that the industry showed an average 68 percent gain
last year, and AMR is forecasting strong growth for most market segments
in 1996.
"The manufacturing software and systems industry is growing incredibly
fast, but it's been doing so very quietly," says Bruce Richardson,
vice president of research strategy at AMR. "It may very well be one
of Wall Street's best-kept secrets. As manufacturers move to client-server
architectures and look to expand their enterprises to include suppliers
and customers, they're turning to these companies to provide systems that,
in effect, become the very backbone of the entire organization."
The 1995 AMR Enterprise Applications Index tracked the performance of 17
public companies that are among more than 300 that AMR follows as a part
of its research and analysis service. Results were based on stock performance
beginning January 26, 1995, and ending with the closing stock price on December
31, 1995.
Of the 17 companies tracked, 14 appreciated in price by 25 percent or better.
Top performers included PSDI (up 191 percent), PeopleSoft (up 160 percent),
American Software (up 117 percent), Interleaf (up 113 percent) and SSA (up
112 percent).
"This industry is doing extraordinarily well right now. Companies like
PSDI, PeopleSoft, Oracle and Baan are trading at or near a 52-week high,"
said Richardson. "But it's far from peaking. Many of these companies
went public in 1995, and even more will go public in 1996." Because
of such growth, AMR is adding 16 new companies to the Index in 1996, for
a total of 33.
Utilities, industry strengthen partnerships
By redefining the location of the traditional supplier-customer interface,
both industrial companies requiring energy and the utilities providing it
have found they can reap significant benefits through a new process.
"The fierce competition within the process industries, combined with
rapid deregulation of the electric power industry, has provided the impetus
for establishing a new partnership between industry and energy providers,"
said Stan Matcek, manager of Houston Lighting & Power Company. "Both
sides win. Industrial concerns improve efficiencies, substantially reduce
costs, and the two sides become more competitive in their respective marketplaces.
The utilities strengthen customer relationships, create a stable customer
base, and grow their own businesses," he said.
The traditional model for the relationship between energy suppliers and
consumers has relied on power demand and fuel needs -- the "fence-line"
interface. However, by examining the process at an earlier interface --
how and why the fuel is being used (the process/energy interface) -- efficiencies
can be increased, and costs and emissions can be reduced.
"Companies in the process industries operate complex and unique production
facilities. Energy and process technology improvements must be crafted individually,
company by company and problem by problem. One solution does not fit all,"
noted Dennis Spriggs, president of Matrix 2000 in Leesburg, Virginia.
Matcek noted that Houston Lighting & Power-working with Matrix 2000
has already developed successful partnerships with local industry. In one,
an integrated petrochemical complex, the utility worked with the complex
to improve heat integration and convert some turbines to motors. Not only
did this improve efficiencies, it allowed boilers to be shut down, reduced
NOx emissions, and provided excess steam capacity to accommodate future
expansions.
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