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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended March 31, 2005 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
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Commission File Number: 0-22993
INDUS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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94-3273443 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(I.R.S. Employer
Identification No.) |
3301 Windy Ridge Parkway
Atlanta, Georgia
(Address of Principal Executive Offices) |
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30339
(Zip code) |
Registrant’s telephone number, including area code:
(770)952-8444
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $.001 par value
Series A Junior Participating Preferred Stock
(Title of Class)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act
Rule 12b-2). Yes þ No o
The aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing sale
price of $1.58 per share of the Common Stock on
September 30, 2004, as reported on the Nasdaq National
Market, was approximately $71,063,049.
The number of shares outstanding of the Registrant’s Common
Stock, $.001 par value, was 56,626,789 at June 7, 2005.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the 2005
Annual Meeting are incorporated by reference into Part III
thereof.
INDUS INTERNATIONAL, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2005
TABLE OF CONTENTS
1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, as well as documents
incorporated herein by reference, may contain forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These
forward-looking statements are not based on historical facts,
but rather reflect management’s current expectations
concerning future results and events. These forward-looking
statements generally can be identified by the use of phrases and
expressions such as “believe,” “expect,”
“anticipate,” “intend,” “plan,”
“foresee,” “likely,” “will” or
other similar words or phrases. These statements, which speak
only as of the date given, are subject to certain risks and
uncertainties that could cause actual results to differ
materially from our historical experience and our expectations
or projections. These risks include, but are not limited to,
projected growth in the emerging service delivery management
market, market acceptance of our service delivery management
strategy, current market conditions for our products and
services, the capital spending environment generally, our
ability to achieve growth in our Asset Suite, Customer Suite and
Service Suite products, market acceptance and the success of our
new products and enhancements and upgrades to our existing
products, the success of our product development strategy, our
competitive position, the ability to establish and retain
partnership arrangements, our ability to develop our indirect
sales channels, changes in our executive management team,
uncertainty relating to and the management of personnel changes,
the ability to realize the anticipated benefits of our recent
restructurings, timely development and introduction of new
products, releases and product enhancements, current economic
conditions, heightened security and war or terrorist acts in
countries of the world that affect our business, and other risks
identified in the section of this Report entitled
“Description of Business — Factors Affecting
Future Performance,” beginning on page 16. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect management’s opinions only as of
the date hereof. The Company undertakes no obligation to revise
or publicly release the results of any revision to these
forward-looking statements.
PART I
General
Indus International, Inc. develops, licenses, implements,
supports, and hosts service delivery management
(“SDM”) solutions, which help clients in a broad array
of industries optimize the management of their customers,
assets, workforce, spare parts inventory, tools and
documentation in order to maximize performance and customer
satisfaction while reducing operating expenses. Our software
products consist of three primary product suites: customer
management, asset management and field service management. These
software products, along with our service offerings enable our
clients to reduce costs, increase production capacity and
competitiveness, improve service to their customers, facilitate
billing for services and ensure regulatory compliance.
Historically, our products have been focused on asset
management, and more recently on customer management and field
service management. Through our acquisitions of best-in-class
customer management software in March 2003 and field service
management software in January 2004, we believe that we are the
first company to offer comprehensive suites of world-class
customer, asset, and field service management products, which we
market and sell as our SDM solutions.
As of March 31, 2005, our software products have been
licensed for use by more than 400 companies in more than
40 countries, representing diverse industries, including
utilities, manufacturing, chemical, oil and gas, pulp and paper,
telecommunications, government, education, transportation, and
consumer packaged goods. Clients include industry leaders such
as American Electric Power Service Corporation, British Energy
Plc., Duke Energy Corporation, Dell USA L.P. (an affiliate of
Dell Inc.), Deutsche Telekom AG, GE Plastics and GE Power
Systems, operating units of the General Electric Company,
Electric Power Development Company Limited (also known as
JPower), Nuclear Management Company, L.L.C., Progress Energy
Service Company LLC, Shaw Industries, Inc., Sierra-Pacific
Resources, Smurfit-Stone Container Corporation, The Kroger Co.,
Tokyo Electric Power Company, and Xcel Energy Services, Inc.
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We are a Delaware corporation formed in 1997 by the merger of
The Indus Group, Inc., a California corporation, and TSW
International, Inc., a Georgia corporation. In March 2003, we
acquired Indus Utility Systems, Inc. (“IUS”) (formerly
known as SCT Utility Systems, Inc.) from Systems and Computer
Technology Corporation (“SCT”). In January 2004, we
acquired Wishbone Systems, Inc. (“Wishbone”).
References in this filing to the “Company,”
“Indus,” “we,” “our,” and
“us” refer to Indus International, Inc., our
predecessors and our wholly-owned and consolidated subsidiaries.
Our principal executive offices are located at 3301 Windy
Ridge Parkway, Atlanta, Georgia 30339, and our telephone number
at that location is 770-952-8444.
Service Delivery Management Background
The current economic climate, including increasing global
competition, demands that organizations in diverse industries
control costs while simultaneously increasing production
capacity. For this reason, most organizations share very similar
goals: increase revenues, reduce operations and maintenance
expenses, increase the reliability and performance of production
facilities and infrastructure, improve customer service and
loyalty, reduce inventory, and make better use of limited
capital. Many software vendors have offered products aimed at
assisting companies with various aspects of this
challenge — such as enterprise resource planning
(“ERP”), customer relationship management
(“CRM”), customer information systems
(“CIS”), enterprise asset management
(“EAM”), and workforce management (“WFM”).
These conventional approaches, which focus only on discrete
areas and systems, have yielded some marginal operational
improvements, but not at levels that actually transform the
business and facilitate operational excellence. We believe there
is a significant opportunity for a comprehensive solution to
rationalize these fragmented enterprise products, eliminate the
inefficiencies of discrete systems, and enable companies to
achieve their operational goals that are described above on a
more efficient basis.
The Indus Solution
To capitalize on this opportunity, we have developed a unique
approach to operational excellence called service delivery
management, or SDM, which allows our customers to eliminate the
inefficiencies of employing multiple discrete enterprise systems
and practices and to achieve the results described above. The
SDM approach allows organizations to manage all of the business
processes related to its customers, assets, and workforce across
the entire enterprise — incorporating customer
service, field service, design service, construction service,
and maintenance service into a single comprehensive solution.
Unlike any one of the discrete ERP, EAM, CRM, CIS or WFM
products, which tend to be customer-centric, asset-centric, or
workforce-centric, our SDM solutions are process-centric. SDM
addresses the business flows within and across each of these
disciplines, and optimizes business processes. The focus of our
SDM solutions is on operational business flows across the entire
organization, breaking down informational and operational silos.
Our SDM software products encompass three disciplines in a
comprehensive product set: customer management, asset management
and field service management. Focusing on the business flows
within and across these critical disciplines, Indus SDM
optimizes business processes to achieve operational efficiencies
that can enable superior performance. Sharing this
process-centric approach to operational improvement, our three
product suites within SDM drive real-time responsiveness to
service needs.
Our SDM products allow customers to push key analytics at the
right time so that critical decisions can be made in a timely
and intelligent manner via real-time performance management.
With our products, users view and analyze key performance
indicators to proactively improve efficiency and minimize costs
throughout the organization. Our SDM products, together with our
various service offerings, enable our customers to:
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Improve Asset Performance. Our products help
organizations control and reduce all asset lifecycle costs, as
well as budget and plan more accurately, by ensuring that assets
operate at peak performance to avoid unnecessary downtime and
shorten planned outages. This requires that the organization
have real-time visibility into the health and condition of
facilities, equipment and/or critical parts. |
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Maximize Financial Performance. Organizations must
transition from reactive to proactive decision-making in order
to optimize performance and maximize financial gain. Our
products facilitate this |
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transition by providing the right tools to analyze and balance
the financial impact of strategic and operational initiatives
across the organization, and to determine best-case alternatives. |
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Optimize Workforce Efficiency. Organizations must operate
their workforces at optimum efficiency, addressing planned and
unplanned work requests in a timely and efficient manner.
Instant field communications and feedback is vital. Our products
give organizations real-time visibility into resource
availability, skill sets, parts, tools, customer requirements,
and documentation. |
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Ensure Customer Loyalty. Customer loyalty is the most
accurate barometer of superior performance. Our products enable
organizations to instantly access and analyze enterprise-wide
information, rapidly respond to customer requests and issues,
make timely and appropriate decisions, and provide accurate
billing and collection. |
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Streamline the Supply Chain. Our products help
organizations operate their supply chain more efficiently, with
better planning and streamlined logistics. Our products provide
increased visibility into the availability of spare parts,
optimize inventory levels, and reduce the number of suppliers,
while helping to deliver the right parts to the right place at
the right time. |
Business Strategy
Our objective is to establish and maintain Indus as the leading
provider of SDM solutions. We aim to achieve this objective by
delivering the industry’s most comprehensive set of
best-in-class customer, asset, and field service management
products. These products help global utilities, manufacturers,
telecommunications companies, original equipment manufacturers,
and third-party service providers optimize and effectively
manage their customers, assets, and workforce.
Our strategies to accomplish our objective include the following:
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Develop and Enhance Software Solutions. We intend to
continue to focus our product development resources on the
development and enhancement of our software solutions. We offer
what we believe to be the broadest solution set in the SDM
marketplace and the only suite offering best-in-class products
for customer, asset, and field service management. In order to
provide additional functionality and value to our products, we
plan to continue to provide enhancements to existing products
and to introduce new products to address evolving industry
standards and market needs. We will identify further
enhancements to our products and opportunities for new products
through our Global Client Services organization as well as
ongoing customer consulting engagements and implementations,
interactions with our user groups and special interest groups
and participation in industry standards and research committees,
such as the Association for Services Management International,
MIMOSA, and the Nuclear Energy Institute. |
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Expand Our Strategic Alliances and Indirect Sales
Channels. We currently sell our products primarily through
our direct sales force. We work on joint projects and joint
sales initiatives on a case-by-case basis with industry-leading
consultants and software systems implementers, including most of
the large consulting firms, such as Accenture, IBM Global
Services, Capgemini, BearingPoint and Deloitte Consulting. This
allows us to supplement our direct sales force and professional
services organization. We have been expanding our indirect sales
channels through reseller agreements, marketing agreements and
agreements with third-party software providers, particularly
internationally. Our agreements with Peregrine Systems, Inc.,
Materna GmbH Information & Communications, in Germany,
A3 Systems Limited, a subsidiary of Yao De Computer Software
Limited, in China, and Electric Power Development Company
Limited (also known as JPower) in Japan, extend our market
coverage and provide us with new business leads and access to
trained implementation personnel. We also have strategic
alliances with complementary software providers. These product
partnerships, including our arrangements with NextAxiom
Technology, Inc. (“NextAxiom”), Business Objects, Inc.
(“Business Objects”), and Oracle Corporation
(“Oracle”), extend our product footprints to best meet
our customers’ requirements. |
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Expand International Sales. We believe that our products
offer significant benefits for customers in international
markets. We have more than 80 employees outside the United
States, primarily in Europe and Asia Pacific, focused on
international sales, servicing our international clients, and
developing reseller |
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channels. In addition to offices in the United Kingdom, France,
Japan, and Australia, we have established reseller and referral
arrangements in countries across the globe, including China,
South Africa, Hungary, Russia, Egypt, and Israel. Our
international strategy includes leveraging the strength of our
relationships with current customers that also have significant
overseas operations and the pursuit of strategic marketing
opportunities with international systems integrators and
third-party software application providers that are
complementary to our products. |
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Acquire or Invest in Complementary Businesses. We will
continue to investigate strategic acquisitions of technologies,
products, and businesses that may enable us to enhance and
expand our SDM software products and service offerings. Where
appropriate, we intend to investigate and pursue acquisitions
that will provide us with complementary products and
technologies, extend our presence into other vertical markets
with similar operational challenges, and/or further solidify our
leadership position within the emerging SDM market. |
Products
Our SDM software products help clients in a broad array of
industries optimize the management of their customers, assets,
workforce, spare parts inventory, tools and documentation. Our
clients rely on our products to achieve best-in-class
performance while minimizing operating costs, improving asset
reliability, optimizing customer satisfaction, improving billing
processes, and ensuring regulatory compliance. Our products are
comprised of three distinct suites: Customer Suite, Asset Suite
and Service Suite.
Our Customer Suite for energy and utility customers provides the
functionality required to optimize customer-facing activities.
This seamless product suite encompasses call center, customer
information tracking, billing, and accounts receivable
functions. At the core of the Customer Suite is the advanced
architecture of the CIS product. Built on Oracle9i application
server technology, the Customer Suite features an adaptive
infrastructure and takes advantage of Oracle’s world-class
functionality for Internet or intranet deployment and
streamlined business processes. The Customer Suite combines
proven and scalable functionality to facilitate enterprise-wide
access to information, cost controls, regulatory responsiveness,
and reduced cycle times from meter reading to collection of
accounts receivable. Enhancing the Customer Suite is CRM
Essentials, a layer of customer relationship management
functionality built exclusively for energy and utility
companies, positioning them to lower costs and improve customer
service. Further fortifying the Customer Suite is EnerLink, a
complex billing solution that helps energy and utility companies
use integrated applications to design, market, administer, and
bill new pricing options, regardless of the market requirements.
EnerLink includes flexible pricing options, robust rate modeling
and bill calculation, support for a complex array of contract
models, integrated data management, and meter data access.
In December 2004, we released Indus Asset
Suitetm,
a new asset management software product. Indus Asset Suite
incorporates key capabilities of both the Indus
PassPorttm
and Indus
InSiteEEtm
asset management products, consolidating years of asset
management software development expertise into a single product.
Indus Asset Suite combines an industry-leading feature set with
an advanced services-oriented architecture and a new user
interface offering a self-evident design for ease of use and
tailorability to fit a variety of business practices. This
product’s wide array of predefined integrations to Indus
and third-party applications allows companies’ entire
workforces to deliver improved efficiencies and more informed,
faster business decisions throughout the enterprise.
Indus Asset Suite supports an organization’s operations and
maintenance workforce, inventory management and procurement
professionals, safety and compliance engineers, and other
decision-making personnel affected by asset care decisions
throughout the enterprise. This suite includes the following
components: asset and work management systems; materials and
procurement systems; supply chain; e-procurement systems;
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and safety and compliance systems. Work management systems
coordinate and communicate discrete work task requirements and
priorities to all departments and disciplines throughout the
enterprise. Safety and compliance systems operate with other
enterprise systems to improve regulatory compliance and
reporting. Materials and procurement systems improve overall
plant performance. E-procurement capabilities add further value
by streamlining the procurement process. Other complementary
components include mobile computing (see WorkMobile under
Service Suite below), enterprise asset integration tools,
sophisticated search capabilities, data warehousing products,
and integration to leading ERP products for financial and human
resources functions. Our Asset Suite provides improved
efficiencies to the management of assets, work orders,
inventory, and purchasing. It helps organizations establish
effective maintenance strategies for the assets they service and
enables supply chain optimization. This proactive,
condition-based strategy lowers maintenance costs and reduces
production stoppages.
Indus offers clearly defined migration paths to the Indus Asset
Suite for its legacy PassPort, InSiteEE and EMPAC customers.
Indus will continue to support each of those products in
accordance with its stated policies.
Our Service Suite provides resource optimization to generate
superior performance at low cost. This suite allows customers to
dispatch resources with all the required tools, information, and
parts at the promised time. Schedules are optimized based on
customer or asset demands, travel times, service level
agreements, technician skills requirements, and internal costs,
enabling more hours “on the job, able to work.” The
suite includes the following applications:
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WorkCenter. Indus WorkCenter is the web-based
order entry and management module. As the starting point of work
and order processing, WorkCenter provides a variety of options
and tools to accommodate the needs of both customers and service
providers. With WorkCenter, call center representatives can
initiate service requests, schedule service appointments, and
check service status from any web browser. Appointment
scheduling is immediate, and the service organization is
notified automatically. Business rules and customer preferences
ensure timely fulfillment by the most appropriate service
provider. |
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WorkManager. Indus WorkManager helps manage the
constantly changing dynamics of field service by furnishing
dispatchers with a real-time graphical representation of people,
places and things in an information and response portal. All
updates and changes to the schedule can be viewed as they
happen. Rule violations, cost and time overruns, and other
performance indicators are highlighted for action. Visual cues
and filters assist management personnel with understanding the
status of all work at any time. Relationships between work
orders, dependencies, and the parent/child relationship within a
work order are evident. Integration with leading GPS systems
further enhances understanding of where personnel are deployed
and how they can be routed. |
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WorkMobile. Indus WorkMobile equips mobile service
resources with real-time interactive wireless applications and
access to organizational data. WorkMobile provides online
web-based or wireless access, as well as offline/sync access.
Handheld and wireless communication devices enable
bi-directional updates that expedite service delivery. Service
personnel have real-time access to schedules, customer details,
and operational response rules. They can update, close or
reschedule service orders from the field with current customer
information. |
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WorkExecutive. Indus WorkExecutive is a planning,
forecasting, and implementation tool that enables senior
management to predict the business impact of all available
execution alternatives and implement the one that is right for
their business needs and objectives. Through management
dashboards and reports, WorkExecutive provides the intelligence
executives need to assess their execution strategy, performance,
and organizational effectiveness. Factors such as the supply and
demand of service personnel, response criteria and profitability
are measured against key performance indicators and benchmark
metrics. |
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WorkOptimizer. Indus
WorkOptimizertm
enhances operational achievements with optimization technology.
The product employs proprietary algorithms to calculate and
accommodate complex but known variables in the field service
chain to help overcome operational inefficiencies and ensure the
optimal balance between profitability, effectiveness, and
customer satisfaction. Real-time logistical support will allow
the organization to deploy field personnel with the right skills
to the right place at the right time. |
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Indus Foundation Architecture |
In January 2005 Indus announced the release of the Indus
Foundation
Architecturetm
(“IFA”), a common architectural platform for all of
our applications. The IFA ensures smooth and seamless
integration between our applications and those of our partners
utilizing XML, service-oriented architecture, and other advanced
integration tools and techniques. IFA is a new convergent
technology strategy that provides common tools across all Indus
suites to deliver a common interface and software platform.
Developed using a service-orientated architecture, the IFA
provides enhanced configurability and agility to meet rapidly
evolving business needs. In addition, it offers a low total cost
of ownership for our SDM solutions by enabling organizations to
harness best-of-breed, process-oriented business applications
for asset, customer and field service management, while
minimizing effort and expense for integration and training.
Services
Our SDM solutions include consulting and other services offered
as part of the Indus Service
Selecttm
program. Our Service Select program is comprised of services,
tools and programs that address the full lifecycle of our
solutions, including implementation, production, and continuous
business improvement. Our service offerings include
comprehensive implementation programs, strategic consulting,
e-Learning and training solutions, three-tiered maintenance and
support plans, and hosting and outsourcing services. Indus
offers a variety of tailored or packaged services designed to
help clients continuously improve their operations, achieve a
faster return on investment, and meet their unique business
challenges. Our Service Select program includes the following
service offerings: professional services, Indus Knowledge
Delivery, Global Client Services, and hosted services.
Our professional services include sophisticated implementation
services, as well as strategic consulting in pre-implementation
assessment/selection analysis, project justification, business
case support, performance benchmarking, root cause analysis, and
post-implementation optimization. Extended services include
migration and upgrade assistance. Our professional services are
provided by subject matter experts that typically have a long
tenure with Indus. These regionally located experts support our
sales organization by helping customers implement advanced
principles, theories, and other advanced best practice
strategies designed to provide a competitive advantage to the
customer. The knowledge gained from prior customer
implementations, the extensive experience of our employees, and
the global experience of our user community provide a
high-quality information exchange as customers learn from the
professional services organization how the Indus software
products address industry-specific requirements.
Indus products are typically implemented through our proprietary
ABACUS tools and methodology. ABACUS consists of software-driven
analytical tools, implementation plans, and educational
resources that consolidate our extensive experience in
implementing software products. ABACUS provides a step-by-step
implementation lifecycle framework for all installation,
integration, education, and business review activities. In
addition, ABACUS enhances the ongoing effectiveness of Indus
software products and assists customers in improving their
business processes.
We have also developed relationships with large systems
integrators, as well as smaller third-party implementers and
providers. This ensures that customers with specific
requirements can leverage the value-added services of these
firms when implementing Indus software products. These
relationships are further described under
“Business — Strategic Relationships.”
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Indus Knowledge Delivery is a collection of tools and services
to help our clients achieve their strategic objectives. We
provide education and training solutions, including
off-the-shelf and customized e-Learning programs. These
solutions include standalone web-based training courses and
easy-to-use online classroom and job-aids called Desktop
Navigatorstm.
These Desktop Navigators provide detailed step-by-step tutorials
and a means to deliver business process workflow integration to
communicate, implement, and deliver leading work practices
across an entire enterprise. We also provide in-depth classroom
training at Indus sites worldwide or in clients’ facilities.
We offer three levels of comprehensive customer support and
service plans that provide our customers with timely access to
support professionals, client advocate engagement, product
updates, and new software releases that offer improved
functionality. Our Global Client Service Centers are
strategically located in North America, the United Kingdom, and
the Asia-Pacific region. Two of our three service programs
provide extended telephone service after business hours for
production-down and critical issues, 24 hours a day, either
five or seven days a week. Regardless of the call’s time or
point-of-origin, our toll-free number automatically routes the
customer’s call to a fully staffed Global Client Service
Center.
Asset Suite and Customer Suite software are available as hosted
services fully supported through remote data centers. We are
responsible for the customer’s hosted system, and we are
the single point of contact for any functionality issues. The
hosted service offers comprehensive functionality, reduces
implementation time, and guarantees service levels.
Additionally, our hosted service integrates with customer legacy
systems, delivering a true best-in-class product that includes
many touch points with other industry software application
leaders such as Oracle and SAP.
The hosted service contains robust, layered security to protect
customer data. Our hosted infrastructure partners provide a
suite of services that expertly manage mission-critical
software. With a large, multi-specialized, technical staff of
certified engineers, the infrastructure partners provide the
level of services and expertise necessary to ensure secure,
scalable, high-performance operation 24x7. Their services
include installation and maintenance of hardware and software,
core software expertise, high-volume backup and recovery
systems, and constant, proactive monitoring by their server
operations center.
Sales and Marketing
We market and sell our products and services to customers around
the world in a variety of industries. To address our markets
effectively, we divide our target markets by geography and by
industry segment and tailor our sales strategy to suit the
specific needs of each market segment. In a given market
segment, we may sell directly through our internal sales force
or indirectly through business partner relationships and channel
partner programs. Our marketing staff is based at our office in
Atlanta, Georgia, while our sales organization is decentralized
throughout the three global regions described below:
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Americas, with direct sales representatives in the United
States and Canada, and strategic partnerships to expand the
scope of sales opportunities. |
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Europe, Middle East and Africa, with direct sales
representatives in the United Kingdom and France, as well as
partnerships which extend our selling capability into
continental Europe, the Middle East and Africa. |
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Asia-Pacific, with direct sales coverage in Australia and
Japan and strategic partnerships to expand the scope of sales
opportunities. |
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In each of these regions, we view the market opportunities as
consisting of multiple vertical business segments. We focus our
sales and marketing efforts on the following industries:
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Utilities |
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Water and waste treatment |
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Nuclear power generation |
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Fossil power generation |
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Hydroelectric power generation |
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Energy transmission and substations |
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Energy distribution and delivery |
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Energy resource extraction and process industries |
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Chemical, petrochemical, oil and gas |
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Metals and mining |
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Pulp, paper and forest products |
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Process manufacturing |
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Discrete manufacturing |
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Consumer packaged goods |
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Facilities management |
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Managed services |
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Telecommunications |
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High-tech and electronics |
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Medical |
By addressing the needs of various vertical industries
separately, we can package and deliver our products to meet the
specific needs of the industries we serve. We conduct
comprehensive industry-specific vertical marketing programs,
which include public relations, trade advertising, industry
seminars, trade shows, and ongoing customer communication
programs such as IndusWorld, our international user group
conference.
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Sales Cycle and Customer Life Cycle |
While the sales cycle varies depending on the customer and the
product being sold, our sales cycles generally require from six
to 18 months. The direct sales cycle begins with the
generation of a sales lead or the receipt of a request for
proposal from a prospect, followed by qualification of the lead,
analysis of the customer’s needs, response to a request for
proposal, one or more presentations to the customer utilizing
the special knowledge of the industry vertical pre-sales staff,
customer internal sign-off activities, and contract negotiation
and finalization.
After implementation of an Indus product, our account executive
program provides regional support and specialized attention for
each of our customers. Account executives assist in implementing
licensed applications over multi-year engagements, promote
licensing of additional applications, and encourage existing
customers to identify and help fund new applications and
expanded core products.
Product Development
Our development efforts are focused on adding new functionality
to existing products, integrating our various products,
enhancing the operability of our products across distributed and
alternative hardware
9
platforms, operating systems and database systems, and
developing new products. We believe that our future success
depends in part upon our ability to continue to enhance existing
products, to respond to rapidly changing customer requirements,
and to develop new or enhanced products that incorporate new
technological developments and emerging maintenance and industry
standards. To that end, our development efforts frequently focus
on base system enhancements and the incorporation into our
products of new user requirements and features identified and
created through customer and industry interactions and systems
implementations. As a result, we are able to continue to offer
our customers a packaged, highly configurable product with
increasing functionality rather than a custom-developed software
program.
We believe that research and development is most effectively
accomplished if customers are involved in the process. Through
direct customer involvement and consensus input from user group
oversight committees, product content is improved and the
customer acceptance of new software deployment is significantly
increased. In addition, the interactive development process
promotes increased customer awareness of our products’
technological features and fosters greater product loyalty. For
this reason, we regularly incorporate customers into the product
development process and compile direct feedback through special
interest groups, user conferences, and early adopter programs. A
recent example of this interactive process was the development
of the new user interface for our Asset Suite, which was
developed with detailed input and continuous feedback from more
than ten of our customers.
We plan to principally conduct our development efforts
internally in order to retain development knowledge and promote
the continuity of programming standards; however, some projects
that can be performed separately have been and will continue to
be outsourced in the foreseeable future. We have established an
off-shore development center in Bangalore, India, where
significant development activities are performed.
Our research and development expenses for the year ended
December 31, 2002, the three-month period ended
March 31, 2003 and the years ended March 31, 2004 and
2005 were $45.8 million, $8.7 million,
$35.0 million and $32.0 million, respectively. We
intend to continue to make significant investments in product
development.
Strategic Relationships
Through a network of strategic relationships established with
more than 50 technology and service partners, we leverage
our internal sales and marketing efforts, expand our
implementation capabilities, and enhance the breadth of our
solutions.
We typically work with large systems integrators, such as
Accenture, IBM Global Services, BearingPoint, Capgemini and
Deloitte Consulting, as well as smaller implementers, on an
opportunity-by-opportunity basis. In some instances, we have
agreements with systems integrators that provide the framework
for the relationship, such as our agreement with Capgemini
U.S. LLC. These types of agreements are typically
non-exclusive and do not obligate either party to any minimum
commitments. Instead, the parties agree to work together to
identify joint opportunities with the goal of furthering the
implementation of our products and the professional services of
the systems integrator or implementer. We work with the systems
integrators on proposals to prospective customers to license and
implement our software. We typically enter into teaming
arrangements that set forth the parties’ respective
obligations in the proposal process. We will typically enter
into a license agreement and a support agreement directly with
the customer, and the systems integrator will typically have the
direct contractual relationship with the customer for
professional services.
In addition to working with large systems integrators to expand
our sales channels and marketing efforts, we also enter into
reseller agreements, referral agreements, and marketing
agreements with third parties that can extend our market
coverage, particularly internationally. For example, our
agreements with Peregrine Systems, Inc., Materna GmbH
Information & Communications, in Germany, A3 Systems
Limited, a
10
subsidiary of Yao De Computer Software Limited, in China, and
Electric Power Development Company Ltd. (also known as JPower)
in Japan, extend our market coverage and provide us with new
business leads and access to trained implementation and support
personnel.
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Software Product Partners |
We enter into strategic relationships with software product
partners to expand the functionality of our existing products,
enabling us to continue our focus on developing and delivering
SDM solutions. We plan to continue our strategy of leveraging
strategic partnerships as the needs of our customers continually
evolve and the global marketplace expands. By combining our own
SDM software solutions with our partners’ market-focused
products and services, we provide our customers with the ability
to maximize their return on investment, while providing us with
additional software license fees and services.
Our strategic relationships with third party software providers
take a variety of forms, such as reseller agreements, embedded
software arrangements, and development arrangements. Reseller
agreements, such as our agreement with Oracle, typically allow
us to develop software products using third party software, and
resell that third party software in connection with our software
products. Embedded software arrangements, such as our agreements
with NextAxiom and Business Objects, typically allow us to
develop software products using third party software, and resell
that third party software embedded in our software products.
Development agreements allow us to develop software to integrate
our products with that of the third party, which extends the
functionality of our software products by making them
interoperable with various third party applications. An example
of this type of arrangement is our agreement with Oracle, which
allows us to develop products that integrate with Oracle’s
corporate financial, payroll and human resources applications.
The following highlights a few of our software product partners:
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• |
NextAxiom — provides a highly differentiated
software platform used to produce, consume and deploy software
components as standard-based services. Business applications
built upon these reusable components are significantly easier to
tailor, manage and integrate with existing software assets. |
| |
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• |
Oracle — provides database platform as well as
Oracle Financials integration. We are a member of the Oracle
Partner Network, as a Certified Partner. |
| |
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• |
Business Objects — supports our Real-Time
Performance Management (RPM) product enabling users to
monitor and improve operational performance across the service
delivery organization. |
Customers
The Company provides software products and services to customers
in the following industries:
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• |
Utilities, including water and waste water treatment, power
generation, and energy transmission and distribution; |
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• |
Manufacturing; |
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• |
Chemical and petrochemical; |
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• |
Oil and gas; |
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• |
Pulp and paper; |
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• |
Metals and mining; |
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• |
Telecommunications; |
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• |
Government and education; |
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• |
Transportation; |
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• |
Consumer packaged goods; |
11
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• |
Medical; and |
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• |
Managed services. |
Customers include industry leaders such as American Electric
Power Service Corporation, British Energy Plc., Duke Energy
Corporation, Dell USA L.P. (an affiliate of Dell Inc.), Deutsche
Telekom AG, GE Plastics and GE Power Systems, operating units of
the General Electric Company, Electric Power Development Company
Limited (also known as JPower), Nuclear Management Company,
L.L.C., Progress Energy Service Company LLC, Shaw Industries,
Inc., Sierra-Pacific Resources, Smurfit-Stone Container
Corporation, The Kroger Co., Tokyo Electric Power Company, and
Xcel Energy Services, Inc.
Competition
Our products are targeted at the SDM market, which is highly
fragmented. The customer, asset, and field service management
software products businesses with which we compete are highly
competitive and characterized by rapid technological change.
They are significantly affected by new product and technology
innovations brought about by industry participants. We believe
that the principal competitive factors in our businesses will be:
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• |
Product quality, return on investment, performance, and
functionality; |
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• |
Adaptability to new trends driven by technology and customer
requirements; |
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• |
Cost of internal product development as compared with cost of
purchase of products from outside vendors; |
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• |
Ease and speed of implementation; |
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• |
Cost of ongoing maintenance; and |
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• |
Time-to-market with, and market acceptance of, new products,
enhancements, functionality and services. |
In the asset management market, our main competitors are MRO
Software, Inc., Datastream Systems, Inc., SAP, Oracle, Mincom
Corp., Industrial and Financial Systems, Invensys, Severn Trent
Systems and Synercom. In the customer management market, our
primary competitors include SPL WorldGroup, SAP, Oracle and
Peace Software. In the field service management market, our
primary competitors include SAP, Siebel Systems, Inc., Mobile
Data Solutions Inc., ClickSoftware Technologies Ltd., ViryaNet,
Ltd., and Astea International.
We believe that we have key competitive strengths that will help
us establish and maintain leadership in the emerging SDM market.
Our strategic assets and competitive advantages include:
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• |
Depth and breadth of products. We believe that no
other software vendor offers the breadth of customer, asset, and
field service management applications, coupled with the depth of
functionality offered in our products. |
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• |
Scalability of our products. Our products are able
to scale up to multiple thousands of users. |
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• |
Substantial installed base. Over the past
25 years, we have attained the leading market share
position in the “Tier 1” market (customers having
annual revenues greater than $1 billion dollars) for asset
management software products, especially among utilities and
process manufacturers. This installed customer base provides us
with a fertile source for selling our comprehensive SDM
solutions, including our Customer Suite and Service Suite
software products, as well as providing us with numerous client
references that can help us close deals with new prospects. |
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• |
Industry expertise. Our professional services are
provided by experts with extensive industry experience. This
experience and domain knowledge gained from prior
implementations allows us to enhance new implementations with
industry-specific best practices. |
12
International Operations
Our international revenue was approximately $42.8 million,
$9.9 million, $30.8 million and $34.5 million for
the year ended December 31 2002, the three-month period
ended March 31, 2003 and the years ended March 31,
2004 and 2005, respectively, which represents approximately 37%,
36%, 21% and 24% of our total revenue for each of those periods,
respectively. International revenue includes all revenue derived
from sales to customers outside the United States. We now have
more than 80 employees outside the United States, nearly half of
whom are located in the United Kingdom. We also have offices in
Australia, France and Japan.
We conduct our direct European operations principally out of our
United Kingdom office, where we have approximately
40 employees. Total revenue for European operations was
approximately $17.8 million for the fiscal year ended
March 31, 2005, which represents approximately 12.5% of our
total revenue for the year. Our direct Asia-Pacific operations
are conducted out of our offices in Brisbane, Australia and
Tokyo, Japan. Total revenue for Asia-Pacific operations was
approximately $11.5 million for the fiscal year ended
March 31, 2005, which represents approximately 8.1% of our
total revenue for the year. We have a growing presence in Japan
where deregulation of the utilities and nuclear industry is
helping to fuel demand for our asset management products in
particular.
Proprietary Rights and Licensing
We rely on a combination of the protections provided under
applicable copyright, trademark, and trade secret laws, as well
as on confidentiality procedures, licensing arrangements, and
other contractual arrangements to establish and protect our
rights in our software. Despite our efforts, it may be possible
for unauthorized third parties to copy certain portions of our
products or to reverse engineer or obtain and use information
that we regard as proprietary. In addition, the laws of certain
countries do not protect our proprietary rights to the same
extent as do the laws of the United States. Furthermore, we have
no patents, and existing copyright laws afford only limited
protection. Accordingly, there can be no assurance that we will
be able to protect our proprietary software against unauthorized
third-party copying or use, which could adversely affect our
competitive position.
We license our applications to customers under license
agreements, which are generally in standard form, although each
license is individually negotiated and may contain variations.
The standard form agreement allows the customer to use our
products solely on the customer’s computer equipment for
the customer’s internal purposes, and the customer is
generally prohibited from sub-licensing or transferring the
applications. The agreements generally provide that the warranty
for our products is limited to correction or replacement of the
affected product, and in most cases the warranty liability may
not exceed the licensing fees from the customer. Our standard
form agreement also includes a confidentiality clause protecting
proprietary information relating to the licensed applications.
Our products are generally provided to customers in object code
(machine-readable) format only. From time to time, in limited
circumstances, we licensed source code (human-readable form) for
asset management software, subject to customary protections such
as use restrictions and confidentiality agreements. We have
historically licensed source code for certain customer
management applications, subject to customary protections such
as use restrictions and confidentiality agreements. In addition,
customers can be beneficiaries of a master source code escrow
for the applications, pursuant to which the source code will be
released to end users upon the occurrence of certain events,
such as the commencement of bankruptcy or insolvency proceedings
by or against the Company, or certain material breaches of the
agreement. We have the right to object to the release of the
source code in such circumstances, and to submit the matter to
dispute resolution procedures. In the event of any release of
the source code from escrow, the customer’s license is
limited to use of the source code to maintain, support, and
configure our applications.
We may, from time to time, receive notices from third parties
claiming infringement by our products of proprietary rights of
others. As the number of software products in the industry
increases and the functionality of these products further
overlap, we believe that software developers may become
increasingly subject to infringement claims. Any such claims,
with or without merit, can be time consuming and expensive to
defend,
13
can divert management’s attention and resources and could
require us to enter into royalty and licensing agreements. Such
agreements, if required, may not be available on terms
acceptable to us.
Indus, Indus Solution Series, IndusWorld, Advantage, PassPort,
PassPort Software Solutions, EMPAC, Enterprise MPAC, Indus
InSite, InSite EE, Service Delivery Management, SDM, ABACUS,
IndusKnowledgeWarehouse, IndusConnect, IndusBuyDemand,
IndusAnyWare, IndusASP, and Curator are trademarks and service
marks of the Company. All other brand names or trademarks
referenced in this Annual Report are the property of their
respective holders.
Employees
At April 30, 2005, Indus had approximately
620 full-time employees. None of our employees are covered
by a collective bargaining agreement, and we have never
experienced a work stoppage, strike or labor dispute. We believe
that our relations with our employees are good.
Executive Officers
The executive officers of the Company are as follows:
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| Name of Executive Officer |
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Age | |
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Principal Occupation |
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Gregory J. Dukat
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44 |
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President and Chief Executive Officer |
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Thomas W. Williams
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48 |
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Executive Vice President and Chief Financial Officer |
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John D. Gregg
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56 |
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Executive Vice President of Field Operations |
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Joseph T. Trino
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56 |
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Executive Vice President of Corporate Strategy |
Mr. Dukat has served as President of Indus since August
2003 and as Chief Executive Officer of Indus since February
2004. From August 2003 until his promotion in February 2004,
Mr. Dukat served as President and Chief Operating Officer.
Mr. Dukat joined Indus in September 2002 as Executive Vice
President of Worldwide Operations to lead the Company’s
global sales and marketing efforts, and was promoted to
President and Chief Operating Officer in August 2003 with
responsibility for all sales, marketing, customer service,
product strategy, and product development functions. From
September 2001 to April 2002, Mr. Dukat served as the Chief
Executive Officer for 180 Commerce, Inc., a start-up reverse
supply chain enterprise software company. From October 1989 to
September 2001, Mr. Dukat served in various positions at
J.D. Edwards, an enterprise software provider, most recently as
Vice President and General Manager. Mr. Dukat is a board
member of CSS International, Inc., a software implementation
consulting firm.
Mr. Williams joined Indus as its Executive Vice President
and Chief Financial Officer in June 2004. Prior to joining
Indus, Mr. Williams served as Chief Financial Officer of
Cendian Corporation, a provider of logistics services to the
chemical industry, from October 2002 to May 2004. From February
2000 to September 2002, Mr. Williams served as Senior Vice
President, Chief Financial Officer and Treasurer of Manhattan
Associates, Inc., a leading provider of supply chain software.
From February 1996 to February 2000, Mr. Williams served as
Group Vice President, Finance and Administration for Sterling
Commerce, a worldwide leader in providing e-business solutions
for the Global 5000 companies. From December 1994 to
January 1996, Mr. Williams served as Division Vice
President, Finance and Administration for Sterling Software, one
of the 20 largest independent software companies in the world.
Mr. Gregg was promoted to Executive Vice President of Field
Operations in February 2004. Prior to his promotion,
Mr. Gregg served as President of the IUS division since
March 2003, when Indus acquired SCT Utility Systems, Inc. from
SCT. From November 1993 to March 2003, Mr. Gregg served in
various positions with SCT Utility Systems, Inc., a wholly-owned
subsidiary of SCT, most recently as President from November 2000
until the acquisition by Indus. Mr. Gregg served as the
Executive Coordinator of Northside Baptist Church during a
10-month sabbatical in 1999.
14
Mr. Trino joined Indus as its Executive Vice President of
Corporate Strategy in January 2005. Prior to joining Indus,
Mr. Trino served as a strategic consultant to Indus from
November 2002 to January 2005, a position in which he was
instrumental in negotiating the acquisitions of IUS and
Wishbone. From May 1994 to November 2002, Mr. Trino served
in various executive roles at SynQuest, Inc., a publicly-traded
software company, including Chief Executive Officer from July
1996 to November 2002, Chairman of the Board from September 2000
to November 2002 and President from May 1994 to December 1999.
From April 1992 to December 1993, Mr. Trino was President
of Kaseworks, Inc., an Atlanta-based provider of application
development tools. From January 1980 to April 1992, he was
employed at Dun & Bradstreet Software Inc. From
December 1988 to April 1992, Mr. Trino was president of
Dun & Bradstreet Software’s Manufacturing Systems
Business Unit.
Employment Agreements
All the current executive officers of the Company have
employment contracts with the Company.
Exchange Act Reports
We maintain an Internet website at the following address:
www.indus.com. The information on our website is not
incorporated by reference in this Annual Report on
Form 10-K.
We make available on or through our website certain reports and
amendments to those reports that we file or furnish to the
Securities and Exchange Commission (the “SEC”) in
accordance with the Securities Exchange Act of 1934, as amended.
These include our Annual Reports on Form 10-K, our
quarterly reports on Form 10-Q, and our current reports on
Form 8-K. We make this information available on our website
free of charge as soon as reasonably practicable after we
electronically file the information with, or furnish it to, the
SEC.
15
FACTORS AFFECTING FUTURE PERFORMANCE
Our operating results have fluctuated in the past and may
continue to fluctuate significantly from quarter-to-quarter
which could negatively affect our results of operations and our
stock price.
Our operating results have fluctuated in the past, and our
results may fluctuate significantly in the future. Our operating
results may fluctuate from quarter-to-quarter and may be
negatively affected as a result of a number of factors,
including:
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• |
the variable size and timing of individual license transactions
and services engagements; |
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• |
delays in maintenance renewals or non-renewals or cancellation
of maintenance services; |
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• |
changes in the proportion of revenues attributable to license
fees, hosting fees and services; |
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• |
successful completion of customer funded development; |
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• |
changes in the level of operating expenses; |
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• |
our success in, and costs associated with, developing,
introducing and marketing new products; |
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• |
delays associated with product development, including the
development and introduction of new products and new releases of
existing products; |
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• |
the development and introduction of new operating systems and/or
technological changes in computer systems that require
additional development efforts; |
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• |
software defects and other product quality problems and the
costs associated with solving those problems; and |
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• |
personnel changes, including changes in our management. |
Changes in operating expenses or variations in the timing of
recognition of specific revenues resulting from any of these
factors can cause significant variations in operating results
from quarter-to-quarter and may in some future quarter result in
losses or have a material adverse effect on our business or
results of operations. Accordingly, we believe that
period-to-period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as an
indication of future performance.
If we are unable to maintain consistent profitability and
positive operating cash flow in future quarters, our business
and long-term prospects may be harmed.
We generated net losses of $12.0 million and
$6.1 million in the fiscal years ended March 31, 2004
and 2005, respectively, and used cash of $3.4 million and
provided cash of $1.3 million in operating activities
during the same periods. We were profitable and cash flow
positive in the third and fourth quarters of fiscal 2005.
However, if we are unable to maintain consistent profitability
and positive cash flow from operations in future quarters it
will negatively affect our capacity to implement our business
strategy and may require us to take actions in the short-term
that will impair the long-term prospects of our business. If we
are unable to maintain consistent profitability and positive
cash flow from operations in future quarters it may also result
in liquidity problems and impair our ability to finance our
continuing business operations on terms that are acceptable to
us. Further, we may need to enter into financing transactions
that are dilutive to our stockholders’ equity ownership in
our Company.
If the market for service delivery management solutions does
not grow as anticipated or if our service delivery management
solutions are not accepted in the market, we may not be able to
grow our business.
Given the saturation of the market for asset management and
customer management software generally, we have broadened our
product offerings to compete in the service delivery management
market. The market for service delivery management solutions is
an emerging market and may not evolve as we anticipate it will.
If customers’ demands in this emerging market do not grow
as anticipated or if our service delivery management solution is
not accepted in the market place, then we may not be able to
grow our business.
16
If the market does not accept our new products and
enhancements or upgrades to our existing products that we launch
from time to time, our operating results and financial condition
would be materially adversely affected.
From time to time, we may acquire new products, launch new
products, and release enhancements or upgrades to existing
products. For example, in December 2004, we released a new
product called Indus Asset Suite, which incorporates the key
capabilities of our legacy PassPort and InsiteEE product lines.
Indus Asset Suite includes IFA, our new services-oriented
architecture, and a new user interface. In January 2004, we
acquired our Service Suite software from Wishbone, which forms a
part of our service delivery management solution. There can be
no assurance that these or any other new or enhanced products
will be sold successfully or that they can achieve market
acceptance. Our future success with these products and other
next generation products will depend on our ability to
accurately determine the functionality and features required by
our customers, as well as the ability to enhance our products
and deliver them in a timely manner. We cannot predict the
present and future size of the potential market for our next
generation of products, and we may incur substantial costs to
enhance a