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| Home : News & Events : PCS In The News : February 5, 2004 |
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PC Maker Systemax Launches Software Unit
 February 5, 2004
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PORT WASHINGTON - Long Island's largest PC maker has become its newest software company.
Systemax Inc., the No. 11 domestic computer maker, is rolling out a business software suite intended to go head-to-head against packages from high-profile companies such as Salesforce.com, PeopleSoft Inc., SAP AG and Siebel Systems Inc.
Should the initiative succeed, Systemax will be able to move beyond the razor-thin margins of the box-making business and sample the 90-plus-percent margins of the software trade, said Matthew Ehrlich, President of Systemax's new unit: ProfitCenter Software, or PCS.
A few weeks ago, PCS got its first major external customer, sighing a "multimillion-dollar deal" with Elmhurst, Queens-based Art Leather Manufacturing, a maker of wedding albums, said Ehrlich.
In the fourth quarter of 2003, Systemax sold 54,000 computers, holding 0.4 percent of the PC market, according to preliminary data from market researcher IDC. Systemax sells unbranded computers and hardware from a variety of brand-name vendors through catalogs and more than a dozen e-commerce Web sites, including Tigerdirect.com. In 2002 alone, Systemax mailed more than 100 million catalogs.
The road into software began with an internal development project that went awry. Systemax had turned to external developers for a business software suite to use internally, but the costly project came a cropper.
An encounter at the Old Westbury Country Club brought Ehrlich together with the Leeds brothers - Chairman and CEO Richard Leeds, Vice Chairman and President of International Operations Bruce Leeds - who own a majority-stake in Systemax and dominate its executive suite.
Ehrlich has built two Long Island-based software companies, including Uniondale-based PowerCenter Systems, an enterprise resource planning software maker that was scooped up in 1999 by Eclipsys Corp. of Delray Beach Fla.
What, the Leeds asked Ehrlich, should they do with the software package they had commissioned? "I junked it," said Ehrlich, who recommended a fresh start. He joined Systemax in February 2002 and began recruiting employees from his past ventures, plus his 70-year-old father as key software architect.
At the same time, the Leeds gave Ehrlich the kind of entrepreneurial maneuvering room a startup would have. "They promised me full autonomy," he said.
The year-and-a-half, multimillion-dollar effort yielded PCS and a new 70-employee subsidiary at Systemax. The PCS software merges elements of CRM (customer relationship management), which lets a sales force track contacts and accounts, with ERP (enterprise resource planning), which typically includes modules for managing purchasing, inventory, customer service, shipping and financial planning.
The big question, though, is why businesses would be attracted to PCS rather than a rival package from the likes of SAP?
One of PCS' key selling points is that it was designed with Systemax's Web businesses in mind and so integrated online and offline selling, Ehrlich said. "Same data, same database."
For that reason, one target market will be companies with mail order and Internet sales channels, such as retailer Land's End.
In addition, PCS is offered as a hosted service, meaning that companies can sign up on rental basis and access the software via the Internet. That model frees customers from huge upfront costs.
Ehrlich said companies such as Siebel, PeopleSoft and SAP hesitate to switch wholeheartedly to hosting because it will "cannibalize their business model." He added: "The pressure on these companies is overwhelming."
Although hosted software does away with a large upfront capital expense, it becomes more expensive for users than buying the application outright, after three years, said Elizabeth Roche, an analyst at Meta Group.
Also, Roche warned, it may not be easy for Systemax to make a successful transition into the software space.
"Looking back historically, hardware companies have a hard time moving into the software space," Roche said. "Digital Equipment went south trying to do that."
But Ehrlich sees only opportunity ahead.
Hauppauge-based advertising agency Kopf, Zimmermann, Schultheis is preparing a major media blitz to promote the software. "People are very turned on," Ehrlich said. "They're very excited. They're dreaming of what their stock options will be."
For additional information, contact ProfitCenter Software Inc., George Winter Executive Vice President at gwinter@profitcenter.com or 516-414-6305.
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