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ProfitCenter Software CEO Pulls No Punches With His Advice to DMers
 May 23, 2006
Adrian Courtenay
Tuesday, May 23, 2006
DM News.com
View The Original Article
Matt Ehrlich, president and CEO of ProfitCenter Software, a Systemax company, is a man of very firm convictions and an enormous ability to express them clearly and forcefully.
The way for catalogers, retailers and direct marketers to turn around their businesses which have stopped growing, he says, is to run their entire businesses off a Web browser.
Here are some of the highly relevant comments made by Mr. Ehrlich in a lengthy conversation we had this week in ProfitCenter Sofware’s Uniondale, LI offices.
“For the last fifteen years, “ he pointed out, “software vendors have focused on mainframes, with their customers paying a license fee. The problem started coming when the Internet challenged the DM industry. Companies had a catalog model or a retail/catalog model. Direct marketers had to make a decision. Do we become an Internet company? Do we do a mix? Most did a mix. But it wasn’t competitive.
“The bigger problem,” he added, “was the data. Over here was the catalog business. Over here was the retail business. And over here was the Internet.”
Mr. Ehrlich found the solution when he was called back by the Leeds brothers, the major shareholders in Systemax, as a consultant. The company had hit a wall after growing from zero to a $1.5 billion direct marketer. Mr. Ehrlich threw out the consultants, took it from 4,000 to less than 3,000 employees, brought in his own team and turned it into an extremely profitable company once again.
The secret to this successful turnaround, he indicated, was ProfitCenter Software, which was initially developed “to fix Systemax”, but is now being sold commercially. Ironically, Mr. Erhlich said, he arrived at the solution because of his idea that he didn’t understand CRM.
It seemed to him that an account and contact system can’t process an order and has no ability to sell anything. His idea was to tie CRM into order management and run the entire business off a Web browser. “There no challenge about Internet vs non-Internet data,” he said, “because it’s all Internet data. Whether the order comes from catalog, retail or email, it all flows through the same repository.”
“Only one out of a hundred businesses in America run their whole business on a Web browser,” he said. “Systemax does it. But very few others.”
One of the main obstacles, Mr. Erhlich feels, is that people are worried about switching to running the whole business through a Web browser. It’s overwhelming.
“When I talk to direct marketers, almost everyone says the same thing. Business isn’t really great. Our catalog business is shrinking. Margins are compressed. The Web business is growing – but from a small base. There’s no growth. The challenge is, how do you start growing again? What you have to do is bite the bullet and accept that the playing field has changed. Margins have gotten tighter.”
“Forty years ago,” says Mr. Ehrlich, ” you needed a lot of money to start up a catalog business. You had warehousing, mailing expenses, etc. Today,” he says, “if you understand technology, you can kick your competitors’ butts. You use the Internet, not a catalog. You drop ship rather than warehousing products. The winners now understand that e-commerce grew 36 percent and non-ecommerce shrank.”
“PCS is not the only solution, but it’s the most obvious solution to fix what ails companies who have stopped growing,” Mr. Erhlich continued. “You’re not paying a license fee. The traditional model was a license fee, which required a high upfront capital outlay. Then you have to pay an undetermined fee to implement. There’s a lot of risk, and it’s all borne by the direct marketer.”
So Mr. Ehrlich came up with his own model. “There’s no license fee. No down payment. PCS does hosting – makes the capital investment and pays the labor. Hosting costs $125 a month per user. Customers can use as much or as little of PCS as they need. It’s a fair deal. And it becomes very compelling. You know exactly what it will cost you to implement.”
“It’s a painful decision to change software vendors,” says Mr. Ehrlich, but sometimes it’s necessary. ” If you don’t change to these tools, you’re fighting a modern war with bows and arrows. You’re dead.”
Mr. Ehrlich notes that he jumped on the Internet “in five seconds” back in the early 1990s. Of all industries where it makes sense, he indicates, direct marketing is number one. What secretly happened when the stock market collapsed in 2000 was that smart companies didn’t pay any attention to the stock collapse. They knew the Internet was the future.
“Any time the Internet can pose a challenge to an old way of business,” he asserted, “the Internet wins.” E-commerce has to be a central part of the business strategy, he said.
“Selling on the Internet is life and death to direct marketers,” says Mr. Ehrlich. “We want to reach direct marketers who are trying to figure out what to do next. What is the next model? The future model is going to be Internet architecture. What do you do?”
Mr. Ehrlich suggests a business mantra for direct marketers: “I run my entire business on my web browser.”
“It’s hitting everybody over the head that we need to do this. At least, the smarter guys,” he concludes.
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| Your Whole Business. On Demand! |
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ProfitCenter Software Inc. (PCS) is a leader in web-based on demand software for multichannel merchants and direct marketers. The company’s Profitability Software Suite™, delivered in a Software as a Service (SaaS) model, is the first integrated, scaleable suite of applications designed to directly enhance a company’s bottom line. The software solution scales to meet the demands of small, mid sized and large complex companies that sell products and services through multiple sales channels, without the costs a complexities of the traditional catalog software, order management solutions and mail order systems.
Through sales, order management, fulfillment, warehousing, shipping and accounting, ProfitCenter Software’s solutions empower companies with the ability to automate and manage their entire customer life cycle and run their whole business off a web browser. With its extensive and broad functionality, ProfitCenter Software provides a comprehensive suite of on demand applications to help multichannel direct marketing companies of every size, industry, and geography.
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