Newbie touts hosted supply chain for smaller firms

Two years ago, Japanese megaconglomerate Mitsui launched an internal business unit with the goal of improving its supply chain operations; on Monday that division will enter the market for hosted business applications under the brand name Mitrix.

Hosted supply chain tools, or Web-based software systems used to automate business processes such as manufacturing, inventory and shipping, are not an entirely new idea. For the last several years the largest software makers in the supply chain management, or SCM, arena, including i2 Technologies, Manugistics Group and SAP have offered some form of the online applications.

Those companies have focused primarily on offering the hosted SCM model as an alternative to traditional on-site software among their core customer bases of larger companies, with limited success. Mitrix is hoping to cash in on new demand for hosted applications among small- and medium-size businesses, also known as SMBs. After helping numerous Mitsui divisions, of which there are approximately 720, better automate their SCM operations, the company believes its technology is ready for outside consumption.

Mitrix executives make no secret of the fact that they're trying to ride the wave of interest in hosted applications for the SMB space touched off by the success of online customer relationship management (CRM) provider Salesforce.com. If Mitrix can convince customers to look at its product for the same reasons Salesforce has drawn interest, a lower cost of ownership and easier installation than traditional software, it will have similar impact, executives with the company believe.

"The biggest advantage with hosted supply chain is that it will allow smaller companies who haven't been able to afford the same best-of-class systems as their larger rivals to better compete," said George Mulling, vice president of business development for Mitrix. "Some people might say that supply chain is a bad opportunity to use the hosted model because of its complexity, but CRM is a pretty sophisticated undertaking, and people have seen all the success stories coming from Salesforce customers."

According to Mulling, Mitsui is a longtime SAP customer, but the company found it was spending increasing amounts of time and money customizing its SCM systems, so it decided to build Mitrix from the ground up. Ed Lewis, chief executive at Mitrix, said the system has already saved Mitsui millions in supply chain spending.

"The key with any supply chain system is to give users the visibility and power to work with data immediately, and that's what the system can do," Lewis said. "Inside Mitsui, we were able to reach inside our trading partners and replace all the paper generated by previous systems, and that alone is a major accomplishment."

Mitrix will aim its service specifically at companies with less than $750 million in revenue, or fewer than 100 employees. The supply chain applications will be sold under an annual license fee of roughly $75,000 per 10 users. Getting started with the software will cost roughly $200,000, the company said. Once a company buys the applications, the software needed by a Mitrix customer's supply chain partners to work with the system is given to those companies free of charge.

Industry analysts observed that Mitrix will likely generate interest among SMBs but said that the software provider's biggest challenge will be getting companies to buy into SCM. Though larger companies already dump sizable amounts of cash into SCM software, small and midsize businesses have yet to prove they are ready to do the same, according to Jason Corsello, an analyst with The Yankee Group.

"Supply chain for the midmarket remains untapped. The question will be whether people are willing to spend on an application," Corsello said. "Four to five years ago there was a push to deliver supply chain to these companies by traditional packaged software vendors that overpromised and underdelivered. Companies are willing to look again, but early execution with customers will be a big deal for Mitrix."