ClickSoftware (CKSW) – Part 2 - Business Issues

ClickSoftware brings to the market a portfolio of integrated products known as the Service Optimization Suite. The company is extremely confident on its service optimization technology being second to none. The table below lists some details of each product in the suite, taken from product brochures:

Product	Functionality	Timeline	Comments
ClickSchedule	Automatic scheduling of the right resource at the right time, based on a large number of industry specific factors	HOURS/DAYS/MONTHS	Easy integration with practically any front- or back-office system via standard adaptors to the leading ERP/CRM products, Support for location-based services, and Multilingual support.
Click Roster	ClickRoster is designed to be flexible enough to create rosters days, weeks, even months in advance, while also being capable of recalculating rosters dynamically based on last-minute input—for example, when an employee calls in sick, and the roster must be adjusted accordingly	HOURS/DAYS/MONTHS	Takes input from Click Forecast and Click Plan. Exports resulting shifts & calendars to Click Schedule.
Click Plan	Capacity Planning Tool based on service demand forecasts. ClickPlan performs gap analyses to identify capacity shortages or overages in a given territory at a given time for a given demand type & facilitates decision making to close the gap between forecasted demand and current workforce capacity thereby enabling the maintenance of optimal staffing levels	MONTHS/QUARTERS	ClickPlan uses demand forecast input generated through ClickForecast and works smoothly with ClickSchedule on the other end to incorporate resource planning decisions into the scheduling process.
Click Mobile	An application designed to enable service organizations to better manage and optimize utilization of their resources in the field. ClickMobile allows field engineers to receive full dispatch work order information and provide real-time status updates on-the-go. With both client-side and server-side components, ClickMobile works fluidly with ClickSchedule and the rest of ClickSoftware’s renowned ServiceOptimization Suite to create a fully optimized service chain	SECONDS/MINUTES/HOURS	The ClickMobile application is built entirely upon IBM mobile technology. Data is sent from mobile client to the server using IBM MQe message queuing technology and encrypted using IBM’s Websphere Everyplace Connectivity Manager (WECM). On the server side, ClickMobile runs on an IBM Websphere Application Server. ClickMobile also comes with IBM’s Websphere Everyplace Device Manager (WEDM) to manage mobile devices, users and application deployment to clients.
Click Locate	Provides detailed location information, including whether engineers are stationary or moving, their travel direction, speed, and the time the information was captured, Periodic or per-request updates of location information, Visual mapping of current engineer locations A scheduling service that uses location data to support dispatcher, scheduling decisions, Retention of historical location information for analytical purposes, and Periodic purges of historical data	SECONDS/MINUTES/HOURS	Click Locate uses their own technology for integrating with different networks using web services.
Click Forecast	An application that enables service organizations to better predict future service demand in both the short and long terms	QUARTERS/YEARS	ClickForecast assists companies in using their own historical information by automatically analyzing trends, seasonality and other repeated patterns in the demand data.
Click Analyze	An application that provides Reporting, Analytics (Insight), and Drill-down (Business Monitoring) of sub-components. ClickAnalyze Reporting offers a wide variety of operational reports that enable decision makers to gain insights about performance and proactively manage their departments. Uses Microsoft Reporting Services 2005. ClickAnalyze Insight provides service organizations with reports about the relevant Key Performance Indicators (KPIs) that enable service managers to monitor performance on a daily basis	ACROSS ALL TIMELINES	Microsoft Excel front-end. Has a thin web client.

The business is broadly split up between software licensing and associated services business. Tracing growth from 2002 thru 2006, the software licensing business grew from $7.008M to $11.999M clocking a CAGR of 11.35%. During the period 2005 thru 2007 (projected), this business grew from $8.182M to $17.22M representing a Compounded Annual Growth Rate (CAGR) of 29.22%, an impressive growth rate. The corresponding figures for the services business comes in at 18.73% and 14.41% respectively. The last three years saw management committed to accelerating the growth in the software licensing business, managing the low-margin services business, and successfully keeping the overall growth at a high level. Conditional to the continuance of this pattern, profitability should climb at a faster pace than the revenue growth rate as software licensing revenue as a percentage of total revenue goes up. This will prove bullish for the stock going forward.

ClickSoftware touts vertical domain expertise as a core competitive advantage. However, for a software enterprise to be successful long term, such expertise needs to be effectively incorporated into the company’s product suite as opposed to selling associated services to bring in additional revenue. Making the installation, configuration, and implementation of the product suite intuitive and avoiding the need for the services business should be the end goal. The packages geared to specific verticals should also follow this vision.

Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) implementations at customer sites are very popular, and they depend mostly on consulting firms to implement complex software packages. The major challenges for ClickSoftware in integrating with these product suites from a plurality of vendors are:

• Necessity to integrate with most of them.
• Lack of standards that allow a generic approach.
• Vendor specific requirements which by nature not very tight.

The company has adopted a strategy of partnering with technology consulting and outsourcing companies to facilitate this integration at customer sites. This has been a fairly successful strategy accounting for about 50% of the revenue. Even so, there is an opportunity to further grow this channel.

ClickSoftware also has proprietary Web Services based interfaces to integrate with mobility technology vendors (GPS’s, cellphones enabled for GPS tracking, etc.). These interfaces are bleeding edge which is inevitable for having the early mover advantage. As standard interfaces are developed, it should become possible for service optimization vendors to integrate more tightly with CRM/ERP vendors and also mobility technology vendors. As an early adopter, the company has an opportunity to participate in developing standards and the onus is on the management to promote such initiatives.


ClickSoftware (CKSW) Analysis:

1. ClickSoftware (CKSW) - Part 1 - Introduction.
2. ClickSoftware (CKSW) - Part 2 - Business Issues.
3. ClickSoftware (CKSW) - Part 3 - Outlook.