Below are the excerpts from Frost & Sullivan analysis, I thought that it would be quite a good read for new investors to understand more about ERP and IoT sector. And of course - ARB BERHAD (7181)
ARB’s key strengths include its design and development capabilities that allow it to create ERP solutions from the ground up – allowing it to craft highly customized systems that can cater to the varied needs of different industries, from retail to agriculture. In this way, ARB is able to cater to the specific needs of its target customer, who typically have very unique requirements with respect to system dashboards, customer support and applications & modules.
With the experience gained from its JVs, ARB has a better appreciation of the requirements that users (business manager etc.) deployed on the ground have. It has therefore been able to tailor its ERP portfolio to be highly aligned to the challenges that SMEs typically face which include:
- Improving management integration;
- Gaining oversight on the costs and benefits from various business activities;
- Engaging in data-driven strategic planning;
- Instituting strict financial control measures;
- ARB’s ERP solutions are also highly scalable according to the needs of its customers (particularly SMEs) especially in the following areas;
- Incorporating machine learning, AI and data analytics tools to automate operations, business intelligence and marketing purposes;
- Achieving integrated supply chain management with a focus on visibility over warehouses and inventory;
- Accommodating multi-level membership/referral programmes;
- Integrating e-wallet solutions in retail systems;
- Optimizing backend operations to improve operational efficiencies; and
- Possessing the versatility required to handle operations across a wide range of industries.
So, can other companies adopt what ARBB is doing? The short answer is no. ARBB's unique business model disable most, if not all close competitors in the ERP sector.
Here's another excerpt from the Frost & Sullivan analysis.
ARB approaches target SMEs (typically with a long track record of growth over 10-15 years) in the distribution and service industries who are in the early stages of their digital transformation journey to form joint ventures (JVs). These SMEs typically do not possess the funds or risk appetite to implement costly ERP solutions and are also facing operational and management inefficiencies that place a ceiling on their growth.
- The JV takes over the business operations of the SME – with the SME focusing on sales and inventory management and ARB (with the controlling interest) financing and operating a customized ERP solution and periodically providing the necessary updates and new modules, freeing up cash flow for the SME in a mutually beneficial relationship. Beyond SMEs, ARB also uses similar JV models in projects with government linked companies (GLCs).
- ARB creates value for its JV partner by providing a solution (based on its technical/business know-how) designed to generate an immediate impact on sales and profits. ARB also improves business outcomes for its network of JV partners by allowing its network of partners to cross-sell their products and/or upsell packages to end customers.
- This innovative business model addresses three major pain points for customers and vendors in the ERP market
- Customers, particularly SMEs, being unwilling to spend on costly ERP implementation (by essentially shifting from a cash/debt driven model of technology investment to an equity-based model of technology investment.)
- ERP systems becoming obsolete or unfit for customers’ changing business needs (by ensuring that the motives of the technology provider and the client are aligned via a profit-sharing model – incentivizing the technology vendor to develop a better understanding of customer requirements and provide periodic upgrades and adjustments)
- Failure of outcome-based models as vendors have very limited levers to influence performance (by giving the technology provider direct managerial oversight to ensure that its ERP solution is being implemented alongside optimal business and workflow processes)
This article's purpose is not to ask you to buy ARBB shares. What my ultimate purpose is to increase the knowledge of public investors in the ERP and IoT sector (Will be sharing IoT's analysis soon), so that you would discover the true value of ARBB.