George Klaus, who, as CEO and chairman of Epicor Software Corp., guided the enterprise software vendor to impressive growth over the past 10 years during a time of unprecedented upheaval in its market, is stepping down to be replaced by Thomas Kelly, the company said today.
The top management switch was part of what the company called an ongoing "succession planning process." Epicor said Kelly is replacing Klaus immediately. The company also said Mark Duffell, Epicor's president and chief operating officer, will leave the company after March 31 "to pursue other opportunities outside of Epicor." Duffell succeeded Klaus as president of Epicor in 2005. Both joined the company in 1996.
Klaus will continue as executive chairman of Epicor's board of directors and will work on a smooth transition to Epicor's new leadership, the company said.
Epicor observers today described the management shuffle as a long-anticipated transition. In fact, said Ray Wang, a Forrester analyst, Klaus, 67, had been expected to step down as early as last year.
The transition from Klaus to Kelly will be an adjustment for some customers, Wang predicted. "George was the architect of Epicor's strategy. He was the guy providing the vision," Wang said. "Also, he was quite accessible. Customers would go right up to George and talk to him. He was a very visible part of Epicor. So the company has been careful to make this transition a gradual one."
When Klaus took over Epicor in 1996, the company had about $30 million in revenue. In the 12 years since, it has grown to $430 million in annual revenue, 20,000 customers, and 3,000 employees.
That growth, which was boosted by the acquisitions of Scala Software in 2005 and CRS Retail Technology Group in 2005, came at a time of widespread consolidation in the enterprise software market. More recently, Epicor has faced intensifying pressure from large enterprise software vendors, such as SAP AG and Oracle Corp., which covet the relatively rapidly growing medium-size enterprise market on which Epicor has long focused.
Facing increased competition and changes in its markets, Epicor under Klaus has turned in inconsistent financial performances in recent periods. Following its third fiscal quarter, which ended Sept. 30, 2007, Epicor said its year-over-year revenue growth slowed to 8%. And, for that period, its revenue from software licenses grew a disappointing 1%.
Epicor, however, rebounded in the ensuing quarter, reporting a 15% jump in revenue, an 18% increase in revenue from software licenses, and a 233% increase in net earnings. The revenue increase was well in excess of expectations for the quarter previously set by Epicor.
Epicor's ability under Klaus to lead many of its competitors in incorporating cutting-edge software architectural features into its products has helped the company succeed in an increasingly competitive mid-market, said Forrester's Wang. Epicor, for example, was one of the first enterprise software vendors to embrace Microsoft's .NET architecture and to build its applications around Web services. More recently, the company rolled out its Internet Component Environment (ICE), a standards-based framework based on Microsoft's Visual Studio .NET tools that allows customers to more easily compose and manage systems.
The ICE framework is widely expected to be the foundation of an on-demand offering from Epicor.
It isn't known whether Kelly will significantly alter Klaus' strategy for Epicor. Requests for interviews with Kelly and Klaus were declined. Following news of changes in the executive suite, Epicor's shares today lost 2.84% of their value, falling to $11.99 per share.
Kelly, 55, has been a member of Epicor's board of directors since 2000 and was named chairman of the board's audit committee in 2003. The company said he would remain on the board. With Klaus moving to the executive chairman spot, Epicor declined to say who would assume Klaus' former role as chairman.
Kelly has held senior executive positions with several technology companies, including Cirrus Logic, Frame Technology Corp., and Cadence Design Systems. Since May 2005, he has also served as chairman and CEO of MontaVista Software, a provider of Linux operating systems and tools for electronic systems and devices. Kelly has also held positions in venture capital firms, including Trident Capital and Morgan Stanley Ventures.
Officials at Epicor said that Duffell was considered for the CEO spot.