Oracle, BlackLine and UNIT4 acquisitions should set CFOs thinking.

6th September 2016

It’s been anything but a quiet summer for the financial systems market. Early July saw UNIT4 acquire Prevero, late July witnessed Oracle’s massive deal with NetSuite and last week BlackLine announced that it was buying Runbook. Each of the deals is driven by many different motives nevertheless one common thread that weaves its way through all of these acquisitions is the over-supply in the performance management space, says Gary Simon, FSN Chief Executive and Leader of the FSN Modern Finance Forum on Linkedin.  

 

The market for performance management is long due for rationalisation and consolidation – just look at the large number of vendors listed in Gartner’s quadrants for Financial Corporate Performance Management (FCPM) and Strategic Corporate Performance Management (SCPM). And we’ve been here before.  Go back 10 years and there was a frenzy of acquisitions which culminated in many popular companies, for example, Frango, Hyperion and Comshare being swallowed up into IBM, Oracle and Infor respectively.  It marked the genesis of the so called performance management suite but left complex systems architectures, product road maps and overlapping applications in its wake.

So what is behind the recent spate of acquisitions and how should CFOs respond?

Oracle and NetSuite

In the main, the Oracle/NetSuite acquisition has been positioned as a sort of home-coming.  NetSuite is a pure cloud vendor, built from the ground up as a cloud product and arguably the very first in the cloud ERP space.  NetSuite is the company that Oracle couldn’t be at the time, but now that cloud is in the ascendency it makes sense for Oracle to extend its reach by snapping up a cloud company – even if there is overlap with its own cloud ERP offerings. 

But more subtly the deal could allow Oracle to undermine its competitors in the performance management space by encouraging NetSuite customers to choose Oracle enterprise performance management products over NetSuite’s existing partners such as Anaplan and Adaptive Insights.

Blackline and Runbook

BlackLine’s well timed acquisition is somewhat different since it isn’t about potentially denting a competitor but extending its pre-eminence in financial controls and automation of financial processes before somebody else does. Blackline, a cloud-based company, was recently named as a leader in Gartner’s 2016 Magic Quadrant for Financial Corporate Performance Management (FCPM) and this acquisition is designed to greatly enhance Blackline’s customer base, geographical and technical reach.  For example, Runbook takes Blackline deeper into SAP territory but more significantly it allows it to extend its cloud-based controls capability into a wider range of financial applications well beyond the financial close.

UNIT4 and prevero

Similarly, UNIT4’s purchase of prevero allows the group, probably best known for its ERP offerings, to secure first division performance management capability to work alongside its transaction systems.  It is likely that prevero will also extend UNIT4’s reach into broader areas of financial planning, especially, workforce planning which fits well with UNIT4’s service oriented and professional services offerings. 

More market turmoil?

It is unlikely that the action is over. Even with these acquisitions out of the way, there are far too many CPM products on offer and many of the newer cloud entrants, with attractive products, growing customer base and technology are yet to make money. It is difficult to see them being able to scale-up to compete on the global stage without considerable external help.  They will either be snapped up or wither on the vine.

So where does this leave CFOs?

CFOs will need to fall back on the fundamentals.  In recent times there has been a clear trend to investing in niche solutions in the cloud. But investing in ‘Best of Breed’ solutions in the CPM space carries risks.   Many of these companies rely on fragile partnerships and are dependent of the next round of venture capital funding to keep them at the forefront. Scale is crucial to survival, profitability and innovative product development.

Recent events suggest that a new wave of acquisitions is underway. CFOs need to tread cautiously when choosing their next generation of financial solutions.

 

OTHER NEWS

SECTORS

CATEGORIES