Size matters, but big isn’t necessarily best, any more than small is always perfectly formed. So recent acquisitions of (and by) vendors in the enterprise resource planning (ERP) space will be perceived as good news by some and less good news by others; either way, there has been no shortage of activity in this area during 2010, says FSN contributing editor, Lesley Meall.
The Advanced Computer Software Group purchased COA (and renamed it Advanced Business Solutions), Compiere became part of Consona, Maconomy was acquired by Deltek, Infor acquired Bridgelogix and the Qurius ERP LN operations, Lawson bought Health Vision Solutions, SAP acquired TechniData and Sybase, Oracle swallowed up AmberPoint, Convergin, Silver Creek Systems, PhaseForward, the intellectual property assets of Market2Lead, and some software assets from eServGlobal, while UNIT 4 acquired IBS Consist and is in the process of acquiring Teta (after outbidding Sage).
How significant these acquisitions are, depends on what is being bought and sold and why, and who is sitting in judgement – though for the acquiring companies the main advantage is clear. “All of our acquisitions are driven by the aim to get more products to sell to our customers and more customers to sell our products to,” says Mark Thomson, CEO of Advanced Business Solutions (formerly COA Solutions). It’s a motivation that is shared by every single acquiring organisation listed above, whether their ambitions are national or international, and whether they are pursuing them by expanding into new geographies, creating opportunities for cross-selling, or acquiring annual revenue streams, market share, domain expertise, or technology assets.
Advanced Computer Software (ACS) is already exploiting its COA acquisition. In the half-year ending 31 August 2010 it signed cross-selling contracts worth more than £6m, used its COA acquisition to save £2m in costs, and expects its interim results (due in November) to show a significant jump in revenue and earnings. But the COA acquisition adds business management products to the ACS patient management systems and is also strategic. “This diversification will protect the group from the worst of the anticipated public sector spending cuts,” says Vin Murria, chief executive of ACS, adding: “NHS budget responsibilities are shifting towards GP consortia and we have the software and services they will need to manage their budgets effectively on the taxpayer's behalf.”
SAP and Sybase are also pitching their marriage as strategic. “We are positioning SAP as the only company enabled to deliver a full suite of enterprise software and next generation business intelligence on any device at any time,” explains SAP co-CEO Bill McDermott. Sybase technology will enable SAP to enhance its existing applications and deliver new ones that extend its reach across mobile platforms and devices (and there is a joint solution developers kit in the pipeline to enable third parties to develop mobile apps). So SAP hopes to increase its market share by being ready to exploit Gartner’s research-based predictions that by 2014 users will be demanding anywhere anytime access to enterprise applications.
Perspective is everything, of course. Software developers have no choice but to focus on the bright shiny future (not least because of how difficult it is to convince most FDs and CFOs to update or replace the ERP applications they currently have in place), and acquisitions are money in the bank for investors and grist to the mill for analysts and journalists; but all of these changes in the ERP space can look various shades of unsettling to many of those affected by them, as they create a range of positive and negative implications for stakeholders such as existing and prospective customers and resellers (and the employees of those acquiring and being acquired).
Customers are understandably worried when the organisation that developed their ERP software changes hands, so acquiring companies tend to send out letters designed to put customers minds at rest. When Oracle bought Sun Microsystems in 2009, Charles Philips, the president at the time, sent customers and partners a letter telling them (among other things) that the company was “dedicated to maintaining and increasing the quality of innovation, support, and service” that they had “come to expect from Oracle and Sun” – something you can interpret in a variety of ways, depending on your level of cynicism or personal experience (though I couldn’t possibly comment).
Despite any or all supplier protestations to the contrary, some acquisitions are good news for some customers, and some are not. When Quintiq discovered that Deltek was buying Maconomy, for example, this was not seen as a bad thing. “We selected Maconomy just before the news about Deltek’s acquisition was made public,’ Victor Allis, CEO of Quintiq explains to FSN, so the developer of advanced planning, scheduling and supply chain optimisation solutions may have been slightly shaken, but it was not stirred. Allis says: “They informed us before we signed the contract and we have not changed our decision, as we believe that Maconomy is exactly the right solution for Quintiq at this point in time.”
It is impossible to predict the direction any ERP provider will take with any certainty, but past experience (and purchases that create overlapping product ranges) make the customers of some ERP providers concerned about unwanted software changes that can occur post acquisition. Product rationalisation is not unheard of, and although you can probably find a specialist third party provider willing and capable of picking up the support for your legacy ERP system (and for less than the software developer charges), this may become progressively more difficult because of the claims and counter claims flying between organisations such as SAP, Oracle, and Rimini Street (the implications of which FSN will be considering in more detail in the near future).
Users and buyers may also be affected by the fate of resellers. Because most ERP developers are at least one step removed from their end-users, resellers tend to be where the relationship management buck stops, if a developer discontinues support for a product or forces its resellers to discontinue support for a competitor’s product. “We used to sell and support two different ERP systems, but some software developers like their channel partners to stop selling competitive products,” says one reseller who wants to remain nameless, “but after one of them was acquired we got an email advising us that if we didn’t become exclusive and move away from competitor’s products, we needn’t bother showing up at the next sales meeting.”
Although a reduced pool of ERP suppliers is not necessarily a good thing for end-users, a close relationship between a software developer and its resellers is not necessarily a bad thing, as Jean-Philipe Pommel, VP for EMEA channels at Infor (which recently bought the Infor ERP LN operations of one of its implementation partners, Qurius) explains: “We acquired some tremendous talent and this acquisition enables Infor to strengthen its ERP LN business and expand our market share in Italy, Germany and Spain.” But what are the implications for customers? “Qurius customers are continuing to work with the same professional services team,” he tells FSN, “and by buying ERP LN operations from Qurius we will be able to better serve all of our ERP LN customers across the globe.”
The proof of the pudding is in the eating, of course (and it can take more than vendor assurances to allay end–user fears of change), but analysts see the ongoing consolidation of the ERP marketplace as inevitable, and if the recent bidding war for Teta between Sage and UNIT4 is anything to go by (which it probably is) major players seem unlikely to stop trying to grow any time soon. As Chris Ouwinga CEO of UNIT4 CEO recently commented: “We expect to see further consolidation in our sector in the coming years, with many acquisition opportunities for UNIT4.” All of which will be perceived as good news by some and less good news by others.
