Magazine Article | August 1, 2003

Squeezed By Consolidation

Source: Field Technologies Magazine

Consolidation in the enterprise software space is a sign of a maturing market. But, its impact can shake the very core of your company.

Integrated Solutions, August 2003
Ed Hess

Regardless of how the PeopleSoft-Oracle-J.D. Edwards battle turns out, a host of end users will be affected. Some will have new vendors supporting and enhancing products that have run for years at these end user companies. Others will retain their vendor of choice, but now a cloud of uncertainty will hang over its head.

In either case, the clash taking place among tier-one vendors simply mirrors what's happening in the overall ERP (enterprise resource planning) marketplace - maturity and consolidation. While Oracle boss Larry Ellison and PeopleSoft's Craig Conway make headlines, other companies in this space are also making moves. Battery Ventures, for instance, purchased 100% of midmarket ERP player Made2Manage shares and took control of the formerly public company. ERP vendor MAPICS acquired Frontstep to give itself an offering for manufacturers that want a Windows-based solution. Best Software, which is no stranger to acquisitions, continues its efforts to bring complementary companies onboard. And, it wasn't that long ago that Exact Software acquired rival Macola Software.

"As a company, you need scale and scope in order to compete. It's a scenario of a maturing market," relayed Best President Ron Verni in a recent conversation. Exact's Jim Kent, VP of sales and marketing in North America, had a similar take. "Right now, you can expect organic growth in this market to be about 3% to 4% annually. If you [a vendor] want to grow at a faster pace, then you have to acquire other companies and their customers." Kent's speaking from experience. Shortly after Exact acquired Macola, it scooped up Kent's company, which was one of Macola's top resellers.

Your Vendor's Been Acquired, Now What?
For end users, changes in this industry can dramatically affect how they do business. After all, the last thing you may want to hear is that your ERP vendor is being acquired. If that happens, you have to protect your investment and weigh options. Here are a few questions to ask yourself if you find that your current vendor has been acquired.

What's going to happen to your software? Get details about the vendor's migration, upgrade, and strategic paths. You may find that your software will be further developed or enhanced. Or, you might find that it's being folded into a different package.

How is your support going to change? Make sure that all current support promises are extended and kept after the acquisition.

How much do you have invested in your current solution? If you're not happy with the newly formed vendor's answers, then you have to be prepared to look at competitors. Even if you stick with the software you have in place, it's smart to map out possible escape routes.

Your life would be much easier if you didn't have to deal with vendor mergers and acquisitions. But in the ERP space, you'd better get used to it.