The Enterprise Applications 'Arms Race' To Be Number Three

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1. Event Summary 2. Similarities 3. So Similar, Yet So Different (and Vice Versa)

Complete Table of Contents

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Event Summary

In the enterprise resource planning (ERP) world there is fierce competition to be number three (after SAP and Oracle). The leading contenders are Infor, Lawson Software, and SSA Global. For a detailed discussion of Lawson, see New Lawson Software's Transatlantic Extended Enterprise Resource Planning Intentions).

This is Part One of the series The Enterprise Applications Arms Race To Be Number Three.

Even those who still believe that weapons of mass destruction (WMDs) will be found in Iraq (or in North Korea or Iran) should by now have realized that the number one position in the enterprise applications space will ultimately be decided in the inevitable showdown between SAP and Oracle (and their accompanying platform and partner ecosystems). Certainly, this does not imply that either of those will ultimately dominate the tier two or high end of the tier three market segments per se. Thus, the arms race for the number three spot is no less exciting (and is maybe even breathtaking), given that the revenue rankings snapshot for SSA Global, Lawson Software (soon to merge with Intentia), and Infor may change at any time, depending on which vendor has most recently announced yet another acquisition. One should also note that Infor, Lawson, and SSA Global have no illusions of dominance in the tier one segment, since that battle will already have been decided between the two aforementioned giants.

One should also not ignore Microsoft Business Solutions (MBS) or Sage Group, in light of their total applications revenues, but these two archrivals are still fighting in the lower end of the market. Their respective significance remains, however, especially given Sages recent acquisition of Adonix (which certainly has many larger midsized customers), and the fit of Microsoft Dynamics AX (formerly Microsoft Axapta) to like-sized enterprises, although this product is impeded by its nascence. Also significant are Epicor Software (with its recent acquisition of CRS Retail Solutions), and China-based CDC Software (with its ongoing digestion of the globally renowned Ross Systems, IMI, and Pivotal brands; its recent

acquisition of JRG Software; and vacillating plans to nab Onyx Software), but they are still at a safe distance, revenue-wise, from the tier two echelon.

Recently, we have given due attention to the Lawson-Intentia combination, and to the rivalry between MBS and Sage (see The Market Impact of Two Powerhouses), so the time has come for a comparative analysis of the remaining two foes: SSA Global and Infor. Executives of these two vendors would be genuinely (or not so genuinely) insulted at any mention of similarities between the two entities, and although the two do have mutually distinct characteristics (which will be tackled further on), the two vendors do indeed have many similarities.

Similarities

For one, besides their similar size, similar geographic coverage, significant industry overlap, close partnerships with IBM, and so on, both are, after all, aggressive acquirers (being more or less strange conglomerations of over a dozen enterprise products). This is in distinction to organic growers, which SAP, QAD, IFS, or IBS largely remain (if one disregards their occasional smaller, complementary acquisitions to fill some functional gaps). Other so-called organic growers include Oracle (prior to their acquisition of PeopleSoft/J.D. Edwards, and Siebel), and premerger Intentia and Lawson (see Rapidly Consolidating Enterprise Applications Market: The Worlds of 'Organic Growers' and 'Aggressive Consolidators').

Both vendors vehemently object to anyone characterizing them as aggressive consolidators, since the term gives the negative impression that acquisitions serve the purpose of farming maintenance revenues without any commitment to developing new solutions. SSA Global contends that it is much more than a consolidator, as it has been espousing and executing a well-defined convergence strategy. On the other hand, Infor claims to be a sort of organic grower of the businesses that it has assembledadding close to 1,000 new customers annually.

Related to this is the similar youth of the companies, which are both around toddler age. We know them now as SSA Global and Infor respectively, but via their progenitor companies, they can each boast about thirty years of market existence and industrial experience.

For example, from bankruptcy (with about $130 million [USD] in revenues and a cash hemorrhage of $16 million [USD]) in late 2000, SSA Global generated almost quintuple revenues of $637.8 million, with a net income of $20 million (USD) for the fiscal year ending July 2004. This was accomplished via nine acquisitions from April 2001 to August 2004. For fiscal year 2005, revenues totaled $711.8 million (USD), not including the last three acquisitions, which will be discussed later. With about 5,000 jittery customers in 2000, SSA Global now has over 13,000 active customers in 90 countries and 121 offices worldwide. The company, which also went public in May 2005, spends on average 15 percent of its annual revenues, or over $100 million (USD), on the research and development (R&D) of new solutions and enhancements.

On the other hand, from its first (hardly ever publicized) acquisitions in 2002, Infor has thus far acquired 18 companies, and estimates are that it has become a nearly $780 million (USD) company. This includes projections for the latest, partial acquisition of Geac Computer Corporation, and the complete acquisition of Datastream Systems, which will also be analyzed later on. It now has more than 3,100 employees in over 50 global offices, with earnings before interest, tax deduction, and amortization (EBITDA) currently around $140 million (USD), or a projected $190 million (USD) after the above acquisitions. The company is privately held, but remains refreshingly open about its finances, which is another similarity with private-era SSA Global. Another similarity is that both companies are far from being finished with their acquisition streaksboth are keeping watchful eyes around the clock on several dozen possible acquisition targets. However, eager candidates can also click designated buttons at these vendors Web sites and offer themselves up to chief acquisition officers (or whatever their titles might be).

Both SSA Global and Infor will sooner rather than later reach the magic $1 billion mark in revenues. As a matter of fact, both vendors are occasionally frustrated at being branded by analysts as mid-market-only providers simply because their revenues do not match up those of SAP and Oracle. In fact, many of their customers are multinational corporations with multibillions in revenues. Another striking similarity is that a lot of due diligence and integration takes place before any acquisition is publicly and officially announced; there is no confusion amongst their ranks about who is staying in which capacity, and about who has to move on. Also (at least at a mid-managerial level), there is a tradition of meritocracy in both houses, whereby incumbent employees do not necessarily have a free ride advantage over newcomersmany employees from acquired companies have actually climbed far up the corporate ladders.

So Similar, Yet So Different (and Vice Versa)

However, there are certainly somewhat different philosophies underlying the current state of affairs for SSA Global and Infor. Being the first to start the acquisition streak, SSA Global had initially shown (at least to lesser-informed outsiders) something of a scavenger nature, by acquiring struggling peer companies that typically had products written off by many as technologically outdated has-beens. But in hindsight, there was at least some underlying method and consistency to these acquisitions: all the products were technologically similar (based either on Unix or IBM iSeries [AS/400]); they were mostly aimed at related discrete and process manufacturing sectors; and they quickly became cash-generating businesses within SSA Global.

On the other hand, with every acquisition, Infor has attempted to solve essential, industry-specific challenges faced by its (by now) more than 17,500 customers (26,700 after the impending acquisition) and implementations in 70 countries. Also, each acquisition has had the role of helping to develop deep vertical expertise within the targeted supply chain management (SCM) and ERP solutions, and within certain regions (for example, Infor has succeeded in becoming the mid-market automotive supplier leader in Germany). The addition of Datastream, a prominent enterprise

asset management (EAM) provider, reveals a lot about Infors strategy to acquire leading brands that round out the entire solution footprint, and that provide compelling combinations to compete against the larger horizontal players like SAP and Oracle.

Certainly, SSA Global has been less focused so far on capturing certain industries with its acquisitions per se, than on acquiring ERP and SCM vendors to grow market share and share of wallet (SOW) by broadening its product footprint. Consequently, nowadays SSA Global develops, sells, and services enterprise applications software, which encompasses ERP, customer relationship management (CRM), SCM, financial management, procurement, project management, human capital management (HCM), business intelligence (BI), and product lifecycle management (PLM).

Even without an initially deliberate focus, SSA Global offers its applications to companies in a number of vertical markets, with a concentration on manufacturing industries (which represent about 80 percent of revenues, at least prior to the Epiphany acquisition; but this acquisition has shifted the revenue balance to about 64 percent, with the remainder coming from the service industries). The company offers its applications to companies in various industries: aerospace and defense (A&D); automotive; chemicals; consumer packaged goods (CPG); industrial machinery and equipment; general process manufacturing; high-tech and electronics; medical products, devices, and equipment; and pharmaceutical. To that end, its SSA ERPLN product is targeted at companies in the A&D, high-tech and electronics, and industrial machinery and equipment sectors, and includes specific functionality for companies in those sectors. SSA ERPLX has a similar focus on batch process companies, in sectors such as pharmaceutical, and food and beverage. Prior to the addition of Epiphany (via eclectic acquisitions such as Infinium or Computer Associates Masterpiece), SSA Global had widened market penetration by adding business services, financial services, government and education, health care, hospitality and gaming, and retail vertical markets to its traditional manufacturing stronghold. Its strategy has been to add strategic solutions that allow customers in targeted industries to support end-to-end business processes with integrated applications from a single vendor.

What the two vendors have since been doing with their acquired portfolios highlights additional similarities and differences. As for similarities, the bedrock policy for both vendors is that no product will be sunset (i.e., killed, stabilized, or discontinued) for as long as the customers want to use the products and pay for maintenance and support (which, incidentally, Infor has not increased, contrary to the customary actions taken by other acquisitive peers).

Also, for new and more avant-garde customers wanting to migrate to more contemporary technologies and the broadest and deepest contemporary functionality, both vendors have embarked on the development and delivery of next-generation products. In the case of SSA Global, this means converging several technologically close legacy products into the SSA ERPLN or SSA ERPLX next-generation ERP offerings (see SSA GlobalThe Right Product Strategy). In theory, these offerings will draw on

the best functional characteristics of all individual acquired products, in addition to new, internally developed (on an ongoing basis) functional capabilities.

Building Ecosystems of Extended ERP

Both SSA Global and Infor have also been building ecosystems of extended ERP, consisting of complementary products that they can peddle (up-sell or cross-sell) to their installed base (and even to new customers in a stand-alone manner), to keep clients on maintenance and sustain them as a source of revenue for many years. Such a strategy has been particularly successful for SSA Global, since in the maturing market for ERP systems, new license sales have long become more difficult to achieve, and increasing revenue from existing customers is thus becoming more important.

On the other hand, although user companies want new functionality, they are quite reluctant to undergo a wholesale rip and replacement of functioning legacy ERP systems, if extended functionality from the incumbent vendor is likely to be good enough (or even better). These factors have led to the philosophy that a vendor's revenue model might depend less on constantly finding new customers, and more on sustaining a large installed base of existing customers, including sales of complementary products and services for integration with the users installed system.

Shifting from an initial focus on portfolio collection, SSA Global has recently been focusing instead on a product convergence strategy, which means developing interfaces between its main applications and its acquired products. The vendor tends to offer an upgrade path to either the iSeries or the UNIX code bases via their respective SSA ERPLX and SSA ERPLN products. Recently, especially on the supply chain execution (SCE) side, it has acquired add-on best-of-breed point supply chain management (SCM) solutions such as CAPS Logistics (from former Baan), Arzoon, and EXE Technologies (and very recently, Epiphany for CRM and Boniva for HCM capabilities, which will be discussed later). SSA Global has been selling these ERP extensions (which in the SCM and SCE applications case are for all ERP products from the separate strategic SCM unit) primarily, but not necessarily to its existing ERP customer base (see SSA Global Forms a Strategic Unit with an Extended-ERP Savvy). The Epiphany acquisition has resulted in a new strategic CRM unit too. The integration of SSA Global's acquired products in areas such as SCM, supplier relationship management (SRM), and CRM should benefit SSA Global customers seeking suite-level integration.

SSA Global Warehouse Management System and Transportation Management System Focus

This benefit might be particularly apposite for customers that increasingly are feeling the pressure of doing business in a complex global supply chain where rising transportation costs have a major impact on business performance and profits. To that end, since the EXE acquisition in 2004, the vendor has delivered a swath of

warehousing enhancements dealing with regulatory compliance, integration with ERP counterpart products, event management, radio frequency identification (RFID), voice interface, and so on. Thus, SSA WMS (Warehouse Management System) 2000 5.5 and SSA WMS 4000 3.10, both from former EXE, provide a better user interface (UI), as well as compliance and warehouse operations facilities, with some industry-specific capabilities. Meanwhile, SSA TMS (Transportation Management System) 6.2, bolstered by new development since the Arzoon acquisition, provides more functionality for international air cargo transactions.

The array of enhancements slated for 2006 (for example, wave planning, agentbased network fulfillment execution, labor and task management, event management, and a multiwarehouse visibility platform) is no less impressive (see SSA Global finds Little Known SCM Gems in Filling Out its Solution Portfolio and Who Needs Warehousing Management and How Much Thereof?). All these enhancements come with the concept that users obtain deeper insight into their customers demands to better match supply with available product, based on flawless demanddriven supply chain and production operations ideas.

SSA has recently had strong momentum and organic growth, especially in the WMS arena: sales of WMS Solutions grew in 2005 from 2004 levels, to now reach EXEs peak revenue levels of 2001. Acting as a stand-alone, best-of-breed SCE supplier rather than an ERP supplier, globally SSA Global has been regaining significant customer share. Basically, by closing well over 100 significant customer transactions with WMS solutions in 2005 (with more than half involving brand new accounts), the vendor may be dispelling any lingering perceptions that it is a mere ERP scavenger. In fact, compared to the pure-play WMS leaders, Manhattan Associates and RedPrairie (including recently acquired MARC Global), SSA Global is more global, since most of its SCE customers come from outside North America. As for industry segments, retail and wholesale distribution was the largest vertical for SSA Globals high-volume WMS transactions, with transportation and logistics being the secondlargest vertical.

Similar Infor Focus

It is interesting to note that the Infor supply chain planning (SCP) group is acting in a similar manner, selling to several of its ERP install bases within all geographic regions. The group currently has estimated annual revenues of $35 million (USD), more than 135 employees, and over 450 customersmore than 75 percent of these customers have come from a competitive customer base (meaning that only one quarter of these have come from an Infor ERP product instance). SCP modules featuring industry focus and deep domain expertise include inventory planning and replenishment (including strategic inventory planning and inventory optimization), demand planning (including demand forecasting and scenario analysis), supply planning (including manufacturing planning and supply optimization), production scheduling (including process and discrete manufacturing scheduling), distribution planning (including deployment and distribution optimization), and sales and operations planning (S&OP) (including S&OP reporting and supply chain optimization).

Somewhat differing from SSA Globals comprehensive convergence of products, Infors assembler strategy for its major business units (discrete manufacturing [automotive, industrial equipment and machinery, high-tech and electronics, metal fabrication, and so on]; process manufacturing [food and beverage, specialty chemicals, pharmaceuticals, life sciences, and the like]; and wholesale distribution for durable goods [paper, plumbing and heating, industrial supply, building materials, electrical supply, and so forth]) is to acquire solutions and to skim off the potential superbreed modules, which it can then sell to users of its own ERP solutions as well as of other ERP solutions, while not losing sight of the vertical focus. Also, the collective domain knowledge and some acquired best-of-breed products will be (or already have been) transformed into evolutionary superbreed products for use across multiple divisions.

The best example, in addition to the aforementioned newly formed Infor SCP division (which stems from the SCT Process and Mercia acquisitions), is the SupplyWEB supply replenishment product for automotive suppliers, which has already incorporated the best functionality from former Future Three and Brain (see The Pain and Gain of Integrated EDI Part Two: Automotive Suppliers Gain), and which has meanwhile been rewritten in Java and is available for all ERP products. Further examples include the Infor eCommerce (formerly bizLinx), eStorefront, and eCatalog products from the Infor distribution division, and VISUAL WMS, from former Lilly VISUAL.

As a result, Infor has been able to integrate the collective industry-specific functionality and savvy of the products and people it assembles, as exemplified by Infor .NETs upcoming Center of Excellence which will join the forces of the former Lilly VISUAL and MAPICS SyteLine product development teams in the discrete manufacturing unit. Consequently, VISUAL WMS is being offered to Infor SyteLine customers, initially as a service offering, whereas the VISUAL Quality Management module is to be offered to both Infor SyteLine and Infor XPPS (formerly Brain XPPS) customers. As an independent entity, MAPICS had already linked the SyteLine CRM product to Infor XA (formerly MAPICS XA), well before its acquisition by Infor; this product will soon be sold to the original Infor COM users and later to Infor VISUAL users. The forthcoming accounting and trading management product ACmanager is anticipated as a new global superbreed product, together with eStorefront (from the distribution group) for SyteLine and COM, and the enhanced demand planning product Mercia Links for XA, SyteLine, and COM. The vendor is also currently analyzing the possible product candidates for superbreeds in performance management, PLM, and CRM.

Over the last 12 months, Infor claims to have gained nearly 1,000 name customers, mostly as a result of the above superbreed products and the COM (primarily in Europe), SyteLine (globally), and VISUAL (primarily in North America) ERP products (VISUALs new license sales reportedly rose 50 percent year over year in the first two quarters after the acquisition). Users are showing confidence rather than consternation after the new owners appearance. The automotive sector has been a particularly successful vertical for Infor: a reported 73 percent of tier one and two automotive suppliers were already using Infor solutions, generating $80 million (USD) in revenues. Additional areas focused on by Infor are wholesale distribution and the make-to-order (MTO) discrete manufacturing business, as well as process

manufacturing, including chemicals, and food and beverage, which will be detailed later.

Not to be completely outdone by Infor when it comes to vertical focus, SSA Global has been adding industry-knowledgeable people to its marketing teams, to contribute to delivering solutions addressing certain customer needs or pain points. The vendor will not build different product versions for different vertical industries (this is in order to maintain the simplicity and effectiveness of the two core ERP applications, which will converge multiple product, multi-code functional footprints), but will rather deliver optional feature packs tailored for certain industries. Needless to say, one would expect customers to apply them as a matter of course. Service packs are not optional (in that they correct bugs), but most simply roll up a number of previous changes. Conversely, some feature packs may contain more features for one industry than another, and it is quite possible that SSA Global might launch a feature pack for one industry, followed by a feature pack for another industry. That, along with the notion that success breeds success, has contributed to the fact that approximately 10 percent of SSA Globals total revenues currently comes from new licenses (although not necessarily from as many new name accounts as in Infors case).

Contributing to the Rejuvenation of Legacy Systems in the Enterprise Resource Planning Field
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1. SSA Globals Contribution to the Rejuvenation of Legacy Systems 2. Industry Trends 3. SSA Globals Technological Vision
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SSA Globals Contribution to the Rejuvenation of Legacy Systems

Lawson Softwares upcoming Landmark platform (see A New Platform to Battle Software Bloat?) and Infors Corestone have been described during our recent The Blessing and Curse of Rejuvenating Legacy Systems series, whereas Microsofts, SAPs and Oracles platform related forays have been duly reported as well (see SOA-based Applications and InfrastructureThe Next Frontier? and Multipurpose SAP NetWeaver). But the time has now come for us to describe the corresponding moves of SSA Global, whose equivalent platform is branded SSA Open Architecture.

This is Part Two of the six-part series The Enterprise Applications Arms Race To Be Number Three.

The common thread to all these platforms is a service-oriented architecture (SOA) strategy built to meet current market requirements, such as hidden complexity, and low total cost of ownership (TCO). Sound product architecture is critical to enabling faster implementations, easier upgrades, easier integration to other non-native applications, and more flexibility to change processes on an ongoing basis. For acquisitive vendors, there is the benefit of lowering acquisition cost; they can assemble component pieces that are non-proprietary, with an upgrade path to greater functionality, while still maintaining the replaceable nature of these components (due to their standards-based quality). The idea is to build anew only what cannot be assembled from the existing component repository. SOA is the unifying integration factor, whereby one can assemble composite solutions from disparate components: some that are built internally; some that come with acquired companies; and some that come from partnering with best-of-breed vendors.

One can thereby thin down a monolithic applications bloated and unwieldy core, while putting increasing amounts of functionality in thinner layer components that can be snapped onto or shared with several application kernels as required. Software built in an object-oriented (OO) fashion is thus less unwieldy; the leaner, more modular architecture can result in quicker implementations, improved flexibility, and easier upgrades. This framework also provides agility and flexibility for integrating industry niche solutions, and for development of industry-specific solutions, with insulation from the vendors major release cycles. For instance, SSA Global has recently been striving to add new functionality to support the food and beverage industry needs in the form of business logic that supports country of origin labeling (COOL), bioterrorism preparedness, and global trade item number (GTIN) compliance.

Although SSA Global has many service, software, and technology alliances or partnerships with companies around the world (such as Atos Origin, Accenture, Fujitsu, Cognos, Sirius, CSC, and Capgemini), its quintessential partnership is with IBM. This partnership was cemented in mid-2004, and aimed to more easily modernize and integrate disparate SSA Global systems across the extended enterprise. Under the terms of the agreement, the two companies jointly market SSA Global extended enterprise solutions built on IBM middleware, including IBM WebSphere Portal, IBM WebSphere Business Integration, IBM WebSphere Application Server, and IBM DB2 Universal Database. IBM Business Consulting Services and SSA Global also collaborate to offer implementation and consulting services.

With thousands of customers already running SSA Global solutions on IBM eServer xSeries, iSeries, pSeries, and zSeries technology, the joint solution should further reduce TCO and time-to-value, while helping these companies adopt a growing list of industry standards and information technology (IT) mandates. In other words, while Intentia, Lawson, and Infor are certainly major IBM partners, SSA Global has possibly become the most exclusive. SSA Global justifies this exclusivity decision by referring to the following three concepts:

1. Synergy: Together, SSA Global and IBM should offer a more complete and
extensive solution, meeting both business and technology needs. Namely, SSA Global has been providing customers with the industry solutions they need for competitive differentiation, whereas IBM has been contributing leading technology and infrastructure (this technical standardization should ultimately lower the TCO).

2. Affordability: The two vendors have been developing solutions for large
global customerssolutions that can be scaled down and made affordable for small and medium customers as well.

3. Interoperability: SSA Global is standardizing on the renowned IBM

WebSphere middleware platform, providing its customers with industrystandard integration infrastructure.

Industry Trends

Like its peers, SSA Global has thoroughly analyzed the industry trends and issues affecting manufacturing and distribution companies worldwide. Business is now moving faster than most companies ability to adapt. The velocity of business transactionsfrom orders by mail, to orders by phone, fax, and now the Internetis ever-increasing, and as a result there are increasing demands on IT departments. In addition, executive strategies passed down through the organization are expected to be implemented faster and faster, which is putting further pressure on IT departments to be more agile and to implement solutions quicker and more efficiently. Globalization is also introducing new levels of complexity, and virtually no company, big or small, has been unaffected by globalization. Whether a company has operations across borders or whether its supply chain extends overseas, it must contend with economic, cultural, linguistic, and regulatory differences, putting more pressure on the IT infrastructure to efficiently accommodate these needs (see Merging Global Trade Management with Global Finance).

The trend towards lowering TCO requirements also needs only small mention, since top executives are wiser today than they were several years ago (given they are apt to have had direct or indirect experience with IT projects that failed to deliver promised business benefits). They are also under more competitive pressure to obtain a tangible return on investment (ROI) and to extend the value of their IT infrastructures. The level of detail for ROI studies has meanwhile increased, and executives demand information that tells them what the true, long-term cost of a technology investment will be (without a credible ROI forecast, the odds are that a given project will not be approved).

Bundled with this is the trend towards application portfolio rationalization; over the last few decades, we have seen a move towards decentralization, as a result of which companies have built elaborate localized technology infrastructures to support the

needs of remote locations. Despite the flexibility and agility of autonomous remote divisions (see Standardizing on One ERP System in a Multi-division Enterprise), many top executives have realized that there is a high cost of maintaining a software infrastructure characterized by a disparate set of standard and customized applications. To achieve greater efficiency, cost reduction, and security, many user companies are moving to consolidate and standardize their applications and associated technology platforms, whereby the objective is to align IT infrastructure with business needs.

Technology landscapes are also consolidating, since customers are beginning to realize that they can get significant cost benefits by reducing the number of technology platforms they support. In addition, there is an inclination toward supporting open nonproprietary standards that offer more control over the applications they use and the vendors with whom they work. The industry consensus is that more than 75 percent of new enterprise application development is now built on platforms based on either Microsoft .NET or J2EE.

In summary, everyone needs more business agility, as well as the ability to conduct more transactions (including quality, service, management, production, and so forth) with fewer resources and assets (in terms of supporting applications and hardware). Like most of its peers, SSA Global is focused on providing business value via underlying technology improvements, such as solving the business problems of supply chain visibility, master data unification, vendor-managed inventory (VMI), and so on.

While the vendor is tackling recent buzzword-based technological concepts like Web services, composite applications, extensible markup language (XML), enterprise service bus (ESB), SOA, and so forth, the point is to map these concepts to true business value (in order to prove that this horde of whiz-bang terms and concepts really adds some value).

To that end, SOA describes modular software which is constructed using discrete executable tasks as the primary unit of subdivision, and which uses exposed service interfaces as the primary method of modularization (see Understanding SOA, Web Services, BPM, BPEL, and More). As mentioned earlier, users have an increasing need for greater simplicity, manageability, and agility, and if their business processes have changed, they want to know exactly how long it will take for an IT department to modify the software accordingly. As for what SOA means for customers, it should enable more rapid integration with existing systems, whereby customers can acquire new services without going through full upgrades. Additionally, it supports hybrid solution rollout and insulation against technology changes, and enables business process configuration and orchestration specific to vertical industries and distributed deployment.

SSA Globals Technological Vision

The SOA enablers of agility in SSA Globals case too are Web services, commonly accepted development standards, and common modules with standard service interfaces. This technology strategy has been driven by the customers requirement to implement and manage their solutions quickly and effectively, while maintaining the lowest possible TCO. SSA Globals technological vision is thus characterized by the following objectives:

1. To support its recently minted corporate product strategy of modernization,

convergence, integration and industry focus. Obviously, the first three pillars have considerable technical implications. Industry focus has technical implications that are less obvious, but remains very important to companies that have specific technical requirements (for instance, specific industry electronic data interchange [EDI] requirements). In particular, some of SSA Globals ERP products have been helping companies comply with the requirements of Part 11, Title 21 of the Code of Federal Regulations (CFR) from the US Food and Drug Administration (FDA), which applies to pharmaceutical manufacturing; and with International Financial Reporting Standards (IFRS), the financial reporting mandates for companies doing business in the European Union. In addition, SSA Global has integrated tax capabilities with its ERP products, so that customers can more easily and accurately process sales and consumer-use taxes for US and Canadian requirements.

2. To provide a common environment in which customers can model, administer, and deploy their solutions, since many SSA Global solutions that currently have their own proprietary infrastructure should greatly benefit by leveraging a common set of tools and technologies (commoditized standard technologies).

3. To provide the lowest possible TCO by leveraging technology standards like J2EE and Web services as the vendor strives to provide more tailored solutions with fewer customizations and quicker deployments, all at lower cost.

Business Strategy

SSA Open Architecture follows a logical approach based on strategic business processes in order to deliver a message platform which is organized around four basic service tiers:

1. people-oriented services

2. decision-making services

3. business process services

4. application services
We will get into more detail shortly as to what these different service tiers represent. For now, let us explain what this strategy intends to deliver, starting with the most important element, which is preserving customer application and technology investments, rather than imposing a rip-and-replace approach. SSA Global pledges to protect customer investment as much as possible, while still modernizing user applications.

Another key component of the strategy is the adoption of the SOA model, whereby software is implemented in the form of modular services that can be reused across the enterprise. In order to do this, the vendor wants to leverage commodity technologies and standards to implement software faster and more cheaply than the competition.

Furthermore, given that SOA technology is not enough without industry-based context and experience, SSA Global also plans to focus on core competencies, and to leverage its selected deep industry expertise to deliver the best and most flexible solutions. Lastly, the vendor pledges to partner whenever someone else can provide value to the customer quicker and more efficiently. By standardizing first on an IBM technology stack (with some other upcoming complementary close partnerships), SSA Global emphasizes that it is not in business to create proprietary technology platforms, but rather to maintain its philosophy as a solution-oriented company.

As for the abovementioned four service tiers, they can all be depicted rather simply. Namely, people-oriented services provide users with personalized UIs to provide a more effective experience and operating environment, allowing them to be more efficient employees. They also provide the ability to aggregate information across applications to give a single, consolidated view of the user enterprise, while they also enhance intracompany communication by providing the ability for employees to collaborate more effectively with the desktop and each other. Decision-making services provide reporting, analysis, and monitoring tools to decision makers within the user company, so that they can make informed decisions via better and faster manipulation, configuration, and analysis of business information. Under the SSA CPM suite (which is powered by Cognos business intelligence [BI] technology), the SSA Financial Reporting, SSA Enterprise Scorecarding, and SSA Analytics modules provide insight into business performance and required changes.

Business process services, as the term implies, aim at enhancing operational efficiency through improved business process management (BPM) functionality for

automating, integrating, and collaborating across the enterprise and into the supply chain (see Business Process Management: A Crash Course on What It Entails and Why to Use It). Standards-based integration infrastructure opens up applications and allows automation of business processes, whereas collaboration allows users to interact more closely with their customers and suppliers. These advantages have been best illustrated with SSA Globals other recent focus on the area of financial and regulatory compliance; SSA Global's compliance framework appears throughout multiple product areas, including functionality in the SSA BPM, SSA CPM, and ERP product lines.

Within the SSA BPM suite, the SSA Workflow capability (with the embedded iFlow technology from Fujitsu) helps companies establish preventative controls to ensure that predefined business processes and business rules are strictly adhered to. In addition, the SSA Event Management capability helps companies identify processes and data that are not compliant. Several SSA Global ERP products have been tightly integrated with the SSA BPM, SSA CPM, SSA FM, and SSA HCM suites to provide a broad range of compliance capabilities. The use of BPM and graphic modeling tools can speed implementation and aid flexibility. For instance, the vendor has lately built a series of templates for its BPM engine, to allow WMS software components to be quickly assembled for particular industries, or styles of warehouse operations.

In recent years legislation and regulations have been introduced to ensure good corporate behavior or governance, but unlike the Y2K issue, the Sarbanes-Oxley Act (SOX) in the US, and IFRS and Basel 2 in Europe, the Middle East, and Africa (EMEA), are not issues looking for a technology solution. Compliance is achieved only through management best practices, and SSA Global recognizes that technologies such as corporate performance management (CPM) and workflow management can be used to facilitate the adoption of such practices. For these reasons, the availability of CPM and workflow integrations is standard within the SSA FM suite, whereas report and process templates will be available as SSA Global engages with customers to define them. For more pertinent information, see Joining the Sarbanes-Oxley Bandwagon; Meeting the Needs of Small and Medium Businesses.

Last but not least, the application services tier provides a common infrastructure across applications, which allows for more efficient modeling, administration and deployment of solutions. Their potential benefit is in reducing the complexity and cost of application management by providing a common, enterprise-wide administration tool set.

Solution Application Framework

The Solution Application Framework (SAF) delivers the previously described service tiers, and allows customers to model, administer, and deploy their solutions using a common set of tools and technologies.

The first SAF component is the studio environment, which provides a single integrated development environment (IDE) for modeling and customizing SSA Global solutions. This includes portal, UI, workflow, reporting, data warehouse, integration, and development environments for solutions built with J2EE, existing SSA 4GL environments (in other words, fourth-generation languages from Baan and BPCS AS/Set technology), iSeries, and others. This is a good example of SSA Globals ability to leverage commodity technologies, since Eclipse IDE is an open source tool (originally developed by IBM, but then donated to the open source community) which is freely available to SSA Global and its customers.

While IBM has provided a number of free plug-ins to support different languages, SSA Global has been providing its own plug-ins to enable developers to use a common development environment for coding in Java, Report Program Generator (RPG), or SSA 4GLs. This industry-standard technology is providing significant value to SSA Global, its customers, and system integrators who can leverage the same tooling for their own customizations.

As far as the administration section of SAF is concerned, common services like unified user management, single sign-on, central deployment, licensing, logging, and configuration should ease deployment and maintenance costs. The run-time services component actually powers UI, portal, collaboration, integration, workflow, application server, and other needs, and it also provides the common infrastructure that supports the various platforms and databases SSA Global currently supports (for example, IBM DB2, Oracle, Microsoft SQL Server, and mySQL). Finally, the repositories of metadata, solution registry, and global solutions represent a significant move toward adopting the SOA model by externalizing functionality in its solutions in an effort to reduce the cost of customizations. As is well-known, customizations requiring coding add significant cost to application ownership, whereas SOA reduces costs by componentizing functionality for reuse and by allowing customization of business behavior by changing the order in which the components are executed. SAF repositories thus externalize configuration to allow for changes in behavior, since by reconfiguring the repository, users can change the business logic and provide the custom logic they might need without incurring the cost of the customizations of the past.

SSA Globals strategy for delivering future solutions is certainly not a big bang approach; rather, it is evolutionary in nature. The vendor started by releasing people-oriented services components with the SSA ERPLN product launch in 2004, whereas with the SSA ERPLX launch some components of the decision services and business process services have been added. Shortly after the ERP LX launch in mid2005, SSA Open Architecture 5.0 was released, and the vendor then initiated a cycle of two releases per calendar year (one in the spring and one in the fall) to continue to provide enhancements.

In September 2005, at its annual Global Client Forum, the vendor announced the general availability of SSA Open Architecture 5.1. The latest version of SSA Globals technology architecture, SSA Open Architecture includes enhancements to SSA Portal Studio, SSA Collaboration Services, and the new Eclipse-based SSA

Studio for modeling and customizations. The latest release features new unified user management and single sign-on capabilities, in addition to other administrative enhancements. SSA Global also designed SSA Open Architecture, so that customers of its predecessor product, SSA Technology Architecture 5.0, could easily upgrade to the new product.

But the best way to describe SSA Globals technological vision is to invoke the idea of customer-controlled introduction of innovation, which is a key strategy for allowing customers to adopt technology at their own pace. If customers start down the path towards SOA, the vendor pledges to work with them to find the best course of action based on their set of implemented solutions. It is not a matter of rip-and-replace, since customers can introduce components to work in their existing systems as they choose. While most articles in the press focus mainly on new SOA applications, most of what customers will likely be investing in is the technology that will enable their current solutions to participate in SOA scenarios. This path should provide the best ROI in the short term and the best TCO in the long term.

Along these lines, at the end of March 2006, SSA Global announced the general availability of the next release of SSA ERPLN, a significant upgrade to its flagship ERP solution for discrete hybrid manufacturers. The new release provides customers with enhanced capabilities in logistics, finance, projects, planning, sales, purchase, and service, and is a key milestone in SSA Globals strategy to help companies better understand and meet actual customer demand by leveraging an agile, standardsbased IT infrastructure. It is based on the above-depicted technology architecture, which provides a Web-based UI, eases the transition to SOA, and enables standardsbased cross application integration. The new release embeds specific solution templates for its primary target industries: hi-tech and electronics, and industrial machinery and equipment. It also extends the global reach of SSA ERPLN (with new embedded localizations for southern European countries and Japan), and in addition to a range of other capabilities, adds an intuitive interactive graphical planning board to simplify the workload for planners.

New Vendor Acquisition Strategies in the Enterprise Applications Field

P.J. Jakovljevic - April 26, 2006

Top of Form

1. Analysis of SSA Globals Latest Acquisitions 2. EpiphanyA Good Strategic Fit 3. Boniva
Part I | Part II | Part III | Part IV | Part V | Part VI

Bottom of Form

Analysis of SSA Globals Latest Acquisitions

Related Book

Although its consolidation appetite is not diminishing by any means, SSA Global seems to be showing signs of more deliberation and even restraint, rather than

jumping the gun to indiscriminately gain market share. Once seemingly insatiable, SSA Global now admits that growth by acquisition is no longer as straightforward and cheap as it used to be in the early 2000s, due to the increased costs of install base acquisition. Namely, while the vendor has paid on average $37,000 (USD) per customer for its 13,000 acquired customers, recently Oracle apparently paid about $2 million for each acquired Retek customer. Thus, while acquisitions at the right price will continue, SSA Global is shifting its focus towards providing extended solutions rather than acquiring peer enterprise resource planning (ERP) products.

This is Part Three of the six-part series The Enterprise Applications Arms Race To Be Number Three.

This article continues a comparative analysis of SSA Global and Infor, two contenders in the fierce ongoing competition to be number three (after SAP and Oracle) in the world of ERP vendors. See The Enterprise Applications Arms Race To Be Number Three for background information and a discussion of vendor similarities, along with Contributing to the Rejuvenation of Legacy Systems in the Enterprise Resource Planning Field. The other leading contender is Lawson Software. For a detailed discussion of Lawson, see New Lawson Software's Transatlantic Extended Enterprise Resource Planning Intentions.

By its own admission, until 2003, SSA Global was merely a collection of ERP products, with a desire to consolidate. At that time, its only established ERP product extensions were the embedded Cognos business intelligence (BI) nuggets, the acquired Warehouse BOSS solution, and a collection of disjointed third-party products (such as Applix for customer relationship management [CRM], Logility for supply chain planning [SCP], and Digital Union/Verticalnet for sourcing and procurement). Acquisitions were focused on ERP as well as on the associated research and development (R&D) investment. This state of affairs is in contrast to todays nearly complete SSA Global solution footprint and delivery of converged solutions having predictable and published product roadmaps. Also, the acquisitions have become rather more strategic, bundled as they are with balanced development investment, and deliveries on promises of continued support.

Although many might still consider SSA Globals acquisitions to be opportunistic, the vendor has long instituted a so-called 4M approach underlying the evaluation of acquisition candidates:

Motivationis the candidate motivated?

Moneywill there be sufficient payback?

Methoddoes the candidate have the right people?

Matchdoes the acquisition fit SSA Globals big picture?

The vendors goal is to ensure that it keeps customers for life. In order to do that, it must preserve the customers investments while continuing to deliver a long-term product strategy of convergence, modernization, and vertical focus, all in a predictable and incremental manner. The short-term strategy, on the other hand, is to enhance the value of current applications in delivering the functionality (with a consistent tempo of releases) that customers have been asking for, by delivering integration to extension products like CRM and supply chain management (SCM), and by delivering first-rate support.

SSA Global s three most recent acquisitions in particular, E.piphany, Boniva Software, and Provia Software, may indicate a new phase in the vendors acquisition strategy and development cycle.

EpiphanyA Good Strategic Fit

In the fall of 2005, SSA Global completed the acquisition of E.piphany, Inc. (also known as Epiphany), an innovative but financially long-struggling global CRM solutions provider. As a result of the merger, Epiphany now operates as a wholly owned strategic CRM division of SSA Global; shares of Epiphany common stock have been delisted from NASDAQ, and deregistered with the Securities and Exchange Commission (SEC).

Unlike many earlier SSA Global acquisitions, Epiphany certainly cannot be categorized as providing an outdated product. In fact, the embattled CRM vendor, which now prefers to drop the dot from its official name, was famed for trying to put the e (the electronic business moniker) into CRM, and was a big name during the dot-com era. Its CRM analytics were (and arguably still are) an important part of ecommerce and e-business development. To a certain degree, it succeeded in building a business on applications related to marketing automation, call center management, real-time customer analytics, and real-time interaction. These applications (the Interaction Advisor, Insight Advisor, and Lead Advisor modules) peaked at $125 million (USD) in annual revenues in 2001, with Vodafone, Nestle, Gap Inc., Citibank, Virgin Holidays, HBOS, and Barclays all signing up as users. However, revenues have since fallen sharply, closer to the $70 million (USD) mark.

Epiphany's products have been widely implemented among business-to-consumer (B2C) companies that have large numbers of direct customers, such as wireless carriers, travel and transportation services, banks and other financial services firms, telecommunications, utilities, and retailers. The catch with these customers, however, is that they tend to spread their applications portfolios over multiple providers, making Epiphanys revenues much less impressive than its customer list. In fact, Epiphany has never shown a profit in any fiscal year since it went public in 1999. Thus, in August 2005, after 7 years of consecutive losses, including a

whopping $2.6 billion (USD) hit in 2001, the innovative CRM provider fell into the arms of SSA Global, for a quite surprising $329 million (USD) in stock. This was all the more surprising given that the company had revenues of about $75 million (USD) and losses of $16 million (USD) in the previous 12 months (although a significant cash position of about $160 million [USD] would have been a good rationalization for SSA Global).

In justifying the merger, the two parties cited two major synergies between them. First of all, out of 450 Epiphany customers, there was reportedly a significant 20 percent of shared customers in the manufacturing, finance, and services industries, with certain cross-selling opportunities owing to the complementary nature of the products. Epiphany filled a major gap in the SSA portfolio, with respect to inbound and outbound marketing automation and analytics (see Why Are CRM and Analytics Intrinsically Connected?), sales force automation (SFA), online solutions, and ecommerce. Some marketing automation features are certainly top-notch, such as collaborative filtering (identifying cross-selling campaign opportunities based on past purchases), real-time data mining and decision-making (using static and dynamic customer attributes while the customer is browsing online), and predictive analytics capabilities (see Predictive Analytics; the Future of Business Intelligence). Although SSA Global had some CRM capabilities with Baan (via the acquisition of Aurum and subsequent in-house developments), these were inconsistent and lacked sophistication, so that the customer demand and mind share for the SSA CRM suite have always been very low. On the other hand, SSA CRMs native strengths lie in sales configuration, order management, and field service functionality, which are not areas that Epiphany covers. Once the integration is complete (some time in 2007 at the earliest), the SSA CRM offering should be more well-rounded and appealing than current native offerings for users of Baan or the Applix add-on on the business planning and control (BPCS) side.

However, concern remains that the two companies have thus far not had much of a common market focus. Namely, while SSA Global is oriented toward business-tobusiness (B2B) applications (primarily in the realm of manufacturing), Epiphany has largely focused on the aforementioned B2C markets in service industries. These install bases naturally have separate functional and support requirements, and only time will tell where additional outlets will arise once the immediate cross-selling opportunities are mined. SSA Global contends that manufacturers too should be interested in reaching customers directly via marketing campaigns (with the help of analytics), as shown by recent success of marketing automation specialists such as Unica and SAS (see Should Uniqueness Vouch For Marketing Automation Niche Players?). Also, since SSA Global had a considerable business in service industries even without Epiphany (for example, with KPN as a customer), there may actually be more of a common market focus than might appear at first glance. With Epiphany, 37 percent of the installed base is now in the services sector; conversely, a significant percentage of Epiphanys customer base was in the manufacturing sector.

But the second synergyshared adoption of technology based on open standards and service-oriented architecture (SOA)might be even more compelling. Namely, while Epiphany has long leveraged J2EE- and SOA-based technologies to rewrite its products, SSA Open Architecture explored in Part Two of this series remains in part a statement of direction, since many of its products will need much retooling to

conform to the SOA vision (although fewer will need retooling as of the third release of the product in the spring of 2006).

The vendor will need developers experienced in these technologies, and by buying Epiphany, it has acquired a development organization which is already at the place SSA Global is aiming for. Apparently, the former Epiphany Customer Relationship Backbone (CRB) platform has already been rolled into SSA Open Architecture (6.0, the first release where CRB and Open Architecture converge, is due in the spring of 2006), and the SSA SCM team has been delivering new warehousing management capabilities while leveraging the savvy of its CRM colleagues.

In summary, existing Epiphany customers will breathe a sigh of relief owing to the strength of a global company behind the CRM products; this assures financial viability and continued R&D. Indeed, CRM is a strategic area of investment for SSA Global, and the Epiphanys team in San Mateo, California (US) has been supplemented by engineers in India, the Netherlands, Dallas (US), and Toronto (Canada). As they have done many times before, SSA Global will commit to continued support for all CRM products. On the other hand, existing SSA Global customers will eventually be exposed to a more complete sales force automation (SFA) and call center solution that enables sales (and service of customers) across multiple channels and lines of business (LOBs). Some customers may benefit from a comprehensive marketing automation solution both for B2C and B2B environments, but all solutions will be under a sole SSA CRM brand which includes all current capabilities on a modern J2EE platform, both for CRM solutions and all future development activity.

The go-to-market CRM strategy for SSA Global consists of maintaining and growing business in B2C verticals, where it plans to maintain a distinct sales structure to focus on traditional Epiphany market segments (such as the financial services and telecommunications sectors). Also, the vendor will try to widen cross-selling opportunities in its installed base by leveraging existing SSA Global sales teams and specific offerings targeted at the mid-market. The idea is also to expand sales into eastern Europe, Latin America, and the Asian Pacific (APAC), by leveraging a global sales organization and providing tier one language support. SSA Global will also try to leverage strategic alliances in some sectors, for example, with IBM (for financial services, retail, and manufacturing), with Capgemini (for telecommunications), and with some resellers such as Harte Hanks and Merkle (for the mid-market).

The combination of Epiphany and SSA Global may be a win-win situation for both camps of customers, as evidenced by recent increased momentum in the market place. Namely, again dispelling the perception of only milking installed ERP bases, SSA Global can still boast (although not to the degree of its supply chain execution [SCE] team) thirty new CRM customers in the last twelve months, and fourteen in the last four months alone (since the acquisition). Most of these customers came from the vertical segments, namely, financial services (for example, Charles Schwab, Banco De Brasil, Credit Social des Fonctionnaires [CSF], Golden 1 Credit Union, and American Express Merchant Services); insurance (Linea Directa, Hartford, Pacificare, Well Point, and Dahlberg Assurance Brokers);

telecommunications and utilities (Essent Cablecom, Telefonica, and Energies De Portugal); retail (Specsavers Opticals, Family Christian Stores, Bombay Company, Etam, and Macys.com); and consumer electronics (Sony Computer Entertainment and Yodabashi Camera). Often, these new customers came at the expense of fierce and respected competitors such as Siebel/Oracle, Amdocs, Unica, and Sigma Dynamics.

The vendor pledges to continue to make significant investments in order to expand the SSA CRM solution suite, via in-house development, acquisition, and partnering. SSA Marketing Version 7.0, slated for 2006, will lead the market in terms of breadth and depth of marketing automation functionality, with its upcoming enhancements:

goal-based arbitration and dynamic arbitration logic, for maximizing revenue and margins

meta-learning, to optimize offer messaging with real-time analytics

sophisticated decision-making strategies by customer segment (with the ability to test, learn, and fine-tune these strategies)

real-time miner enhancements (the ability to learn by customer group, channel, or time period, and to use multiple real-time miners on a single offer for advanced learning)

the ability to use statistical models in real-time decisions

multi-row customer profiles

rule sets, global rules, faster rule definition

User interface (UI) and reporting interface enhancements

Furthermore, all planned SSA Sales, SSA Service, and SSA Marketing releases beyond the 7.0 version will deliver new or enhanced CRM capabilities, including seamless integration with ERP offerings

The table below shows the due diligence and go-to-market homework (with key target segments analysis) conducted by SSA Global following the Epiphany acquisition:
Segment Characteristics Key Business Needs Key Solutions

Financial Services Insurance and Communications

Millions of named customer relationships

Maximization of average revenue per user, and products per household

SSA Inbound Marketi ng

High cost of customer acquisition

Minimization of churn

Fragmented customer interactions

Multichannel customer service

SSA Outbou nd Marketi ng

Organic growth as key to success

SSA Service

Retail

Travel and Leisure Hospitality

Millions of customers but limited number of named customer relationships

Maximization of wallet share

SSA Inbound Marketi ng

Low marketing effectiveness

Multichannel customer service

SSA Outbou nd Marketi ng

Targeted promotions to premium customers

SSA Service

Consumer Electronics

Consumer Packaged Goods Food and Beverage

Millions of customers but limited number of named customer relationships

Effective management of dealers and distributors

SSA Service

Targeted promotions by customer segment

Direct relationship with premium customers

SSA Outbou nd Marketi ng

Large distribution network

General Manufacturing (Discrete and Process)

Business customers

Zero-error order capture

SSA Sales

Complex orders

Streamlined opportunity to cash processes

SSA Service

Optimized field Service

SSA Outbou nd Marketi ng

Boniva

While the Epiphany may partly align with SSA Global's established business model of mining its installed customer base by bringing new CRM functionality (such as marketing analytics and call center applications), additional install bases, and particularly a CRM mind share to the SSA Global portfolio, the August 2005 acquisition of Boniva Software, Inc., a human capital management (HCM) start-up, was a pure technology buy, since there were hardly any current customers there. Bonivas J2EE-based strategic talent management portfolio of e-learning, employee recruitment, skills management, and performance management applications has already been integrated into the SSA HCM solution. The suite should now enable companies to automate core processes such as human resources (HR) administration, benefits, and payroll, but should also offer capabilities such as selfservice, analytics, and workflow, in order to better connect managers and employees in real time. Built on open standards (including J2EE and extensible markup language [XML]), SSA HCM can be deployed on multiple platforms, including the UNIX, iSeries, and Microsoft Windows operating systems.

Provia

In early March 2006, SSA Global announced the acquisition of Provia Software, Inc., a Grand Rapids, Michigan (US)-based mid-market provider of order-to-delivery SCE solutions, such as the ViaWare warehouse management system (WMS); the FourSite order management system (OMS) and billing solution for third-party logistics (3PL) providers; labor management solutions and yard management systems (YMS); visibility and analytics solutions; transportation management systems (TMS); small parcel shipping (SPS) systems; radio frequency identification (RFID) systems; and scheduling solutions, all recently enabled as Web services, and integrated within the ViaWare suite (see Provia Tackles RFID in a Twofold Manner).

Despite our initial impression that SSA Global was thereby crowding its SCE solution portfolio, the acquisition of Provia should provide the vendor with a small-to-medium market SCE solution which affords a more cost-effective approach for distributionintensive companies. Provia's solution complements SSA Global's existing supply chain management offerings, which target larger, high-volume distribution fulfillment customers, whereas the existing SSA Global WarehouseBOSS mid-market solution remains for IBM iSeries customers. By adding Provia, SSA Global now believes that it can offer SCE solutions for any company supply chain (no matter what the size of the company), in many more vertical industries and geographies.

At second glance, there might indeed be strong synergies between SSA Global and Provia. This is especially true given that many of SSA Global's customers serve the same industries as Provia (including 3PL, consumer packaged goods (CPG), food and beverage, high-tech and electronics, wholesale, and retail), and also given that Provia has been integrated with SSA Global ERP solutions at many customer sites. The acquisition of Provias products should strengthen the SSA WMS offering and market share immediately, owing to a focused 3PL sales and marketing team. Provia has a strong position in the 3PL market, which represents about half of its customer base (with such customers as Menlo, NYK, and Hanson); SSA Global also has a strong position in the global 3PL market, with tier one customers such as UPS, DHL, FedEx, and BAX Global). Provia products will thus address the lower-end 3PL markets in North and Latin American with a lower TCO solution, whereas the products that come from former EXE will address tier one 3PL and the high-volume warehouse operations markets globally.

As expected, there will be a drive towards a common SCM SOA solution in the longterm. At first glance, existing SSA WMS customers should expect to benefit from Provias Visibility and Analytics solutions. Conversely, Provias existing customers may benefit from SSA SCM solutions, such as Slotting, Event Management, voicedirected systems, and TMS.

The Impact of the 'Assembler Strategy' in the Enterprise Applications Field

P.J. Jakovljevic - April 27, 2006

Top of Form

1. Genesis of Infor Process Group 2. Challenges 3. Datastream Acquisition

Complete Table of Contents
Part I | Part II | Part III | Part IV | Part V | Part VI

Bottom of Form

Genesis of Infor Process Group

Related Book

In evaluating recent acquisitions in the enterprise resource planning (ERP) field, it will be useful to describe Infor Process Groups vertically-focused assembler strategy (also see Stability and Functionality for Process and Discrete Manufacturers). It is interesting to note that the Infor of today originated with the Infor Process Group; its very first acquisition was the 2002 Process Group spin-off from the former SCT Corporation, which brought Adage ERP and Fygir SCP process manufacturing products into the fold (see iProcess.sct Enters Golden Gate Opportunity). It is ironic, however, that this very functional and prosperous mother product portfolio has been left largely unattended by Infor for some time, owing to a spate of other acquisitions, especially within the now much larger discrete manufacturing and wholesale distribution groups.

This is Part Four of the six-part series The Enterprise Applications Arms Race To Be Number Three.

But any injustice in this regard has seemingly been rectified. For one thing, in late 2004, Infor acquired IncoDev Software-Entwicklung GmbH, headquartered in Hamburg (Germany). Over the past twenty-five years, this company has provided ERP software to large and midsized European companies within the chemical, dyes and paints, life sciences, and food and beverage industries. Their software has deep a vertical focus, supporting most requirements of the lot- and recipe-oriented manufacturing industry, which, combined with its broad customer and partner base throughout Europe, was an important factor in strengthening Infors position within process industries.

The combination of IncoDevs ERP capabilities with Infors existing supply chain planning (SCP) offerings, international presence, and financial strength, provided additional benefits to its customers while increasing the vendors competitive advantage. IncoDevs ERP solution, rebranded into Infor Blending, now supports many aspects of financial management, production planning, and inventory management for specific process industries, and is certified for the pharmaceutical industry. The solution also includes integrated quality management, a laboratory information management system (LIMS), and hazardous materials management. The product serves over 200 large and midsized customers, and has more than 10,000 users; this is a result of being marketed directly (in a big way) in Germany, and through a dedicated network of solution partners throughout western Europe.

Consequently, the Infor Process Group now boasts over 120 employees (with over 80 percent of employees in the research and development [R&D], support, and professional services departments) and over 400 customers (of which 150 are specialty chemical enterprises, 50 are pharmaceuticals, and 200 are food and beverage companies). The group has estimated annual revenues of about $36 million (USD), with license revenue amounting to 27 percent (with an equitable split between the support and maintenance revenues). Europe contributes 53 percent of revenues, and North America contributes the remaining 47 percent.

This continuation of a series comparing SSA Global and Infor Process Group, two contenders in the fierce ongoing competition to be number three (after SAP and Oracle) in the world of ERP vendors, analyzes Infors acquisition of Adage ERP and Fygir SCP from the former SCT Corporation, and of Datastream Systems. Later articles will discuss Infors acquisition of Formation Systems and Geac.

See The Enterprise Applications Arms Race To Be Number Three for background information and a discussion of vendor similarities. For more information, see Contributing to the Rejuvenation of Legacy Systems in the Enterprise Resource Planning Field. Also see New Vendor Acquisition Strategies in the Enterprise Applications Field for a comparable analysis of SSA Global. The other leading contender is Lawson Software. For a detailed discussion of Lawson, see New Lawson Software's Transatlantic Extended Enterprise Resource Planning Intentions).

In combination, the two ERP products, Infor Adage and Infor Blending, feature support for the resolution of many process manufacturing fatal flaws (see The Fatal Flaws for Process Manufacturers, Fatal Flaws in ERP Software Create Opportunity for Niche Software in CPG Companies, and Process Manufacturing Software: A Primer). Some key differentiators worth mentioning include support for variable weight or catch weight; lot traceability to help food processors trace any portion of each batch or lot (for purposes of damage control, the US Department of Agriculture [USDA] requires food processors to be able to trace any portion or product of, for example, a processed chicken); quality management; variable weight-based costing and pricing throughout the supply chain; regulatory compliance; and a comprehensive supply chain management (SCM) solution for process industries.

Challenges

The vendor does acknowledge some technological and functional shortcomings, especially with respect to the Adage product, which still lacks a proper graphical user interface (GUI). Also, Adage often needs to interface with strong financial management products (such as SAP or PeopleSoft solutions), and lacks US Food and Drug Administration (FDA) regulatory compliance for pharmaceutical companies. For that reason, a helpful target division of products would involve using Adage for larger companies in the food and beverage, and chemical sectors, and Blending for smaller companies in the pharmaceutical and consumer products sectors.

In the short term, which means by the end of 2006 (or even earlier), the products are slated for user interface (UI) enhancements (in terms of browser deployment and improved usability for Infor Adage 5.0), and for integration with Infor WMS (i.e., VISUAL WMS) and Infor Global Financials (for the Infor Blending 5.9 release only)the latter stemming from Varial. The idea is to migrate the Adage 6.0 and Blending 6.0 releases in 2007 to the adopted Infor client (within Corestone) and to integrate them into Infor Global Financials. Also, both products are to be migrated to n-tier architecture, with complete encapsulation of business logic in a manner enabled by service-oriented architecture (SOA). All these short-term and midterm

functional enhancements have been driven by user groups, regulatory compliance, and industry trends.

The long-term roadmap, for 2008 and later (and for both product releases 7.0 and later), is to eventually converge the products into an Infor Process ERP product (in a way that is somewhat similar to SSA Globals current forays), using Corestone architecture components, with core process industries applications such as process manufacturing, order management, and costing. By then, the product will also be integrated with Infor Global Financials, Infor WMS, Infor CRM (coming from SyteLine), and Infor SCM.

Datastream Acquisition

Related to the process group, which has many asset-intensive customers (although the Infor Distribution Group may also have many customers with interests in fleet tracking and management), is the acquisition of Datastream Systems in early 2006. The merging parties are working to close this transaction as soon as reasonably possible, and it is expected to be completed in the second calendar quarter of 2006. Datastream, founded in 1986, provides asset performance management software and services to more than 6,700 enterprises (in more than 140 countries), including more than 60 percent of the Fortune 500. Its solutions combine enterprise asset management (EAM) functionality with advanced analytics, to deliver a platform for optimizing enterprise asset performance.

The flagship product, Datastream 7i, delivers an asset performance management infrastructure combining an advanced SOA (which is in tune with the upcoming Infor Corestone platform), with broad enterprise asset management (EAM) functionality, integrated procurement, analytics, and multi-site capability. By using these solutions, customers in sectors such as manufacturing, hospitality, health care, transportation, telecom, facilities management, and government can maintain and manage capital assets. These assets might include manufacturing equipment, vehicle fleets (including mobile assets like forklifts or automated guided vehicles [AGV]), and buildings. These solutions also allow customers to create analyses and forecasts so that they can take action to improve future performance. The Web-based product, which is strong in capabilities such as asset tracking; work order management; scheduling; preventive maintenance; parts inventory; and maintenance, repair, and overhaul (MRO) procurement capabilities, allows users to view maintenance activities across multiple plants. There is also a separate e-procurement package (Datastream 7i Buy), which is integrated with Datastream 7i to provide automatic requisitioning of parts as reserved by maintenance orders, with access to the catalogs of hundreds of MRO suppliers, along with support for internal catalogs.

Furthermore, a calibration module manages tools and equipment, and an e-records and e-signature module enables record keeping for compliance with such regulations as the well-known US Food and Drug Administration Code of Federal Regulations (FDA CFR) Title 21 Part 11. The analytics module provides calculation, contextualization, correlation, connectivity, and visualization tools, for a better

understanding of the trends and root causes of equipment performance and reliability (thus enabling visibility and better decision making by pushing data to dashboards, palmtop computers, web-browsers, and pagers). These EAM and manufacturing intelligence capabilities (see Plant Intelligence as Glue for Dispersed Data?), while not yet being at the level of SAP, especially following SAPs recent acquisition of Lighthammer (see Has SAP Nailed Plant Level Leadership with Lighthammer?), certainly raise the bar for Infor in comparison to the capabilities of SSA Global, Intentia, IFS, Oracle, IBS, Ross Systems/CDC Software, Epicor Software, QAD, Glovia, and so on.

Datastream Benefits

Datastreams asset performance management strategy delivers value to customers by connecting critical maintenance and asset information with operational data, in order to improve organizational performance; maintenance can be subsumed under overall corporate strategy, and resources can thus be focused more accurately to enhance opportunity, and reduce risk and cost. With the advent of best practices such as reliability-driven maintenance (RDM) (see Reliability Driven Maintenance Closing the CMMS 'Value Gap'?), employee safety, and total productive maintenance (TPM), the asset maintenance function has been receiving increasing attention lately within enterprises, and has been elevated above the role of an expense department. However, as long as maintenance remains within the realm of separate enterprise asset management/ computerized maintenance management system (EAM/CMMS) software, management will be missing some mission-critical parts of the big picture its enterprise application system aims to present. While CMMS and EAM have optimized inventory levels across plants and improved throughput at lower production costs by reducing equipment downtime and performing preventive maintenance, only an integrated EAM or ERP platform permits a complete view of the entire organization's key metrics for a comprehensive performance perspective (including not only planning, manufacturing, sales, procurement, inventory, finance, and human resources, but also maintenance performance metrics and opportunities for improvement).

With such an integrated platform and inherent information sharing, asset-intensive user organizations should reap tangible benefits:

Greater purchasing power and better spending control In theory, integration of ERP with EAM allows better control over purchasing processes (negotiation, decision-making, electronic ordering, spending control), and helps standardize and minimize spare parts inventories.

Production efficiencies An integrated system should make it easier to view production schedules to determine the best time to take an asset off line (for example, for preventive maintenance).

Analysis of equipment failure An integrated system should provide consideration of equipment downtime in the analysis of supply chain efficiency, and its impact on quality and order fulfillment; following a repair, ramp-up costs can thus be more easily analyzed.

For more information on potential benefits, see EAM Versus CMMS: What's Right for Your Company?.

Given the asset-intensive nature of Infors customer base and target markets, Datastreams EAM solutions will address a key business need. The combined company will have 24,700 customers in 140 countries (the two companies already have 1,000 common customers). Datastream has more than 6,700 customers on support (for example, Boeing, ChevronTexaco, Pfizer, and GlaxoSmithKline) and a dedicated employee base which should expand Infors expertise in the manufacturing and distribution sectors, as well as other asset-intensive industries. Datastreams technological leadership in developing Web-architected solutions should also complement Infors own commitment to assembling cost-effective solutions tailored to customers specific operating environments. Conversely, Infors financial backing, global reach, and additional product solutions may provide Datastream customers with a path for continuous operational improvement and long-term growth.

In the short term, it is thus logical to expect Datastream to remain as an autonomous division and to be sold as a best-of-breed application. However, eventually it will be cross-sold globally as a superbreed product by the Infor sales force, and will be more fully integrated into the Infor solution suite. However, one challenge will be Datastreams lack of current support for the IBM iSeries platform, which is well-represented amongst Infor ERP products. For this reason, the recent predatory (and highly visible) moves on the install base by EAM competitors MRO Software and DPSI should not surprise anyone, especially given some users concerns about the future of Datastreams midmarket MP2 product.

Acquisitions Fuel Vendor Growth in the Enterprise Applications Field

P.J. Jakovljevic - May 1, 2006

Top of Form

1. More Acquisitions 2. Infor Acquires Formation Systems 3. Deconstructing Geac

Complete Table of Contents

Part I | Part II | Part III | Part IV | Part V | Part VI

Bottom of Form

More Acquisitions

Both SSA Global and Infor continue to grow through the acquisition of companies that extend the scope of their offerings. Related Book New Vendor Acquisition Strategies in the Enterprise Applications Field and The Impact of the Assembler Strategy in the Enterprise Applications Field began an examination of these acquisitions. We continue by examining Infors acquisition of Formation Systems and Geac.

This is Part Five of the six-part series The Enterprise Applications Arms Race To Be Number Three. Parts One to Four were published April 24 to April 27.

This is part of a comparative analysis of SSA Global and Infor, two contenders in the fierce ongoing competition to be number three (after SAP and Oracle) in the world of enterprise resource planning (ERP) vendors. See The Enterprise Applications Arms Race To Be Number Three for background information and a discussion of vendor similarities. Also see Contributing to the Rejuvenation of Legacy Systems in the Enterprise Resource Planning Field. The other leading contender is Lawson Software. For a detailed discussion of Lawson, see 'New' Lawson Software's Transatlantic Extended Enterprise Resource Planning Intentions.

Infor Acquires Formation Systems

Infor cites continued organic growth, license revenue from new customers, and install base cross-selling and up-selling as key growth drivers for the group. The company is also betting on expansion outside the North America and Germany strongholds, into the UK and other key markets such as the Asian Pacific region and China. A potentially expanded footprint in the realms of product lifecycle management (PLM) or enterprise asset management (EAM) should also contribute to the top line. To that end, in August 2005, Infor announced that it had acquired Formation Systems, a privately-held provider of PLM solutions exclusively for process manufacturing companies. This acquisition further strengthens Infors broad product portfolio for process industries. Formation Systems has since joined the Infor Process Manufacturing Group, which is led by Hermann Stehlik (vice president [VP] and general manager [GM]), and which continues to operate in Southborough, Massachusetts (US).

As a leading provider of PLM solutions for the food and beverage, home and personal care, and specialty chemical industries, Formation Systems should significantly enhance Infors capability to integrate, streamline, and manage the entire process of product development. For ten years, the company has provided PLM software solutions to high-profile process manufacturers, and has built a highly skilled and dedicated workforce having a deep knowledge of PLM best practices in the vertical markets they serve. Thus, the acquisition of Formation Systems supports Infors vertical strategy, and should establish the combined company as a global leader in providing solutions with an integrated PLM system to selected process manufacturing industries.

For a more detailed discussion of process manufacturing ERP, see Preparing for Product Development in Process Manufacturing.

Many regulatory bodies have renewed their focus on product compliance, and the Formation Systems acquisition confirms the trend towards PLM functionality becoming an essential element of an enterprise application portfolio. It also confirms that industry-specific functionality is increasingly critical to buyers of enterprise applications. Naturally, regulatory requirements vary according to the industry, as do many other PLM requirements (for more information see PLM is an Industry Affair Or Is It?).

While product design rules engines may eventually be retrofitted to apply across several vertical industries, the tricky makeup of recipes/formulae and security mandates will require a deep understanding of process manufacturing requirements. Consequently, defining and formulating recipe-based products requires industrytailored solutions to adequately allow product development. The Optiva product suite from Formation Systems features strong formula management capabilities which might give Infor a differentiating value proposition when selling to prospective customers in process manufacturing, as well as the ability to up-sell and cross-sell to a larger installed customer base. Infor and Formation Systems customers may mutually benefit by gaining the opportunity to standardize on a single broad process solution for all their process ERP, supply chain planning (SCP), supply chain execution (SCE), corporate performance management (CPM), and PLM needs.

The centerpiece of the suite is Optiva Workbench, which accelerates product development by supporting design collaboration with suppliers on formulas and specifications, as well as by providing the visibility needed for fully using existing information to avoid unnecessarily reinventing the wheel. Other modules in the Optiva product suite, such as Optimization (for constraint-based formulating), Requirements Management, and Specifications Management, are designed to capitalize on the data management features of Workbench (see Formation Systems Pioneers Product Design Collaboration For The Process Industries). Also widely deployed are integrated packaging management (from the primary pack to the pallet), integrated label content management, product performance, safety and efficiency testing, material safety data sheets (MSDS) and hazard label generation, nutritional and nonconformance analysis modeling integrating laboratory information management systems (LIMS) assay results, integrated stage gate, and portfolio management. Capabilities such as parametric searches, visual comparisons, material usage restrictions, best practices feedback, and role-based modeling are used from concept to launch.

In its entirety, the Optiva suite speeds up the product development lifecycle by easing collaboration, facilitating access to supply information, and managing product testing and the other tasks that precede a commercial release. Combining process PLM with process ERP can produce a unified sample management solution that allows product samples to be shipped in the same manner as commercialized products. Furthermore, combining process PLM with process-oriented supply chain solutions can provide unique recipe optimization capabilities that evaluate current inventory to

develop least-cost or best-fit formulations, thereby accelerating the new product introduction (NPI) process and achieving globally compliant products with lower development costs and a shorter time to world markets. It is thus no small wonder that Coca-Cola Co., Akzo Nobel, Gillette Co., GE Plastics, Campbell Soups, and over forty other process manufacturing clients (several of them are also Infor customers) are on the vendors roster of high-profile process manufacturing clients.

The downside, however, is that Optiva, despite deep and broad collaborative product data management (PDM) functionality, is not yet a full-fledged PLM suite, since it is missing important pieces like strategic sourcing, product configuration, portfolio management, shop floor integration, and regulatory compliance for multiple industries (both discrete and process). For more information on what constitutes a full-fledged PLM system, see Critical Components of an E-PLM System and The Many Faces of PLM.

In fairness, Optiva integrates sourcing and extends traditional strategic sourcing, to meet process industries specific requirements and to drive significant material cost and cost avoidance savings. Strategic sourcing applications are nonetheless limited to total spend analysis, and lack pervasive content management. With Optiva, companies like RPM have a purchasing action component that not only analyzes total spend across more than twenty companies having multiple ERP packages, but also more accurately projects cost, time, and risks involved in material and vendor rationalization. This automated business process thus helps refine the business case, since once a project is approved and resources are apportioned, executive management has insight into trade-off decisions and achieved cost savings.

This business process helps the diverse teams managing materials, formulas, packaging, and vendors to better rationalize their charges. By using the integrated design and compliance applications, more projects should be completed, and more savings should be delivered. Also, since all product development teams have insight into material, vendor, formula, and packaging status, redundant materials or rationalized materials are not re-introduced, and cost savings are sustained. Additionally, as part of new material introduction, the sourcing team should have visibility the instant a new experimental material is entered; alternate approved materials or vendors can then proactively be suggested.

Many companies have cross-functional teams which continually assess material value-add and regulatory risk. In an effort to minimize compliance risks, one customer reportedly turned off over 48 percent of its materials, and achieved significant cost savings. As companies buy, sell, close, or reconfigure plants, they need strategic sourcing suggestions. To that end, Optiva plays a critical role in requalifying, reformulating, and repackaging, in order to ensure regulatory, cost, and quality compliance. Companies are also finding that they are making sourcing decisions based on incomplete information, although the item and vendor item module in traditional ERP systems is well-suited for nascent regulatory requirements. A hypothetical scenario provides a good demonstration of the utility of this kind of module: Once an ERP item (a vitamin, for example) is entered and certified, alternate vendors may be sourced from, and entered as vendor-specific items, with

differences in cost also entered. If a new allergen law (lets say) is enacted, it might suddenly be relevant that the first vendor uses peanut oil as a processing aid. But if one or more of the vendors uses vegetable oil as a processing aid instead, then a critical decision needs to be made.

Since sourcing is a numbers-oriented game, factors such as compliance risks and product quality need to be included. Several customers have integrated such sourcing metrics into product development, in order to ensure that products require less post-launch effort when developing alternate sources for single-sourced vendors, or when finding lower cost providers. These customers will focus R&D efforts on having fewer single-source materials, or will calculate the percentage of materials coming from preferred vendors. Integration of Optiva with ERP systems allows product development to leverage high volume (and often in-stock) materials. Rather than simply selecting an approved material, using these higher volume or in-stock materials means that managers can avoid generating new purchase orders, as well as the carrying costs of partial drums (or other bulk packages). If the material has shelf life issues, material write-off can be avoided too. Rather than needlessly duplicating existing strategic sourcing capabilities, Optiva has extended these capabilities to drive cost reduction and cost avoidance.

Optiva can also send recipes compliant with Instrumentation, Systems, and Automation Society (ISA) standard S88 to manufacturing execution systems (MES) used at multiple customer sites. Using integrated business process management (BPM) capability, the system can integrate with one or more ERP and MES systems, which should eliminate time and cost wastage, while optimizing cost performance and compliance. As these platforms are approved for multiple plants and markets, product platforms that are truly global can be relatively quickly adapted to company specificities, and companies can minimize time to global rollout.

With every new release, Optivas portfolio management capabilities are enhanced. Most customers are using rule-based scoring and prioritization, risk rating, and readiness rankings, which are rolled up with each activity to provide near real-time visibility in Web-based dashboards. Being focused on process manufacturing, Optiva has developed a process-focused product configuration capability which is based on application platforms. Common uses include color matching, flavoring, or scenting of application platforms. Rather than maintaining a separate formula and packaging bill of material (BOM) for every possible combination, customers are building product platforms which are certified for permissible options (by plant, market, brand, use and user, and sometimes customers). This allows new requirements to be matched to the option, and also allows the most cost-effective and compliant intermediate material to be identified. A unique formula and package can be derived and validated for compliance.

Still, this laser-sharp focus is likely the reason why SSA Global was not more aggressively involved in the bidding for Formation Systems, although it would come as no surprise to learn that it was involved in preliminary (at least) merger discussions. Again, lately SSA Global has been considering only the acquisitions that would help in a bigger picture manner. In a way which is analogous to its CRM

case, the vendor has a decent PDM solution stemming from Baan, but admits that the products low brand recognition has limited it to only the existing install base (and even there it has to contend with best-of-breed PLM products). Conversely, as mentioned earlier, the vendor has become a feared competitor in the supply chain execution (SCE) space, given the successful assimilation of once well-known products such as EXE or CAPS (indications are that the license revenues from these products have quadrupled under SSA Global, compared to their status under their formerly independent and struggling vendors). Thus, if and when the time comes, SSA Global will most likely acquire a well-rounded and well-known PLM product (or a strategic sourcing and supply chain planning [SCP] product), although it recognizes that specialty process PLM vendors such as Selerant, Prodika, Sequencia, and IMS would be a good fit for its process-manufacturing-oriented products, which stem from both BPCS and the former Marcams Protean and PRISM products (see The Name and Ownership Change Roulette Wheel for Marcam Stops at SSA Global). For the same reason, Infor will also likely remain in the hunt for more solutions, in order to round out its PLM, EAM, and product configurator capabilities.

The Optiva strategy is to develop tier one applications in modeling, vendor collaboration, compliance, and portfolio management, and also to increase its open integration capabilities. This will likely be used to integrate with applications from Infor or other vendors; as these tier one capabilities are developed, Infor pledges to develop best practices offerings that can be deployed by smaller process manufacturing customers.

Deconstructing Geac

This brings us to Infors latest acquisition, which again highlights a differing strategy compared to SSA Global. In early November 2005, Infors parent company, Golden Gate Capital (a San Francisco, California [US]-based private equity firm focused on investing in high-growth businesses in change-intensive industries), and Canadian company Geac Computer Corporation Limited (TSX: GAC and NASDAQ: GEAC) reached a firm agreement that Golden Gate Capital would acquire Geac in an all-cash transaction valued at approximately $1 billion (USD), which represented a 27 percent premium over the trading price at the time. Geac thereby capitalized on its diverse industry-specific focus and expertise in the manufacturing, government, financial services, health care, and retail sectors. The company claims that its vertical market success will be enhanced by the current initiatives and momentum within the Golden Gate portfolio.

With more than $2.5 billion (USD) under management, the technology businesses acquired by Golden Gate are carefully selected based on their growth potential and ability to deliver vertically-specific enterprise software offerings and deep market expertise. Golden Gate views Geac as a natural addition to a successful strategy of looking at acquisitions with a different perspective compared to most private equity firms. Namely, as witnessed with Infor, the parent firm seeks to integrate companies that can grow significantly faster together than they could on their own. This strategy has been implemented successfully with respect to Concerto/Aspect Software, AttachmateWRQ, Inovis, and Infor; the firm pledges to aggressively support the

Geac business units with its assembler acquisition strategy. Consequently, upon completion of the acquisition, Geac will be reorganized into two separate Golden Gate Capital portfolio companies.

As part of the reorganization, Infor will acquire Geacs ERP software products, including System21, RunTime, Ratioplan, StreamLine, and Management Data; the employees who support them will move to Infor. By bringing together the resources, talent, and expertise of Geac and Infor, customers should benefit from the combined entitys solutions and services. On one hand, Infor customers will have access to additional domain expertise, while on the other hand, Geacs ERP customers should benefit from increased product diversity, additional product investments, and improved global reach. In addition to the immediate product and service portfolio enhancements, customers should also benefit from Infors strong financial backing and proven deep focus on developing enterprise solutions for manufacturers and distributors.

Geacs financial applications and industry-specific applications (ISA) will become two business groups under a newly formed company, which will be launched under the name Extensity immediately upon finalization of the transaction. In addition, Geacs general and administrative (G&A) staff, including the finance and accounting, legal, information technology (IT), and human resources (HR) teams, will provide a global G&A infrastructure for Extensity. The newly formed financial applications business unit under Extensity will include the products and employees currently involved with Geacs Enterprise Server, Anael, Expense Management, and MPC products. This business unit will target the integrated financial applications software market; the combination of these solutions will become the foundation of a complete offering of financial performance management applications. Geacs ISA businesses (commercial systems division, libraries, local government, public safety, and restaurants) will form a second business unit under Extensity, and will continue to target their current industries; each ISA business will remain independent from the others, similar to the structure existing within Geac today. Ken Walters, president of Infor, has been named chief executive officer (CEO) of Extensity. He has been with Infor through all eighteen acquisitions, and will now leverage his successes there to guide Extensity.

Over the years, Geac has grown considerably via acquisitions, thereby garnering a broad portfolio of diverse applications, including its SmartStream financials system (which it picked up in 1996 from Dun & Bradstreet), and its System21 ERP suite, a well-regarded (at the time) process industry system, which Geac picked up in its acquisition of JBA International in 1999. More recent deals include the company's $52 million (USD) acquisition of business intelligence (BI) and CPM provider Comshare in August 2003, and the $47 million (USD) purchase in September 2002 of former Extensity (whose name will be used for Geac under Golden Gate), which had one million seats worldwide for its automated employee-based finance processes such as time and expense (T&E) management. Previous acquisitions include Interalty; the real estate unit of GTE Enterprise Initiatives; the assets of Princeton Network Systems; Management Data; the midrange software business of EBC Informatique; and many more (see Geac Gets Its Commonsense Share Of Consolidation, With Revolving Door CEOs No Less).

Geac Background

Although since 1990 Geac has acquired over 50 companies (and since 1999 spent over $550 million on acquisitions), it failed to add significant value and synergy to its highly unrelated acquisitions. To make things worse, the market prices for some coveted but unfulfilled recent transactions (which Geac attempted to conduct in a bid to revive its business) have been very high, and it has been difficult to find accretive targets.

Size certainly matters in the IT industry, and those which are not big enough (or not focused enough) can hardly hope for new big deals. Thus, these vendors will not be able to finance further business development, which in turn will result in a rapid downward spiral. Geac was such a case; following a losing bid for its acquisition target MAPICS early in 2005 (ironically to none other than to its eventual suitor Infor/Golden Gate), it found itself facing the future as acquisition prey rather than acquisition hunter. Geac CEO Charles Jones simply had to concede that he could no longer find a catalyst acquisition capable of turning around declining revenues and profitability. Some products like System21s Aurora ERP product (see Geac Hopes To See System21 Shine Again Like 'Aurora') and Geac/Comshares MPC CPM product have apparently been going down well with users, but their impact is not enough to make the difference with respect to the entire awkward congregation of unrelated businesses and products.

Geac became far more attractive as a takeover proposition after it began to turn the company's dwindling sales and spiraling losses into flat (at least) revenues and growing profits (it also maintained a hefty cash position). With a customer base of 18,000, including half of the Fortune 100, Geac would have been a tempting prospect for serial acquirers like SSA Global or CDC Software, the China-based enterprise application vendor which would have used Geac as a beachhead to move beyond its Asia-Pacific stronghold. Geac might even have been an attractive target for Intentia for several reasons: it has a substantial installed base in North America, which Intentia needs (even with the impending Lawson merger); and a good part of Geacs installed base runs the IBM iSeries, which matches Intentia's installed base. Also, Geac's System21 installed base is largely in the food and beverage and apparel industries, which matches two key verticals targeted by Intentia. And of course, the Geac connection with Intentia's new leader, Bertrand Sciard, could only be helpful (although the same would hold for some SSA Global executives).

Geac would even have been remotely attractive to Microsoft and Oracle, which have both been building their applications divisions; or to SAP, which always wants to add even more weight to its mid-market presence, so as to keep the heat on and to maintain a distance from a growing Oracle and its PeopleSoft/J.D. Edwards units. Finally, even if unwanted by the enterprise applications vendors, Geac would have been of interest to members of the BI society, such as Cognos, Business Objects, MicroStrategy, or Hyperion, since they would have liked the composition of Geac's customer base as well as its increasing recent focus on software for the chief financial officer (CFO) (see Business Intelligence Vendors).

Why Infor?

But while all the above publicly traded companies had an advantage in terms of visibility and public fundraising mechanisms, Infors private nature, along with the backing of a wealthy parent, came in handy. SSA Global and others might have wished to cherry-pick only a few good Geac ERP products, instead of buying the entire company with all its baggage (a low ratio of license revenue to service and maintenance revenues, several legacy-status products in unrelated industries, and so on) and thus affecting future earnings per share or similar financial metrics for its investors. Again, it is commendable that SSA Global exercised restraint and forethought in this respect, given that only a few years ago the vendor would not have thought twice before jumping at the market share growth opportunity (and also given its 2003 acquisition of mainframe-based cash-cow financial management product Elevon, which now sticks out like a sore thumb within the vendors aforementioned service-oriented architecture [SOA] forays).

Thus, Golden Gate (and indirectly Infor), not having the burden of quarterly reporting, has been able to leverage returns to its equity investors by using debt financing for a portion of the purchase. With about $440 million (USD) in revenues, $70 million (USD) in profits, $100 million (USD) in generated cash, and $186 million (USD) in cash on Geacs current balance sheet, this appears to be a good deal.

Moreover, Infor will now add the IBM iSeries-based System21 to its growing discrete manufacturing ERP (and associated software) portfolio, along with its much-vaunted Geac Style version, mostly aimed at the textile sector and fashion or apparel industries. This shows Infors continued assembler focus, and its recognition of another vertical segment opportunity; if Infor had wanted mere market share growth, it could have gone for the whole Geac package, albeit with consequent diluted focus. Conversely (similarly to the Adage and Blending ERP combinations with Optiva PLM in the process group), the addition of System21 as its ERP provider and RunTime as its PLM offering (RunTime was formerly QuestPLM, which former JBA International acquired prior to being acquired itself by Geac) should provide Infor with a strong offering in apparel manufacturing. With the end of apparel import quotas, this sector is growing rapidly in India and the Far East, while the passage of the Central America Free Trade Agreement (CAFTA) promises to bring additional activity into Central America as well. Infor thereby joins SAP, Intentia (see SAP Learns The Ropes Of Fashion/Outfitting and Intentia: Stepping Out With Fashion and Style), 3i-Infotech, Jesta IS, STYLEman, New Generation Computing, Gerber, and several other niche players in attending to this quite underserved and less contested (yet seemingly lucrative) market segment.

System21, with some 2,000 customers (primarily in the UK), has lately experienced limited functional extensions and enhancements under Geac (most prominently with the new Web-enabled user interface [UI]). This is fertile ground for Infor, which will gains about $120 million in additional revenue, become one of the largest iSeries ERP suppliers, and also have the largest installed mid-market base in the UK. The deal for the product, as with its other siblings within the Infor discrete manufacturing group (VISUAL, SyteLine, and so on) implies absolutely no sun-setting of existing

systems, but rather the promise of support and advancement incrementally, at any time, with new technology modules such as the warehouse management system (WMS) and SCP elements being reversed into the existing systems.

Furthermore, process industry users of System21 will have access to Formations Optiva PLM system, whereas automotive users will have access to SupplyWeb, if they so desire. RunTime, a solution focused on rapid design-to-production of clothing, will obtain additional channels in Asia and Latin America. This PDM product may gain the expertise necessary for sales to seating and interior suppliers in the automotive industry, which is another stronghold of Infor.

Certainly, the downside is a somewhat dubious future for Geacs StreamLine, Ratioplan, and Management Data suites, which, as niche products, will likely have backburner status within the Corestone migration. The same holds true for about 600 System21 Aurora customers within the process industries; these customers will be supported in the future, but the bulk of focused process manufacturing R&D will certainly be within the native Infor Process Group, to which this product is not going to belong (it has been added to the discrete manufacturing group). Also, there have been different code bases within System21 (for example, Geac Style versus Geac Beverage) for different industries, which was an additional acquisition deterrent for the likes of SSA Global.

But this is really the best that anyone could have done with Geacs unfocused business in the first place. Golden Gate has shown shrewdness in not mixing apples with oranges (by not mixing, for example, Infors manufacturing and distribution businesses with solutions to libraries, realtors, and many other esoteric vertical areas for which Golden Gate will likely find other appropriate assembler portfolios). The new company will adopt a similar strategy to Infors, which is to build one business unit focused on financial applications (for example, former Comshare CPM solutions, Extensity expense management products, and Dun & Bradstreet financials). The other business unit will acquire other software companies in particular verticals, such as libraries and public safety.

Recommendations for Users of Acquired Enterprise Resource Planning Systems

P.J. Jakovljevic - May 2, 2006

Top of Form

1. Added Value 2. SSA Global Added Value 3. Recommendations for Users

Complete Table of Contents

Part I | Part II | Part III | Part IV | Part V | Part VI

Bottom of Form

Added Value

The added value of both SSA Global and Infor is that existing users of relatively small and dubious enterprise resource planning (ERP) providers should now gain the benefits of synergistic software developments from other ERP siblings.

Related Book

This is Part Six of the six-part series The Enterprise Applications Arms Race To Be Number Three.

This article is part of a comparative analysis of SSA Global and Infor, two contenders in the fierce ongoing competition to be number three (after SAP and Oracle) in the world of ERP vendors (see The Enterprise Applications Arms Race To Be Number Three for background information and a discussion of vendor similarities). The other leading contender is Lawson Software. For a detailed discussion of Lawson, see 'New' Lawson Software's Transatlantic Extended Enterprise Resource Planning Intentions.

Both SSA Global and Infor have also been building ecosystems of extended ERP consisting of complementary products that they can peddle (up-sell or cross-sell) to their installed base (and even to new customers in a stand-alone manner), to keep clients on maintenance and sustain them as a source of revenue for many years.

Essentially, the ERP suppliers that were acquired could not afford the software investment necessary to continue building a globally competitive solution. In addition, the development of modules and components which run across all solutions dramatically improves the financial viability of each code base, in an economy-ofscale manner, compared to their individual pre-acquisition viability. However, integrating a multiplicity of ERP components, which were written with different data semantics, domain expertise, and development philosophies, remains challenging and usually more painstaking than expected. Thus, it is logical to expect that some less globally promising solutions, such as Infor Swan (former Infor COM purchased this small product in the UK, and subsequently sold very few of these systems) or Geacs Management Data, Ratioplan, and Streamline, and possibly Datastreams MP2, will not have a simple and quick upgrade path within Infors upcoming integration and development platform (although all Infor products should in principle benefit from this strategy).

Incidentally, Infors technology framework initiative Corestone was depicted in detail in Enterprise Resource Planning: Bridging the Gap between Product Vision and Execution; it suffices to recap by saying that Corestone includes a drive towards a common user interface (UI), coding, navigation method, and messaging standards, in addition to database independence and the adoption of dominant information technology (IT) standards (including in particular Java 2 Enterprise Edition [J2EE] and Microsofts .NET platform). Needless to say, this is a major initiative, whereby Infor plans to exploit both platforms and to offer the same business functionality on each. The Corestone initiative aims to cover a multitude of development subjects: security, authentication, service-oriented architecture (SOA), application integration standards, Java and Microsoft .NET development standards, and so on. Internally,

Corestone takes form in several ways: a strategic direction in the form of specifications (the Security Model being an example); strategic development components (the Bedrock Server for Java or common UI for Microsoft .NET being examples); and overall corporate standards (for example, the use of POJOs [Plain Old Java Objects] rather than Enterprise Java Beans [EJBs]).

The vendor expects the first Corestone release to include a browser-based UI and data dictionary, followed by a master data management (MDM) application; by the end of 2006, all planned functionality should be available. As for how it will play out, while SyteLine has long been ported onto .NET (see Frontstep Ups the .NET Ante), the VISUAL Quality Management module will be ported onto the platform, and then made generally available where required. Similarly, the SupplyWeb supply chain visibility and supplier relationship management (SRM) system will run with all ERP systems, whereas the Java-based Infor Varial financials solution will also become the financial management system (FMS) component for all products over a three- to four-year time frame.

SSA Global Added Value

Coming back to similarities between Infor and SSA Global, Infors offering is in tune with the SSA FM (SSA Financial Management) 2.0 product stemming from the Masterpiece product used by nearly two thousand customers around the world, and which is becoming available to most SSA Global ERP products. The scope of SSA FM 2.0 covers both core and extended financial management; core financial management consists of the general ledger (GL), accounts payable (AP), accounts receivable (AR), fixed assets, purchasing, inventory control, fund accounting, job costing, labor distribution, and draft services modules, which have meanwhile been augmented by numerous customer-driven enhancements. The core financials element can also be augmented by integrations with a number of SSA Global strategic solutions, to provide a range of extended financial management capabilities, such as role-based portals, corporate performance management (CPM), supplier collaboration, and workflow, at no additional charge.

SSA Global recognizes the need to go beyond the transactional support of back-office accounting procedures and the need to provide chief financial officers (CFOs) and other financial executives with best practice support for strategic financial decision making, whereby a broader range of ancillary financial functionality is needed to facilitate enterprise financial management:

integration of planning and forecasting data, so that planners can allocate resources to support business strategies, operational plans, and customer demand, and so that executives can allocate resources to ensure operational plans are met.

configurable key performance indicators (KPIs), to measure how well operational activities meet strategic goals; performance measurement and analysis tools need to be available for evaluating these KPIs relative to strategic objectives and operational goals.

the ability to share data and analyze results, so that CFOs can interpret data and make strategic decisions based on the data.

the ability to communicate strategic objectives to employees and stockholders so that employees know what the strategy is and how to put it into action.

Further along the line of similarities, given that the user productivity bundled with analytic reporting is the main pillar of all next-generation product architecture forays (see Portals: Necessary But Not Self-sufficient), the Java graphical user interface (GUI) from the Infor COM solution is being leveraged for Infor XPPS too, and this will likely become the GUI for all Infor products. On the SSA Global side, since 2002 business planning and control system (BPCS) users have seen the BPCS Enable thin-client UI, whereas since mid-2004, the vendor has offered a thin-client Webbased UI for SSA Baan IV customers (SSA Baan IV was originally released in 1995). This UI has since become universal for all SSA Baan ERP versions and for SSA ERPLN, and should enable customers to upgrade to future releases more easily. Continuing the SSA Global model of supporting customers for life, SSA Baan IV customers can continue to leverage the Web interface even when they choose not to upgrade to newer releases. The Web UI affects the technology layers of the product but not the application logic, and Baan IV customers more easily do not need to reinstall or maintain the Web application at any user location, or to deploy additional hardware. On the IBM iSeries side, the vendor now has a new iSeries Web UI; this Web-based thin client UI for the iSeries-based ERP products is based on InAbler technology from former Infinium, and is available for SSA ERPLX, SSA PRISM, and SSA Infinium.

Recommendations for Users

The information provided in this series of notes is indisputably great news for users of products that are now under SSA Global and Infor respectively, given the recent successes of these vendors, along with their apparently winning (albeit somewhat different) strategies. While their large cash coffers are reassuring, a more positive sign is their candid intent to reinstate themselves as true software-developing vendors, rather than simply software brokers or dealers. To see the latest instance of similarity between the two vendors, one need simply note their maintenance renewal rate percentages, which are in the high ninetiesmuch higher than before their acquisitions. The number of new customers, especially for Infor, speaks volumes about the ability of these vendors to round out compelling value propositions for supporting broad business processes in selected industries.

Thus, their respective customers should consider their recent acquisitions as a move toward a more viable position for their IT investment, and treat it in a business as usual manner, albeit with open eyes. The crucial step for current and potential users will be to discern each vendor's corporate strategy viability within the product line or industry in question.

Existing Customers

Existing SSA Global and Infor customers should seek assurances that their current infrastructure will not radically change; they should evaluate product roadmaps and related impacts by understanding the vendor's roadmap for the industry in question and by assessing how the next-generation platform fits into the users current business and technology environment. They should also vigorously question vendor executives on how their product line will evolve, and investigate all alternative solutions in order to fully understand their situation and options.

Current users will benefit from approaching Infor or SSA Global, as the case may be, to find out what the company is planning with respect to future service and support (or discontinuation, or product stabilization) for its individual products, and to discover what the ramifications of migrating (or not) to a new product offering might be. In particular, those who have been yearning to rejuvenate their nearly outdated technologies should welcome the merger plans discussed in this series, and should check to see which next-generation product might be a suitable candidate for a fresh replacement or (long-awaited) migration path. They should bear in mind, however, that switching products is typically a bumpy road, even for users of legacy applications.

As for existing users and those currently going through implementation projects, business as usual would be the best course of action. Most of the recently acquired products are valuable properties, and will probably be taken seriously by their new owners, at least for significant maintenance revenue (if not for ample cross-sell and up-sell opportunities within the existing install base and beyond).

Effects on Customers of the Acquired Vendors

To be more precise, the acquisition by Infor is generally a positive development for Formation Solutions customers, because it enhances the small company's financial viability, while also indicating Infors serious intent with respect to the process manufacturing segment (some onlookers might have had doubts of late). However, those who are not customers of Infor Optiva should request regular product development plan updates from Infor, and make contingency plans if they believe that the product's planned evolution will not meet their needs. Formation's exceptional product lifecycle management (PLM) functionality for batchmanufacturing process manufacturers, along with Optiva's open character, will necessarily be maintained, and customers of ERP products other than Infors Adage and Blending will continue to benefit from the integration (including a small

contingent of Infor XA process manufacturing customers). The same holds true hold for the existing Datastream customers, especially those in sectors yet to be tackled by Infor, such as transportation or government services.

The same also holds true for existing Epiphany customers outside SSA Globals strongholds, as well as for other enterprises considering business-to-consumer (B2C)-focused marketing automation functionality, such as campaign management and real-time interactive cross-selling; they should certainly seek direction about SSA Global's customer relationship management (CRM) roadmap. Those consumeroriented customers looking for tight CRM and ERP integration might want to evaluate alternative solutions until true integration between SSA Global and Epiphany is consummated.

Epiphanys CRM customers and other prospective customers evaluating CRM suites should consider SSA Global's CRM offering if they think they would benefit from the SSA Global enterprise applications portfolio, including its native CRM functionality (sales order configuration and quoting, and field service). Current SSA Global business-to-business (B2B) manufacturing customers should investigate whether and how Epiphany's campaign management, integrated view of the customer, and callcenter functionality could help their businesses, and thereby better round out the SSA CRM suite.

Less technologically aggressive global companies (or their divisions) that are happy with their product instances performance may be better off staying with older products for the time being. Nevertheless, many users will eventually have to undergo thorough what if scenarios, such as porting onto another platform, keeping the status quo, migrating to another SSA Global/Infor product, choosing another ERP provider, and so on. The best course of action would be to approach the local SSA Global/Infor sales representative, to vigorously negotiate assurances and firm commitment to future product roadmaps, service, and support. For more on what to do about the legacy application in place, see The "Old ERP" Dilemma: Replace or Add-on and The Old ERP Dilemma: How Long Should You Pay Maintenance?.

Users should become involved in special interest-focused groups, since by voicing concerns or requirements that might have otherwise been overlooked by SSA Global or Infor, they increase the likelihood of future enhancements to their system. They should still be aware that no core development enhancement is likely to be provided for very old productsor that if it is, it will be for a price. Users might even benefit from helping the vendor figure out these dinosaurs, as they will thereby gain a clearer understanding of the choices confronting them.

Until the new product strategy is crystal clear and publicly committed to by the new owner, we advise potential users to warily evaluate even the products corresponding to their manufacturing sweet spot. (Of course, learning about new features and attractive pricing would be beneficial, at least for purposes of information and leverage with respect to other vendors.) We suggest evaluating the flashy bells-and-

whistles components, price, and reference sites within the pertinent industry, as well as the corporate viability of other vendors, before making a selection. Current customers with embedded components from many outgoing or current partnerships should clarify any ramifications of recent acquisitions on their current IT investment.