Monday, April 25, 2011

The Case for ERP Consolidation

Today I was reading Bruce Richardson’s View From the Inside. Bruce was one of the longest tenured analysts with AMR Research (and its Chief Research Officer) before AMR was acquired by Gartner at the end of 2009/beginning of 2010. Bruce and I really moved in opposite directions. While I spent 30 years working for software companies before joining the analyst ranks, at the time of the AMR acquisition by Gartner, Bruce moved to Infor and is now on the software side. So we’ve both seen the view from both sides now.
The subject of Bruce’s “View” today was “A Tour of the Distribution ERP Market with Infor’s Andy Berry.” It talked about roadmaps and growth of sales to this market. But what specifically caught my eye was the announcement that Infor would be consolidating its multiple distribution products down to two and eventually to one offering. This is definitely a new approach for Infor. Throughout its history of over 35 acquisitions, Infor has avoided the consolidation or rationalization of products, sometimes in sharp contrast to companies it acquired.
The one merger in particular that comes to mind is Infor’s acquisition of SSA Global (August 2006), which itself had been a product of serial acquisitions and had defined a path of rationalization. Having just left SSA myself about 6 months prior to the acquisition, I was intimately familiar with its consolidation strategy. With somewhere around 10 different product lines at the time, SSA’s plan had been to consolidate down to two ERP solutions (LX and LN) and one financial management product, which ultimately would provide the basis of the financial modules in the two ERP solutions. But the company wasn’t too far down the path of execution when the merger happened, and the consolidation message, quite frankly, had not been very well received by its customer base. So abandoning that strategy seemed like a no-brainer at the time.
Add to this a couple other similar situations in the ERP market. Oracle had acquired Peoplesoft and JD Edwards, and also had its own business suite. But its announcement of its Fusion product as a single consolidated product line also met with resistance from its installed base. This was also about the time of Microsoft’s Project Green, which was meant to rationalize the four acquired ERP products (AX, NAV, GP, SL) down to one. Same reaction. Boos from the crowd.
So the case seemed to be pretty solid against rationalization unless you wanted to seriously tick off your customers. And maintenance revenue streams are way too important to an ERP solution provider to risk. So why was one ERP that also grew by acquisition – Epicor - successful in doing exactly the opposite?
On October 21, 2008, Epicor Software Corporation announced Epicor 9, the culmination of an eight year effort to converge its nine different product lines. And along the way, it didn’t seem to alienate its customer base. In fact over the years I have spoken with numerous Epicor customers that perceived a reimplementation as an opportunity, rather than a hardship. What was the difference?
Of course there are a myriad of differences, but I think the one that really mattered was that Epicor made the new destination different enough to really matter. Many installed base customers faced with a reimplementation perceive it as a “rip and replace” only to spend lots of time and effort to get back to exactly where they started.  Epicor took a staged approach to delivering on its goal of convergence and did not lose sight of its promise to protect investments along the way. But it also knew that it had to bite the bullet and do a complete re-write of its underlying base architecture. So first it built its Internet Component Environment (ICE) 2.0, a second-generation Service-Oriented Architecture (SOA) and Web 2.0 technologies. Then over the course of several years it converged from nine to four and then to one. Customers weren’t re-implementing on the promise of something new and different in the future. It was already there and they knew if they just tried to re-create their existing environment they would be cementing in place any restrictions they currently faced.
Oracle Fusion and Microsoft Green promised new architectures but they weren’t “there” yet. SSA had no new architecture to promise.
Infor always had the vision, but for several years got side-tracked through attempts to architect its own middleware. Infor has now decided to stick to what it does best – enterprise applications. By 2013 the two “destination” distribution products will share the same functional code base. Infor is already working on building identical user interfaces based on its new Infor Workspace and it is also working on integration with Infor ION, which it describes as “a new generation of business middleware that is lighter weight, less technically demanding to implement, and built on open standards.” I believe Infor ION will be a key factor if Infor is now successful in implementing a rationalization strategy here on the distribution side … and perhaps among its different ERP solutions for manufacturing? For its multiple financial management solutions? There are lots of opportunities for consolidation here and lots of work to be done. But then remember the 400 new developers Infor intends to hire?
And also don’t forget the two major acquisition announcements that emerged recently – that Infor intends to acquire Lawson and that APAX Partners intends to merge Epicor with Activant (ERP  for distribution). Fortunately Lawson Mashup Designer and Infor Workspace have a lot in common, at least conceptually. This could help. And time will tell if Epicor 9 becomes Epicor 10.


  1. Very neat insights !

    I feel that what Oracle started, the wave of consolidation, that is rightnow in long tail phase, so consolidation will go on till SMB focussed ERP orbit too gets consolidated.

  2. Thank for share ,