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.

My initial take on Epicor, Activant and Apax Partners

Yesterday Epicor announced it had agreed to be acquired by Apax Partners. While I am not personally familiar with Apax, its website tells me it is an independent global private equity advisory firm and holding company for the worldwide Apax partnership which is the lead investment adviser to the most recent Apax Funds. Apax Funds buy both majority and minority stakes in large companies that have strong, established market positions and the potential to expand. It has a strong heritage of technology investment.

At the same time, it was announced that Apax would also acquire Activant Solutions and merge the two companies. The combined entity will operate under the name of Epicor Software Corporation and become a privately held company. Of course it is too early to tell exactly how the merger will be executed, but Epicor itself has a history of acquisition and is the only ERP company that has grown through acquisition and successfully executed a product convergence/consolidation strategy. Epicor 9, released in December 2009, is built on Epicor Internet Component Environment (ICE) 2.0, a second-generation Service-Oriented Architecture (SOA) and Web 2.0 technologies and is generally recognized for its visionary architecture. But just as importantly, Epicor 9 merges capabilities of nine different products (hence the “9” in the name).  If Epicor remains true to past strategies, I would expect it to treat the Activant products similarly.

But then again….maybe not. Activant serves some very specific vertical industries including:

·         automotive aftermarket

·         farm-home

·         hardware and home centers

·         heavy duty truck and trailer

·         lawn, garden and nursery

·         lumber and building materials

·         painting and decorating

·         pharmacy retail

·         specialty retail

·         wholesale/distribution

While Epicor also serves retail and distribution sectors, Epicor also has products which complement ERP in support of a retail environment, and has never been that “niche” oriented.  It remains to be seen whether these industries are best served by separate product lines or whether Epicor will decide to continue the convergence and turn Epicor 9 into Epicor 10, or maybe even Epicor 11 or 12.

For now it is safe to assume the transaction will be good for Epicor and allow it to fuel more aggressive growth in the market. As for Activant, customers should take comfort in knowing that Epicor’s strategy has been very customer-centric with a motto of “Protect, Extend and Converge.” Whether convergence is in the future or not, I have a lot of confidence in the resultant management team preserving the part about protect and extend.

Epicor University: Do we really need education and training?

Last week (March 15, 2011) Epicor announced the launch of a new university for its customers, partners and employees. Epicor University was created to address the challenge of delivering consistent high-quality training worldwide, and to expand the range of Epicor’s education deliverables. It also offers certification programs for Epicor’s partner channel. With the introduction of the university concept, all content, materials, and training is developed by a dedicated centralized team.

The primary objective is to provide customers with resources and tools to help them realize the greatest benefit from their enterprise software investment while allowing individuals to learn in the way they learn best. Epicor already offers a lot of resources, from embedded courses within their ERP system, to user guides, classroom courses and certifications, to an online help system that gets down to individual fields help and technical reference guides. According to Epicor, there are more than one hundred embedded courses associated with Epicor 9 and over 100 virtual or classroom courses available, 2,500 pages of content and graphics in Epicor technical guides, and 74,000 fields defined in Epicor 9 Field Help.

So why is a University needed? After all, user interfaces have become so much more intuitive and software has become easier to use. Navigation through an enterprise application is no longer cumbersome and confusing. And when was the last time you read the instructions for any kind of software anyway? If you can’t figure it out easily it just doesn’t get used.  

Exactly! That’s one of the reasons that education and training often gets ignored. Sure the user interface is intuitive. Sure it is easy to navigate through the various functions. But these are potentially complex business processes that are being modeled through an ERP. Are those business processes efficient? Are they standardized and repeatable? Do they produce a clean audit trail? Can they be easily audited? Do they put you in a position of competitive strength or hold you back from realizing your full potential? Most importantly, are you getting the most value out of your investment? Why do you think one company fails miserably while another succeeds beyond all expectations while they both use the same software?

Most every software company on the planet is working to enable self-service training and support. That makes sense. Like any other type of company today, most are attempting to grow while also reducing or constraining costs. The software business itself is very scalable. Create one piece of software and sell it dozens or hundreds or thousands or hundreds of thousands of times. But services don’t necessarily scale as easily. Sure, you can make it more scalable by creating user guides and online on demand training courses. But there is a certain element of education and consulting that happens one person, one hour or day at a time. And even the very best software can be underutilized, used incorrectly or used to model inefficient and incomplete processes.

So kudos to Epicor for bringing education and training back into the spotlight. Are you getting the maximum value possible from your ERP?

Epicor ERP customer gets great mileage from change

Many industry observers focus on failed ERP implementations. Of course while understanding the possible pitfalls has some value in warning other companies to avoid them, I prefer to highlight the successes and the potential business benefits of doing it right. Epicor Software is one of the ERP solution providers I follow closely and was pleased to see this article by Matt Danforth (Modern Machine Shop) on Bley LLC, an Epicor ERP customer, a small international contract manufacturer that serves a “diverse array of markets, including heavy transportation, mining, oil and gas, alternative energy, aerospace and defense.”

ERP Synergizes Disparate Departments, Applications : Modern Machine Shop
Source: mmsonline.com

It is apparent from the article that Bley has effectively used ERP to “streamline operations and boost efficiency, productivity and operational visibility”, but it is also clear that the ERP solution alone can’t produce those results. With no disrespect intended, I am sure there are other Epicor ERP implementations that have not been equally successful. In fact Bley was one of these until manager Krishna Rajagopal took over. Up until then, manual processes were still largely in place in spite of the ERP solution being available.

So what happened when Mr. Rajagopal took over? From the article it is clear that customizing the solution for a better fit and integrating it with other software applications (HMI/SCADA, Quality Management, CAD, etc.) were two of the major differences. Epicor ERP’s service-oriented architecture, modular structure and the ability to tailor the solution without major surgery were all factors.

But it seems that Mr. Rajagopal also took advantage of being the “new guy” to make things happen as well. Any company can either get a lot of mileage out of change or it can get mired in the change. Seems like Bley, LLC is taking full advantage of change and its ERP solution, and they aren’t done yet. I hope I continue to hear more great things about their progress. In the meantime, take a moment to read the full story.