Even in such a volatile stock market and under investor/regulatory scrutiny, going public as a means of getting some capital investment is still an option — the most recent examples being Deltek and NetSuite. On the established public vendor side, CDC Software, Epicor Software, Lawson Software and Oracle (if not even SAP too) would be examples of mostly unrelentingly acquisitive vendors in the enterprise applications space.
On the other hand, there has been a general feeling lately of a money crunch in the private equity and venture capitalist (VC) world for those software companies that still prefer to remain privately-held and yet acquisitive. Some of these vendors have been discussed in my recent “ERP Reincarnations” posts, Part I and Part II.
In other words, can the likes of Infor, Consona Corporation and Solarsoft really continue without running out of steam? Namely, besides Solarsoft’s continued acquisition activity of late (including the offer to acquire the United Kingdom (UK)-based Chelford Group, where the SSI-World’s versatile TROPOS product is a part of the business), once seemingly unstoppable Infor and Consona have lately taken a noted break.
In fact, Infor’s chief executive officer (CEO), Jim Schaper, has lately admitted to a likely (temporary or not) stall in future acquisitions, especially major ones. This is in part due to the changed climate owing to deflated VC investors’ sentiments and a lessened availability of private equity. Infor might also be having some issues with digesting all the hefty arsenal it has acquired thus far, and its financial backers probably want to see that the vendor can run this product portfolio properly (in a cash-flow manner) before buying more.
Some competitors might even insinuate possible (yet unconfirmed) management issues under the covers, some inherited problems from within acquired companies (e.g., customers’ defections from cash-cow service & maintenance contracts) as well as that the company’s professed ambitious up- and cross-selling, bundled with the lofty Infor Open SOA interoperability strategy, might not yet be working as anticipated.
As for whether there is still enough private equity money to acquire new vendors and solutions, the market is certainly more selective than it used to be. However, at least one vendor, Consona, claims that its modus operandi (MO) is still exactly as it always has been. Namely, as to point out that they have not been fazed by the credit market crunch and other current poor economic indicators, Consona’s top executives, sometimes in a gushing manner, talk about the company’s unchanged key strategy points.
These approaches are often quite different from many other peers in the industry, yet have thus far been (and hopefuly will be in the future too) key tenets of Consona’s success.
1) The first component of Consona’s strategy is customer intimacy, or deeply knowing customers and their industries. The company strives to use this intimate understanding of its customers’ businesses to then ensure that its software, services and support (an overall solution) meet specific, tailored needs. All that should ultimately provide far better outcomes and continuous business process improvement for the customer.
Along these lines, Consona is focused much more on serving existing customers than on attracting new ones. Conversely, so many enterprise resource planning (ERP) vendors put their existing customers second to winning new business. Also, by deeply understanding the businesses of its customers, Consona uses that knowledge to provide ever-better ongoing service and value. From ensuring that 70 percent of its staff are in customer-facing roles to supporting a sophisticated helpdesk system, Consona continuously invests in the people and tools required to deliver superior customer care.
Another related tenet here is the “product quality over the next new thing” attitude. Namely, while technology is important, it long ago became clear to Consona that building trendy new features in the latest & greatest technology is not necessarily the way to add value to customers’ business. It costs everyone a lot of money, while product quality and functional fit are often sacrificed. Consona’s priority, first and foremost, is building a product that users both recommend and help design, and that, in turn, should drive quality, fit and value.
2) The second aspect of the vendor’s strategy is providing a high degree of each solution’s functional fit to its customer’s business. This is accomplished via a target market vs. solution match of over 80 percent functional fits to be available “out-of-the-box”. That fit, in turn, happens via Consona building and/or buying industry-focused solutions that are extensible for a further, even tighter fit.
Conversely again, many enterprise solution providers have attempted to create a single software product to address all the possible needs of all types of businesses and organizations. They try to be everything to everyone, but these “one-size-fits-all” solutions become costly, overly complex (”bloated”), and difficult to maintain for not only the customer, but also the software vendor. Thus, for each industry segment/niche Consona has chosen to serve, it has either built or acquired core solutions that are designed from the ground up to closely fit the special needs of companies in closely-related environments.
3) The final aspect of Consona’s strategy is what the company likes to refer to as execution, and it comes from the vendor’s focus on running its efficient global operations. Now that virtually everyone is operating in a maturing, consolidating industry, everyone is also required to do the hard work that every other industry has (or has had) to do — that is to grow profitably (as opposed to just grow at all costs). In other words, Consona sticks to the “manage for profit, not market share” motto.
It is particularly important to existing customers, and for the future of their information technology (IT) investments, that Consona remains a stable, financially strong vendor. To that end, the company is one the fastest growing, most profitable companies in the enterprise applications industry, and is fairly open about its financials (with estimated 2007 revenues of about $120 million).
For the above reasons, Consona remains quite confident about continuing to follow its original plan of finding good franchises and then extending them through product rebuilds, better operating approaches as well as acquisition bolt-ons. The company is hereby telling us to just stay tuned and watch its moves down the track closely.
Given a recent blog post at the Enterprise System Spectator site citing some ominous layoff rumors at Consona, the truth seems to be that the company recently did a very small reorganization rather. This has basically created more accountability around the two main divisions, Consona ERP and Consona CRM.
This rationalization was accomplished by taking some of the shared services/corporate functions and put them under these divisions. The reorganization was accompanied by some new positions being created and some old positions being eliminated, with not much change in overall employee population at the end of the day.
Consona also did, as it does every year (much like General Electric [GE] does), some performance related actions, mostly centered on management. There was not a reduction of either research and development (R&D) or support staffing levels per se. The source for the above-mentioned harsh blog post was probably one of such performance actions’ outcome (i.e., a disgruntled employee). This is the apparent downside of the Internet (despite its potential of keeping everyone honest) — people can repeat rumors and half truths and bloggers sometimes do not check facts before they blast out sensationalistic stuff like this.
In fact, as for the ERP side of business, Consona claims to have had a great finish to the year despite the economic head winds. The Consona Intuitive ERP product is growing organically faster (40 percent or so) than any other public company’s manufacturing ERP product (Consona thinks it is growing faster than any private one too, but it cannot clear data on those). Consona AXIS grew revenues by whopping 80 percent, Consona Encompix grew revenues by 30 percent, and all the other micro-vertical ERP solutions had solid years as well.
What is your opinion on the strategy of the above-mentioned, recently renamed acquisitive companies? Which of them are (or are not) in for a bright future?
Also, is the vendor’s size, brand recognition and viability what makes you most comfortable and that factors in your software selections? Or, is it more about the functional fit and customer intimacy side?