Robert Kugel's Analyst Perspectives

Golden Gate Capital and Infor (which is owned largely by Golden Gate Capital) will acquire Lawson Software for approximately $2 billion  in a transaction that is expected to be completed sometime in this year’s third quarter. Lawson is the latest in a string of enterprise software acquisitions made or financed by Golden Gate that began almost a decade ago. Today, Infor is made up of legacy companies such as Baan, Comshare, ePiphany, Dun & Bradstreet Software, SSA, Sun Systems and Symix, to name just a handful. Compared to Oracle’s acquisition approach, I would describe Golden Gate’s as more of a “rollup” of applications software vendors because it incorporates a larger number of smaller companies. While Oracle has focused primarily on serving the largest corporations, Infor’s customers tend to be midsize to large companies or divisions of very large corporations. Nonetheless, with this acquisition Infor will have a larger base of revenue and installations to work from in an industry where size and economies of scale drive profitability and competitiveness.

Companies (especially in high technology) that sell through an indirect channel face a difficult challenge because global sales channels are complex, fragmented and changeable, with different business practices and customs than direct channels. Keeping track of which products have sold in and sold through which partners can be a difficult task. Unless a company is working with only a handful of channel partners, just collecting the data is time-consuming. Not only is the data complex, much of it is taken from disparate IT systems of individual channel partners. They report their data at different times and in different ways using a mishmash of data structures, aggregations and nomenclature, so companies have to go through a data-cleansing step to acquire a consistent data set with which to work. Yet having accurate, detailed and timely data is important to both the day-to-day and strategic management of a corporation. Without that, it’s hard to manage customer and partner relationships effectively and have a timely, accurate view of aggregate indirect channel sales and inventory positions.

Back in the old days (20 years ago or so) companies that wanted to expand or update their telephone systems had to do what was called a “forklift migration.” In other words, they had to remove big, heavy and very expensive boxes of electronics from an equipment room and replace them with newer big, heavy and very expensive boxes. The process of adding, deleting or changing people, offices and phone numbers was equally burdensome and costly. This all seems quaint now because digital telephony and voice over IP (VOIP) have completely changed the technology underpinnings of voice communications. I bring this up because we may be on the verge of substantially reducing the “forklift migration” equivalent of replacing or updating on-premises ERP systems and other enterprise software. This possibility is important for software vendors as well as users. Retaining a maintenance base and revenue stream has become a key strategic objective for any enterprise software provider. In North America in particular, companies that have outgrown their enterprise system or want to replace it almost never exhibit total brand loyalty. Instead they begin the replacement process by looking at alternatives, winnow it down to a short list and then select the best of the lot. If migration is as much work as implementing a new system, organizations are likely to view replacement as an equally attractive option, increasing the probability that the incumbent vendor will lose a customer. But if there’s little pain in changing an ERP system to acquire new functional capabilities or meet other objectives, incumbent vendors stand to benefit.

Alight Planning sells planning and budgeting software mainly to midsize  companies and stresses its software’s ability to support a more effective approach to corporate planning and budgeting. It calls this “agile planning,” a term used to contrast a traditional, highly deterministic method of drawing up and executing plans with an “agile” mindset that is better able to deal with the high level of economic volatility that most businesses confront today. In many respects Alight’s approach is consistent with what Ventana Research refers to as “integrated business planning,” which I have written about as a business priority and an area that I have extensively researched.

Although I continue to believe that governance, risk and compliance (GRC) is not a firm software category, software vendors continue to add depth and breadth to their offerings that support corporate governance, help manage risks systemically in business and IT and provide greater visibility into compliance efforts. For example, with its release of OpenPages 6.0 IBM had made an important enhancement by marrying the document management capabilities of its OpenPages acquisition with Cognos’s Analysis Studio. Although automating documentation of regulatory compliance and risk management functions has value (in the sense of lowering the cost and increasing the probability of full compliance), incorporating analytics and the ability to perform contingency planning in concert with document-driven processes potentially multiplies the business value of such automation.

While Europeans have long had to adapt to working in many languages, currencies and legal jurisdictions, a generation ago most midsize companies in the United States did all their business in their home country and in U.S. dollars. Today, though, the relentless globalization of the world economy means that an increasing number of midsize companies in North America are functionally multinational and face the challenges of managing a more complex and demanding accounting and financial management function.