Acquisitions

Infor Acquires PeopleAnswers: New Twist to Continuing Trend in ERP and HCM

Big Data, Predictive Talent Analytics Drive Performance

On January 8, 2014, Infor announced it had acquired PeopleAnswers,  a pioneer in cloud-based predictive talent analytics. This continues a trend of large Enterprise Resource Planning (ERP) vendor acquisitions in the realm of performance management and recruiting. But unlike other acquisitions, this one adds quite a unique new value proposition to its broadening footprint of Human Capital Management (HCM) solutions. Its software as a service (SaaS) talent analytics capabilities add a measure of data-driven behavioral science to an otherwise “soft” discipline.

Adding Talent Management to ERP

For decades in the world of Enterprise Resource Planning (ERP), human resource management (HRM) was little more than an afterthought. For many years, the perceived requirements were rudimentary at best and Human Resource Management modules often were just repositories for employee data. They didn’t really manage anything. ERP continued to expand functionality around the transactional system of record of the business. And apart from payroll transactions, which might or might not be included in the HR landscape, HCM really didn’t involve the transactions that fueled trade. Integration didn’t have to be “tight,” leaving a world of opportunity for separate add-on applications.

A Developing Market

This left plenty of room in the market for a lot of smaller HR specialists to seize the opportunity and grab a niche. The overall software category of HRM became broader, turning into human capital management (HCM) and several different “specialty” categories emerged: talent management, including recruiting, performance management (reviews), incentive compensation, as well as skills development and learning, workforce planning and analytics and time tracking. Sometimes payroll was included, sometimes not.

The number of players in the market proliferated.  Because few took the full suite approach, new HCM software vendors could grasp a foothold and gain traction even with a relatively small footprint.  The success of these new vendors proved to the market just how big the demand was (and is) for this type of software.

Customers and ERP Vendors Respond

Today, not only are customers more demanding and less willing to subject employees to the hassle and confusion of multiple systems, but also the big ERP players are no longer content to leave that opportunity on the table. The result: A big round of consolidation has begun. The year 2012 saw SAP’s acquisition of SuccessFactors and Oracle’s acquisition of Taleo. Last year NetSuite announced its intention to acquire TribeHR. All three of these are cloud-based, software as a service (SaaS) solutions in the talent management arena. So Infor’s announcement was the fourth major ERP vendor to announce an acquisition of a talent management solution, and a cloud-based one as well.

This is not Infor’s first venture into the realm of HCM however. It already has quite a comprehensive offering across the HCM landscape, offered either on-premise or SaaS. Its acquisition of Lawson back in 2011 was a major step forward, particularly in satisfying the human capital needs of certain industries, including healthcare, retail and hospitality. Coincidentally, all three of these industries are human capital-intensive. It later rounded out its offering with its acquisition of CertPoint, which filled an important gap in learning management. Now it is seeking further differentiation through PeopleAnswers’ decade-long investment in “big data” and its unique approach of including behavioral science.

How is PeopleAnswers Unique?

Some areas of HCM categories might struggle to produce hard data that supports evidence of return on investment (ROI). After all human resource management is a relatively “soft” discipline. Manufacturing can accurately produce hard measurements such as production output, lead times, and quality metrics. Sales can measure bookings and revenue against quota. Marketing can count leads captured and converted. Finance can measure discounts lost, days sales outstanding, earnings and profits. But capturing human capital metrics related to performance and employee engagement are indeed softer and harder to measure.

Yet the metric PeopleAnswers attacks most directly is much more firm and definitive. Although its product can legitimately be characterized as both performance management (employee assessments) and recruiting, the real metric that drives ROI is turnover. The premise: By accurately assessing the performance of individuals, you improve your ability to hire the right people. By hiring the right people you improve overall performance and retention. Customers routinely report reduction in turnover by 40%, and even higher returns in reducing involuntary turnover.

How does it do that?

PeopleAnswers uses a data-driven scientific approach to objectively tie individualized performance metrics to the key behaviors of its customers’ best employees. This is not a fluffy, feel-good approach to performance management, but patent-pending scientific research. PeopleAnswers has a science team, including 10 individuals with PhDs in behavioral science.

Through its research, this team has determined that skills alone are not predictive of the future performance of a new hire. The team developed a list of 39 attributes that correlate most directly with performance, including ambition, discipline, energy, acceptance of authority, attention to detail, flexibility, conscientiousness, and empathy. Good hiring managers have been subjectively evaluating these traits for decades. PeopleAnswers takes the subjectivity out and puts consistency in.

The implementation process starts by developing customized Performance Profiles™ from employee assessments, focusing specifically on characteristics and behaviors of top performers and weighting the 39 attributes differently for different jobs and perhaps even geographies. These Performance Profiles become the benchmark for selection, development, and succession planning.

Candidates are required to fill out a questionnaire uniquely tailored to the company and the position. This is used to construct what PeopleAnswers calls the Behavioral DNA™ of the candidate. It then compares that against the Performance Profiles of top performers and “scores” the candidates to help identify future superstars.

PeopleAnswers is also unique in how it charges for its service. It is not unusual to charge on a per-use basis (per assessment and/or per applicant) in this category of software, and PeopleAnswers certainly can accurately measure this. However it prefers to eliminate any excuse for delaying, reducing, or skipping the assessment process in order to save money. To get the most value from the solution, you need to assess every employee and every candidate that applies for a job.  So PeopleAnswers doesn’t charge based on the number of assessments but rather a flat, all-inclusive fixed fee that includes unlimited assessments.

Data Needed

This eliminates any (valid) excuse for not entering an assessment and makes the calculation of ROI that much easier. Of course any customer needs to start the implementation with some clear baseline metrics. Figure out your current turnover and estimate the cost of losing an employee. This might be different for voluntary and involuntary turnover, but even a single estimate will provide a good starting point. From these two numbers you can figure out what turnover is costing you today. If you, like other PeopleAnswers customers, can reduce turnover by 40%, the software will probably pay for itself pretty quickly.

But apart from simplifying the math, providing incentives to collect as much data as possible only makes sense. This is particularly important since without data, the model is useless. In fact without a lot of data, it would seem the model is useless. The more employees you have, the more recruiting you do for the same or similar positions, the more value can be derived directly from the tool. So this may not have the same value proposition for small companies, as it will for large companies. And human capital-intensive industries will benefit more. So a small manufacturer operating in a highly automated plant might not gain the same ROI as perhaps a large healthcare facility staffed with hundreds of nurses, or a retail environment with thousands of in-store personnel.

Who Will Benefit?

Infor’s installed base of customers includes all of these different profiles. At the time of the announcement, Infor and PeopleAnswers have 80 joint customers. About 70% of this customer overlap is from prior Lawson customers, which are most likely to fit the “human capital-intensive” bill. So that will be the first order of business as Infor starts the integration process. The goal is to deeply integrate the PeopleAnswers’ Behavioral DNA into the current Infor Talent Management suite, starting with the Lawson product. If the Lawson acquisition is an indicator of success, this first wave of integration should take about 120 days. Note, this time frame is the current plan and is reflective of past performance, but many factors can impact development plans. So this should not be interpreted as a hard commitment. The timing of future releases and Infor’s development plans remain at the sole discretion of Infor.

This effort will also include bringing Infor 10x enabling technology to the PeopleAnswers products, including Infor ION (light weight middleware), Infor Ming.le (a centralized platform for social collaboration, business process improvement, and contextual analytics) and Infor Motion (mobility).

At the same time, it will be making the Infor Enwisen HR Service Delivery platform more “behavioral.” Infor will then move on to integrating PeopleAnswers to the Infinium product line.

What Does the Future Hold?

While this new addition to the Infor family of products may not be uniformly applicable to its entire installed base of 70,000 customers, it certainly adds clear and measurable value to the subset that operates in human capital-intensive industries where making the right (or wrong) hiring decisions can make (or break) a company. But the potential value might not stop there.

Acquisitive companies typically look to improving bottom line performance by eliminating redundancies between the merged companies. This is an effective approach when those redundancies are limited to back office administration. But when staff reductions start to hit the development team, it can become counter-productive. Infor recognizes this and tends to not only protect the acquired development staff, but also add to it.

The first order of business after the acquisition is completed will be to integrate PeopleAnswers with selected Infor products (Lawson S3). Infor intends to preserve the PeopleAnswers team in order to expedite this. But at the same time it will bring Infor10x technology to the PeopleAnswers product. It is not out of the realm of possibility that Infor will actually add development staff to do this. While at other acquisitive companies an acquisition may trigger layoffs, at Infor it is just as likely to trigger hiring.

As big data and analytics continue to make their way to the forefront of employee and business performance management, it will be interesting to see what other results the addition of a “science team” can produce at Infor. And as the combined Infor and PeopleAnswers teams start to work more cooperatively together, who knows what other value behavioral science can bring to a whole host of other activities beyond recruiting.

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NetSuite Jumps on the Cloud HCM Bandwagon with TribeHR

Last month NetSuite announced its intention to acquire TribeHR, a cloud-based provider of an integrated suite of human capital management (HCM) solutions. HCM solutions are pretty “hot” these days and cloud-based HCM is even hotter. Some make the mistake of thinking interest (and growth) in the HCM market is a very recent phenomenon.  SAP’s acquisition of SuccessFactors and Oracle’s acquisition of Taleo (both cloud-based, by the way) only served to fuel that assumption. After all, if the “big guys” are jumping in, it must be the next “big thing.” Right? Yes and no.

Obviously HCM is “big” right now, but that didn’t happen overnight. I have been following HCM solutions since 2006, some years more closely than others. I actually think this HCM market started heating up back in the 2005 – 2006 timeframe. But it wasn’t the big guys that were making it happen. Instead, a lot of smaller HCM specialists saw the opportunity and jumped in. Most grabbed a niche – talent management, recruiting, performance management (reviews), incentive compensation or just plain HRIS. Very few took the full suite approach and that left the market with lots of players, but very fragmented.

In the early stages of this market growth, human resource management was still an afterthought in the world of ERP. For many years, the perceived requirements were rudimentary at best and Human Resource Management modules often were just repositories for employee data. They didn’t really manage anything. So what changed?

I believe there are three different forces converging here.

  1. The work force has changed
  2. All these smaller players demonstrated there was a real demand
  3. ERP vendors are more aggressive about expanding their footprints

The Changing Workforce

The workforce has actually been changing quite dramatically (at the very least) for the past two decades.  The combination of automation and outsourcing to countries where labor is cheap has resulted in the blue-collar and hourly workforce shrinking enormously. When the work force was made up largely of these types of roles, nobody really worried about “employee engagement” or managing an inventory of skills. Employees were hired for a particular job that might or might not require special skills. Companies advertised job openings, even for salaried workers. Potential employees filled out applications on paper and resumes came through the mail. Benefits came in standard packages where one size fit all, whether they really fit or not. There was no “self-service.” Reviews were paper-based and recognition might (or might not) come with a length of service award announced at the company Christmas party.

We live in a very different work world today where the hourly worker has largely been replaced with the knowledge worker. When companies today say, “Our employees are our greatest asset” they really mean it. The way we recruit and hire is different. No place is the “social” aspect more prevalent than in managing human capital.

The Demand for Solutions is Real

The proliferation of smaller HCM vendors has proven there is a real demand for solutions to help manage this changing workforce. Until these vendors came on the market with solutions for everything from applicant tracking to hiring and onboarding to managing performance, benefits and incentive compensation, human resource professionals managed with paper and spreadsheets. Of course some, particularly in smaller companies, still do. But that only serves to increase the market potential and the cloud helps make these solutions much more affordable for smaller companies.

Even these smaller HCM niche vendors have tended to focus their efforts on larger companies, always measured by numbers of employees. As ERP vendors that serve small and medium size businesses bring these options to their existing customers, that could change very dramatically and market growth could accelerate even more quickly.

The Expanding Footprint of ERP

I have been saying for the past few years that the footprint of ERP has expanded to the point where it is getting more and more difficult to tell where ERP ends and other applications begin. This obviously is by the design of the ERP vendors. An ERP vendor can grow in several ways. Obviously it can grow by acquiring new customers (e.g. one ERP swallowing up another). It can grow by selling one new customer at a time. And it can grow by increasing its share of its customer’s wallet. This means cross-selling and up-selling existing customers. And an ERP vendor can either develop its own solutions to sell to existing customers, or it can acquire them. Most growing ERP vendors today will combine these growth strategies.

In this case, NetSuite has chosen the shorter route to market by acquiring a suite of HCM solutions. With such an acquisition I always caution customers and potential customers of the vendors to look closely at integration. Just because a vendor acquires a complementary solution doesn’t mean that solution is integrated and if not, there may be no additional value delivered than was available prior to the acquisition. In the case of NetSuite’s acquisition of TribeHR this is not a concern.

Earlier this year TribeHR joined NetSuite’s SuiteCloud Developer Network (SDN) and has already created TribeHR SuiteApp, integrating the two solutions. The integrated solution is already available on NetSuite’s Marketplace. Joint customers have the added advantage of a pre-configured and integrated solution. Start the recruiting process in TribeHR and when you make the hire, it also sets up and automatically provisions the employee in NetSuite’s ERP. Yes, there is some redundancy but the transfer is “touch-less” and the data is synchronized in real-time. So far, about 30 out of the 450 TribeHR customers are also NetSuite customers.

The Opportunity

So where is the opportunity for growth in merging the two companies? It seems the biggest opportunity will be in up-selling the NetSuite installed base. Those NetSuite customers already running NetSuite Payroll have the highest probability of also wanting to buy HCM, but there are only about 100 of them, all US based. TribeHR is already deployed in more than 50 countries, but NetSuite’s Payroll supports US businesses only. But there should also be added opportunity for those small to mid-size businesses that have not yet invested in an HCM suite or even any HCM solutions. For the large enterprise, NetSuite will continue to partner with Oracle with Oracle HCM at the corporate level. But TribeHR might also be a viable alternative for two-tier deployments in smaller subsidiaries or divisions.

It is much more likely an existing NetSuite customer will extend its ERP solution with HCM than it will for a TribeHR customer to purchase an ERP, unless of course a new purchase of ERP was in the cards already.  According to Mark Gally, previously Chief Revenue Officer at TribeHR and now HCM, Vice President of Sales and Marketing at NetSuite and ric Gerstein, Sr. Business Development Manager, HCM at NetSuite, TribeHR will continue to be sold as a stand-alone solution. The real question will be whether the NetSuite brand will help or hurt in that sale.

NetSuite Poised to Compete

The bottom line: this acquisition positions NetSuite to compete in the expanded ERP market, where prospects are looking for their ERP vendor to satisfy are larger percentage of their enterprise needs. Because managing human capital is becoming more critical to the continued success and to market differentiation, this category has become more important and will likely continue to gain in importance. Those ERP vendors that can’t fill this need will be at a competitive disadvantage.  Acquiring a suite of HCM solutions is the fastest time to market and with all the recent acquisitions, the candidates for acquisition are shrinking quite quickly. Fortunately for NetSuite, it made its move with what appears to be an excellent choice, while the market is hot.

 

 

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NetSuite Acquires OrderMotion: Bringing Omni-Channel Products and Expertise

Earlier this week NetSuite announced its latest acquisition: OrderMotion, Inc., a provider of cloud-based Direct-to-Consumer (D2C) order management solutions. The acquired company is located in Burlington, MA. NetSuite’s go-to-market strategy is to take a suite-based approach, providing an end-to-end solution, which addresses the full quote-to-cash life cycle. The customer order is at the very core of this process and therefore the SaaS ERP company has always carefully guarded any function that touches the order. No alliances or marketing partners here. When it comes to customer orders, NetSuite wants to own the functionality.  In this regard, an acquisition makes perfect sense. But given OrderMotion is not embedded in the suite and NetSuite already fancies itself as having an industry-leading order management system, what value does it hope to gain from this addition?

NetSuite is buying OrderMotion for its expertise as well as its products. OrderMotion’s products are typically sold stand-alone and that will continue. The target is not current NetSuite customers. So this is more a market share play than it is one that goes after an increased share of the customer’s wallet. NetSuite intends to continue selling the OrderMotion product but it also hopes to apply some very specific expertise to further strengthen its own current order management capabilities. The OrderMotion engineering team will continue to innovate the acquired product but NetSuite also hopes to have them contribute to the order management modules of its ERP suite.

NetSuite already has a strong order management solution with capabilities that include distributed order management, fulfillment from multiple locations and return merchandise authorization (RMA) as well as strong back-office integration with billing and cash collection. It provides standard integration to major carriers like United Parcel Service (UPS), Federal Expres (FedEx) and the United States Postal Service (USPS). It can deal with multiple currencies and multiple sales and use tax structures. OrderMotion will add more depth of functionality in orders “direct” from the consumer and trends in the industry towards omni-channel commerce.

Omni-channel refers to the ability to use different channels simultaneously. Consumers might purchase online, but pick up, or return merchandise at a physical store. Retailers may use retail stores as distribution hubs. As consumers make online purchases, it may be advantageous to ship from a store location where the item may be overstocked, thereby drawing down surplus inventory. Or the choice of ship from location may be made to minimize cost and lead-time. Combining all these options requires a level of expertise and feature functionality not typically included in your traditional ERP software suite.

This is definitely an issue for retailers today. But more and more manufacturers and distributors find themselves also selling direct now, so it is just a matter of time before they need to deal with omni-channel supply chain issues as well.

In continuing to sell OrderMotion stand-alone, I would expect the acquisition to be accretive. But behind the scenes I would also expect to see the OrderMotion team lending a hand to further extend distributed order management and omni-channel supply chain capabilities in NetSuite’s ERP suite. Both solutions have a strong technical architecture that supports multi-tenant SaaS, so business models are consistent. But they are different architectures. While I don’t expect them to be sharing code, I would expect them to share designs.

NetSuite ERP will benefit from the expertise of a team dedicated exclusively to order management, one that has specific omni-channel expertise. OrderMotion engineers should also benefit from having to blend this functionality into an integrated suite, something they have only done at arm’s length previously.

Overall NetSuite winds up with a new product and a better way to attack the retail market that is already forced to deal with this omni-channel phenomenon. And it has the opportunity to further strengthen its existing product as the omni-channel commerce begins to invade the world of manufacturing and distribution.

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Infor ION at the Center of Providing Immediate Value to Lawson and Infor Customers

On July 5, 2011 the acquisition of Lawson Software by GGC Software Holdings, Inc. (an affiliate of Golden Gate Capital) and Infor was completed. The next day Infor wasted no time in announcing integration plans for the company and some of the combined company’s products. Neither Infor nor its new CEO, Charles Phillips, is a stranger to acquisitions. Infor itself has executed over 31 acquisitions in its relatively short history. Mr Phillips’ prior stint at Oracle, known in the industry for fast and efficient integration of acquired businesses, has prepared him well for his first acquisition since taking the helm at Infor. These veterans of the world of mergers and acquisitions (M&A) know that it is important to immediately send a strong message to all customers that the future of the products they use is secure and that the merger actually brings them value.

MERGING THE COMPANIES

In a nutshell, Infor has combined Lawson with SoftBrands, Inc., an affiliate company which was acquired back in 2009. This affiliation enables Lawson/SoftBrands and Infor to share and integrate technology and partner on product offerings. Look for joint cross-selling, marketing and distribution arrangements in the near future. This represents a bit of a divergence from past acquisition strategies. Until it acquired Softbrands, Infor had generally executed mergers where the staff was fully integrated and the acquired company’s brand was subsumed by the Infor brand. The last acquisition approaching this size was the acquisition of SSA Global in 2006 and you would be hard pressed to find any reference today to the SSA brand and only insiders might know that certain Infor employees used to be SSA employees. The value in combining Lawson with Softbrands is not entirely clear to me; Infor tells me it was simply a structural move to consolidate affiliates. But preserving the Lawson brand does make sense, at least for now. It sounds much like the approach SAP took (quite successfully) with both Business Objects and Sybase. While Lawson does not have quite the brand equity of either Business Objects or Sybase, it has particular significance to the Lawson installed base. And the Lawson installed base should be a prime sales target for Infor. When (and if) Lawson and Infor deliver on the promise of a fast pace of development and delivery of deeper industry-specific features for key industries (manufacturing, healthcare, distribution, public sector and hospitality), the importance of the distinction between the two brands will fade. While Infor and Lawson’s product portfolio both compete with and complement each other, come to find out, the two companies share a significant base of common customers. Infor maintains that 9% of Lawson’s active customers also use Infor products, and 48% of Lawson’s top revenue customers use at least one Infor application. Although Infor does not specify the threshold for “top revenue,” one would think this is a large enough segment of customers to present cross-sell opportunities.

 PRODUCT INTEGRATION PLANS ANNOUNCED

But for many of the Lawson (and possibly some Infor) customers, this is just background noise. What they really want to hear is what the new affiliation will mean to them in terms of the products they run. That means both continued support and development plans. Anticipating this question, the Infor and Lawson product development teams have already begun integrating applications using Infor ION. ION is a suite of interoperability and management services designed to facilitate and manage data regardless of whether the data is stored on premise or in the cloud and regardless of which application (or software vendor) “owns” it. This has always included both Infor and non-Infor applications, which certainly makes bringing Lawson software into the mix. Current plans targeted for release later this year follow.

LAWSON S3 AND INFOR FMS SUNSYSTEMS ENTERPRISE

This first integration project targets organizations that have now or plan to implement a two-tier financial management strategy. Lawson S3 would sit at corporate headquarters and larger divisions, while Infor FMS SunSystems Enterprise could be used at smaller operations, potentially distributed globally. This configuration would support multiple countries, languages and currencies. A hidden benefit is that it would also allow each distributed operation to upgrade separately, often a forgotten consideration.

LAWSON S3 AND INFOR EAM

This is an interesting approach since Lawson also offers an Enterprise Asset Management (EAM) solution. Yet the Lawson EAM solution is much more firmly anchored in the manufacturing and distribution sectors, which is where M3 and not S3 plays. The City of Greensboro, N.C. is an example of a public sector customer that Infor and Lawson have in common. Indeed, prior anticipatory announcements called out Lawson’s expertise in the healthcare industry, a sector in which Infor has not really penetrated. The thought appears to be to enhance Lawson S3 with Infor’s EAM and bring the integrated solution to large hospitals, in addition to government and other public sectors.

LAWSON HUMAN CAPITAL MANAGEMENT AND INFOR WORKFORCE MANAGEMENT

While Lawson has made a bigger name for itself (than Infor) in terms of Human Capital Management (HCM), Infor’s strength is more along the lines of direct work force management. This integration could add Time & Attendance as a complement, for example to Lawson’s Nurse Scheduling application.

UNDERLYING TECHNOLOGY

So all this makes sense from a feature/functionality standpoint. But what about the underlying architecture? It is quite clear that the integration projects and future technology development will be based on Infor ION. But while Infor has been developing Infor ION and some follow-on products like Infor Workspace (which Infor calls a new “consumer grade user interface designed to revolutionize the experience of doing business using enterprise applications”) Lawson has not been standing still. In fact Lawson just released Lawson Mashup Designer, which shares a lot of similar features and functions with Infor Workspace. First available for M3, Mashup Designer was recently released for S3 (MAy 2011). So the question will be, will the (integrated) S3 product line be enhanced with Mashup Designer or Infor Workspace? Lawson Mashup Designer is based on Lawson Smart Office (LSO), which was released back in March 2008. LSO was meant to be an intuitive, personalized user interface that allows users to directly access Lawson and Microsoft applications and update data pervasively and instantly across the applications. Mashup Designer builds upon LSO and extends beyond the realm of Microsoft. LSO is the foundation for Mashup Designer. And finally, underlying both M3 and S3 is Lawson System Foundation, a middleware layer insulating the Lawson applications from the underlying operating systems and databases. Because ION can be used to connect both Infor and non-Infor solutions, it would appear than LSF does not need to be replaced immediately, but it also doesn’t make a lot of sense for the combined company to maintain two different teams and parallel development efforts to continue to develop both ION and LSF or Lawson Mashup Designer and Infor Workspace. So there are some open questions for Lawson customers that have invested in LSF, LSO and Mashup Designer.

 KEY TAKEAWAYS

From all appearances it would appear that Infor and Lawson combined are on track to deliver value rapidly to customers, albeit some will see direct benefits sooner than others. What’s in it for Infor and Lawson? • Scale. The larger the company the more resources for innovation and development • Happy customers. And happy customers mean cross-sell and upsell opportunities What’s in it for their customers? • Scale. The customers benefit as well from more development resources and more innovation. • Security. While Infor has been a private company and not subject to the scrutiny of Wall Street per se, Lawson has always kept a close eye on profits. Even during the worst of the recession, when revenues dipped, Lawson CEO Harry Debes kept operating margins on the rise. So Infor is not inheriting a financial mess – far from it. • More solution. The immediate integration efforts will extend options from expanded solutions, although it appears that the S3 installed base will benefit more quickly and will be more differentiated from other Infor products. M3 will become one of several ERP solutions for manufacturers, but heavily targets some industries where Infor touches only lightly. M3 could benefit from the cross-fertilization of manufacturing talent throughout Infor.

Time will tell just what this means for the brands, but by the time that is decided, it probably won’t matter that much.

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In the End, Infor Gets Lawson

Exactly 6 weeks ago today (March 15th) I posted an entry highlighting Infor’s bid to acquire Lawson. At the time and for several weeks afterwards, there was much speculation about the price, whether or not there would be additional bidders, as well as the probability of Lawson staying independent. Shortly after this announcement, Harry Debes (CEO of Lawson) addressed a large flock of Lawson customers at CUE 2011 (CUE stands for customer user event) and acknowledged all the speculation as the “elephant in the room.” He said the company was considering all possible options, including staying independent.
I don’t think a lot of people put money on independence as the future outcome, but there did seem to be a lot that counted on other bids popping up… maybe not a real bidding war, but at least a second bid that might drive the proposed price higher. Why do I think this? Quite simply, the stock price went up. At the close on the Friday just before the weekend when the initial offer for $11.25 per share was made, the stock price had been $11.55. Instead of going down as a result of the bid, it continued to go up. Someone was betting they could turn a profit on prices between $11.55 and over $12 a share. I don’t profess to be a trading whiz, but I do know $11.25 is less than $12. And $11.25 will be what they get when the deal is sealed. There won’t be an opportunity to watch the stock go back up because it will no longer be on the market. Infor, at least for now, is a privately owned company. Indeed the offer is really being executed by GGC Software Holdings, Inc., an affiliate of Golden Gate Capital, which is one of Infor’s investors.
So, now that the deal is really going down, what does this mean to the customers and employees of both companies?
There is always a certain level of uncertainty concerning the workforce of any acquired company. Those in Lawson’s development organization should take heart in knowing that Infor already announced its intention to hire 400 additional software developers. So my guess would be that good developers are safe. Poor performers in any department should probably be looking over their shoulders as an acquisition is the perfect opportunity to clean house. Let’s just hope Infor is able to distinguish the good employees from the underperformers. No offense intended, but that distinction is often much harder to make than it would appear to be. And in any acquisition, there will be some level of redundancy, particularly in the back office.
What about the impact on customers? My initial take is that the customers from both camps will benefit directly from this move. There will be more innovation and I hope this provides some impetus for some rationalization and cross fertilization of product lines because Infor’s reputation and brand has suffered as a result of having too many.
 In an open letter to Infor and Lawson customers, partners and employees, Charles Phillips, newly appointed CEO of Infor, highlighted several benefits to the deal, which also imply some plans. In fact he even starts out by saying, “Lawson customers can rest assured:  Product investment, innovation and customer success will be our key areas of focus” and references Infor’s previously announced plans for accelerated innovation, including those 400 developers he intends to add.
In this letter he highlights the following points:
Complete ERP suite: As the boundaries of ERP continue to be stretched, the top ERP contenders continue to expand their footprints.  Mr Phillips references Lawson’s enterprise financials and human resources products as standalone products, across multiple industries and the intent to integrate them with Infor’s manufacturing, supply chain, workforce, and asset management products. I “get” the reference to human resources as Lawson has developed this area further than Infor has, but Infor has financial management products that are available as stand-alone products as well, so the implication I see might be a rationalization of products, with Lawson’s S3 forming the basis over the SunSystems or Masterpiece product lines?  But just cross-selling independent extensions to ERP without truly integrating them doesn’t get you a “complete suite.”  So there is some real work to be done here.
Complementary products: Mr Phillips states, “The product lines are complementary, not overlapping.”  Complementary yes, but I diagree…they are also overlapping. Consider the financial product I mention above and Lawson M3 competes directly with several of the Infor ERP solutions for manufacturing. But I will say that Lawson has stuck to its knitting in terms of declared verticals. This means there is less overlap, but there is still a lot. However, the example Mr Phillips uses: ”… Lawson’s expertise in the healthcare industry will be enhanced by Infor’s Enterprise Asset Management which will be targeted for large hospitals and Time & Attendance product, complementing Lawson’s Nurse Scheduling application.  This is truly a scenario where 1+1=3.” But don’t forget Lawson also has an EAM solution.
Standards-based integration:  Infor’s underlying architectural strategy has undergone some changes over the past year, and appears to still be transforming itself somewhat, but the path seems to be towards openness and a commitment to stay out of the middleware market. This will pave the way for integrating the two new product lines with other Infor product lines.
Re-inventing the applications experience:  Both Infor Workspace and Lawson Mashup Designer have similar goals here. It will be interesting to see if and how these two separate products are rationalized.
The remaining points refer to expertise in key industries (of which neither company lacks in both complementary and overlapping industries), innovation and investment (as evidenced by prior announcements and growth plans for R&D) and scale. In terms of scale, Mr Phillips makes reference to 75,000 customers and concludes with, “Having more customers allows us to invest more, identify more requirements and develop a large partner ecosystem.” I agree with the premise, but Infor already claimed to have 70,000 customers, so I am a little puzzled by such a small (7%) increment.
I do believe Lawson customers in particular will benefit from the increased focus on innovation. While Lawson has indeed brought innovation to the table, even as revenues were down during the recession, its profitability stayed strong, which was commendable for a public company with an obligation to its shareholders. But it also limited its investment.
My conclusion… while I hate to see the number of distinct and competing ERP vendors shrink once again, I believe that if the combined companies are not afraid to make some bold steps to consolidate strategies, perhaps rationalizing product sets, the customers will be the clear winners.
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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.
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Infor and Golden Gate make a bid for Lawson

Over the weekend (or on Monday if you really “turn off” over the weekend), we all saw the news that Infor and Golden Gate Capital had made a $1.84b bid for Lawson. I watched all the Tweeting and chatter yesterday with interest. Prior to venturing into the analyst/research community about five years ago, I spent over 30 years in the enterprise applications world, the last 22 of which I never officially changed jobs. But during those 22 years, the company name on my business card changed five times. Also during those 22 years, I “experienced” first-hand 14 different acquisitions, sometimes being the acquirer, sometimes being the acquiree. Sometimes I was intimately involved and sometimes I was a casual observer on the periphery.  So I consider myself quite experienced, if not an expert, on mergers and acquisitions of software companies.  While all this chatter is interesting, one thing I can say with certainty is this: at this point it all boils down to speculation and gossip.
I know both of these ERP companies very well, both from the context of their products, as well as their history of software acquisitions. Within my first few months of joining Aberdeen back in March 2006, I wrote about acquisitions by Infor and Lawson that were quite momentous. About that time, three companies were approximately the same size in terms of revenue: Infor, SSA Global and Lawson. Shortly thereafter, in part in a bid to outdistance Infor and SSA, Lawson acquired Intentia in May 2006, only to be one-upped by Infor , which not only acquired SSA Global but also Systems Union and Extensity in August.
Lawson and Infor are both similar and different. They are similar in that both are primarily ERP solution providers that have grown by acquisition, and have stretched the boundaries of traditional ERP with complementary solutions such as Human Capital Management, Asset Management, Performance Management and Business Intelligence, etc. Also, neither has grown very significantly since those major acquisitions back in 2006.
However, there are some glaring differences. Lawson essentially has two major (largely non-overlapping) product lines:
·         S3 (which stands for Staff, Source and Serve) targets healthcare, retail, government, education, financial services, general service
·         M3 (which stands for Make, Move and Maintain) targets fashion, food and beverage, wholesale distribution, asset intensive industries and general manufacturing
Infor has many different ERP solutions as well as stand-alone complementary solutions. Here’s the latest list I have of just its ERP solutions alone:
  • Infor ERP Adage
  • Infor ERP SX.enterprise
  • Infor ERP SyteLine
  • Infor ERP VISUAL
  • Infor ERP COM
  • Infor ERP FACTS
  • Infor ERP LN 6.1
  • Infor ERP LX
  • Infor ERP Baan5.x
  • Infor ERP BaanIV
  • Infor ERP BPCS
  • Infor ERP Xpert
  • Infor ERP Blending
  • Infor ERP XA
  • Infor ERP TRANS4M
  • Infor ERP AS
  • Infor ERP System 21
  • Infor ERP VISUAL Jobshop
  • Infor ERP A+
  • Infor ERP TakeStock
  • Infor ERP Enspire
  • Infor ERP commerce@work
  • Infor ERP CAS
  • Infor ERP Infinium MM/PM
  • Infor ERP MK
  • Infor ERP MANMAN
  • Infor ERP MAX + TM
  • Infor ERP MAXCIM
  • Infor ERP PRISM
  • Infor ERP Protean
  • Infor ERP KBM
  • Infor ERP Leanware
  • Infor ERP PRMS
Some of these are strategic to Infor’s growth, while others must be viewed as legacy or “heritage” products (a “heritage” product is a legacy application you are proud of.) Although Infor has decried a rationalization strategy and maintained all acquired products, not all get equal share of the marketing or development budgets. Unlike Lawson’s two product lines, which have little overlap, many of Infor’s product lines do indeed overlap with each other and this has presented a challenge to Infor in the past, both in product maintenance and development, as well as market presence. If this acquisition does go through, M3 will compete with several of Infor’s existing ERP solutions. There is less similarity with S3, but it will compete with the Masterpiece and Infinium product lines, but will position Infor better in competing in the Human Capital space and also in Healthcare.
But, as I mentioned earlier, this is all just speculation. Will Infor raise its bid? Will others start to bid? If so, who? There are only questions right now, no answers. But some of the questions that must indeed be answered before this is all played out are similar to the questions that must be asked in most any acquisition. Questions like:
·         If there is a merger between Lawson and Infor (or any other competing vendor) will Lawson remain relatively autonomous or will it be entirely integrated? This will impact both its brand as well as the possible reduction in force that generally follows any acquisition.
·         What will be the impact on product roadmaps of all the products owned by the combined companies, regardless of whether additional bids emerge and who wins?
·         Will technology infrastructures be merged, or kept a separate? Consider for example very different cloud strategies, Lawson on the Elastic Compute Cloud (EC2) platform (Amazon and other partners provide the infrastructure; Lawson provides the application.)  The two key components of Infor’s cloud strategy and its infrastructure: Microsoft’s Windows Azure and Infor ION.
One thing that should be a “given” is the continued support to Lawson’s existing customer base. In any acquisition of this magnitude, growth (and not attrition of) the installed base is always a goal. Existing customers should rest assured this will be a primary goal of Infor, or any other player that joins the fray. Exactly what that means remains to be seen.
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