I had a chance yesterday to catch up on Aptean, the new company formed when Vista Equity Partners bought and merged Consona and CDC Ross. I consider myself a bit of an expert in acquisitions, having survived 15 of them myself over my career, 14 of which happened while I worked on the “other side of the fence.” Before I became an industry analyst and researcher, I spent over 30 years working for software companies, predominantly ERP solution providers. The 15th (and last) came about 6 months after I became an analyst, when Aberdeen was bought by Harte-Hanks. As a result, I saw acquisitions from different angles; sometimes I worked for the acquiring company, sometimes for the company being acquired. For some I was intimately involved, for others just peripherally. Sometimes after an acquisition, life goes on and nothing much changes. In other instances there are massive changes, some good and some painful. As Vista Equity partners merges these two companies, I expect there will be many changes.
Consona itself is a product of acquisitions. Founded in 2003 (originally as Made2Manage) and backed by Battery Ventures VI LP and Thoma Bravo LLC, the company acquired nine different ERP solutions. Six of these were in rapid succession from December 2005 to July 2006. Apart from ERP, Consona also acquired Onyx (CRM) and Knova (Knowledge Management). This buying spree culminated in its most recent acquisition of Compiere in June 2010. Remarkably though, there was very little overlap in markets for all these acquired products.
CEO Jeff Tognoni’s trademark moves were evident throughout. Some of these companies had been publicly traded, but each acquisition resulted in the companies becoming privately held, each operated as a separate business unit and acquired brands were preserved. Most of the acquired products served very clearly defined niche markets. The acquisition of Intuitive in July 2006 is the exception and produced the largest overlap in markets. Intuitive and the original Made2Manage products can both be considered horizontal ERP solutions, although Intuitive has largely been sold into electronics and high tech manufacturers while Made2Manage does a better job of addressing the needs of “to order” environments.
Compiere paved the way for Consona to enter the world of enterprise-class, cloud-based business solutions while also leveraging its distribution market capabilities. Compiere is also unique within the Consona portfolio in that it uses a reference architecture for cloud computing based on open source tools, which admittedly have been better received in Europe than in the Americas or Asia Pacific. It is by far the most technologically advanced Consona product from an architectural standpoint, but it is still a relatively new product, which does not have the depth and breadth of functionality of its siblings in the portfolio.
CDC also sells and supports a portfolio of products, but only one ERP solution: CDC Ross, acquired from Ross Systems in 2004. Yet there is little overlap with the Consona products since Ross exclusively serves process (versus discrete) manufacturers and is strong in food and beverage, a sector that Consona never addressed. And CDC also brings a manufacturing execution system (CDC Factory MOM) to the party, something Consona has never offered.
There will however be significant overlap on the CRM side of the house. Pivotal (acquired by CDC) and Onyx (acquired by Consona) compete directly, although Knova (acquired by Consona) serves a different need in the market for knowledge management and is therefore complementary.
The end result of this merger is Aptean, a company that now has 32 products in its portfolio. So what impact does this have on the different product lines and what does this merger mean to its customers? Aptean seems not to have any plans, at least on the ERP side, to converge these products. By convergence I mean taking the features and functions of several products and combining them into a single go-forward solution. Aptean feels its strength lies in being able to satisfy the needs of those niche markets without adding in a lot of complexity that inherently results from adding diverse industry-specific features to a general-purpose (horizontal) ERP.
Aptean has made a commitment to not “sunset” (stop supporting) any of its products. At the same time, no company can be successful in dividing its attention equally over 32 different products. Therefore expect Aptean to invest heavily in a few strategic products. I would expect those few would include Made2Manage, Ross ERP, Compiere, Factory MOM, Knova and at least one of the CRM solutions. Intuitive will likely be included as well given the large installed base and the revenue it generates to the business.
What I have not heard is any intention to develop a middleware layer along the lines of Infor’s ION or Epicor’s ICE. The advantage of such a strategy is to be able to develop functionality as components that can be shared across product lines. However, while this is not a declared strategy, it is not something that Aptean has ruled out either. The company is still in the early stages of mapping overall product strategy and individual roadmaps and therefore still has many decisions yet to make.
And Consona had already made some moves down a similar path. Its latest version of Made2Manage 7.0 was just released on September 28, 2012. The transition from 6.01 to 7.0 represents a major architectural shift. Version 7.0 was developed in VB.Net built on Windows .Net Framework 4.0. It has a true three-tier architecture model with:
- Presentation Layer
- Business Logic Layer
- Data Access Layer
The advantages of the architecture change include more flexibility in making changes to the software, better scaling and greater adaptability to automated testing, which can lead to a sharp improvement in product quality. So yes, the architecture is more modern, but in order to better facilitate testing in the transition from 6.01 to 7.0, Consona locked down the product from a feature/function standpoint. That made testing and transitioning easier but also prevented them from adding enhancements for an extended period of time.
Consona compensated for this by developing some components that can be added to 7.0 to extend the functionality. Examples of these are an Outlook contact manager, the ability to import Bills of Materials from any source (not just the most common CAD products), a margin analyzer, advanced shipping and mobile functionality for the shop floor. While in the past these would have been made available for purchase, Consona compensated for not delivering enhancement features in 7.0 by making these available for free to any customer on maintenance.
This same approach could be used to deliver common functionality across multiple product lines providing they are architected to be open and easily integrated.
So what other changes might we expect to see as a result of the merger? Vista Equity Partners takes a much more “hands on” approach than Battery Ventures ever did and it also is a big proponent of standardized business processes and standard systems and tools. This is an approach ERP consultants promote to their customers, but not too many ERP solution providers actually take for themselves. Not only does Vista encourage standards, it provides the resources to make them happen. This should help the combined companies come together as a single cohesive unit, typically a plus for its customers and the customer experience. I would expect more collaboration between product lines than seen with Consona, and Consona seemed to collaborate better than CDC Ross.
In a merger such as this, there is always the fear that the investor is only interested in milking the installed base. Vista seems willing and able to provide the sales, marketing and product development resources needed to keep the combined companies moving forward on a strategic trajectory. Time will tell, but I don’t think we will have to wait all that long to see some benefits from this merger.