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ERP Vendor Consolidation -- How it affects ERP users


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Enterprise Resource Planning (ERP) software vendors have been subject to a tremendous amount of merger and acquisition activity. How does this affect industrial ERP users?

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ERP Vendor Consolidation -- How it affects ERP users

  1. 1. IFS ERP Survey: Impact of Mergers & Acquisitions Overview
  2. 2. BackgroundIn the fall of 2011, a study wasconducted among manufacturing This study wasexecutives and professionals of conducted by IFS North Americamiddle market to large and Mint Jutrasmanufacturers to better understand , an independentthe impact on customers when research-based consulting firmsolution providers grow through that specializes inacquisition. analyzing the business impactThis study illuminates: of enterprise• Concerns of customers applications• How they respond
  3. 3. Major Areas Explored What percentage of companies Applications included: are impacted by acquisitions?  Enterprise Resource Planning (ERP) How are these acquisitions  Customer Relationship Mgt perceived? (CRM) What actions are taken by  Enterprise Asset Management (EAM) customers post-acquisition?  Project/Portfolio Mgt (PPM)  Supply Chain Mgt (SCM)
  4. 4. Key Findings• Over half (54%) of survey respondents have “experienced” an acquisition of their software vendor• Acquisitions that result in broad portfolios of products are not necessarily viewed negatively but this will depend on the nature of the portfolio• Concerns primarily arise over the continued support and innovation of products that are implemented at the time of the acquisition
  5. 5. Type of Business Process Mfg 38% Discrete Mfg 36% Other 12% Consultant 7%Contracting/Industrial Projects 5% Utility 1% 0% 10% 20% 30% 40%
  6. 6. Size of Company by Revenue $100M - $2.5B billion or $150M, 16% more, 29%$150M - $250M, 14% $250M - $1B - $2.5B, 11% $500M, 16% $500M - $1B, 15%
  7. 7. Applications Currently Implemented90% 78%60% 39% 42% 34%30% 18% 6%0% ERP CRM PPM EAM SCM Other
  8. 8. Have you used a product from a vendor that was acquired?35% 31% 31%30%25% 23%20% 16%15%10% 5% 0% Yes – product Yes – product was No Don’t know acquired before acquired after selected selected
  9. 9. Post Acquisition: Still running it?70% 68%60%50%40%30%20% 14% 10%10% 4% 4% 0% Yes, and plan to Yes, but plan to Yes, but plan to No, we have No, we have continue using replace it through replace it with a replaced it with a replaced it with a this product a competitive product from the product from the product from a selection "acquiring" "acquiring" different vendor vendor Most continue to run software post-acquisition. But whenvendor replaced, the incumbent vendor does not necessarily have the advantage. A search for replacement is > 3X as likely to be put out to bid.
  10. 10. Typical Goals of Acquisitions• Grow market share: – Growth of customer base is quick and in “steps” rather than gradual – Can be cheaper to acquire large blocks of customers than selling them one at a time – Recurring revenue stream benefits from larger base• Grow share of customer wallet: – Cross sell and up sell opportunity – Quicker to acquire a solution than to develop it internally – Strengthen internal expertise immediately• Enter new markets
  11. 11. How does the customer benefit?• Grow market share: – Stronger financial position – Can “bail out” struggling companies• Grow share of customer wallet: – Broader solution – Potential synergies between merged companies/solutions – Can accelerate (or slow) innovation processes• Enter new markets – Little to none unless customer is in (or entering) a market that is underserved by original vendor (questionable choice originally)
  12. 12. View of a broad portfolio of products?50% 44%40%30% 27%20% 15% 10%10% 4%0% Very unfavorably Somewhat Somewhat Very favorably I don’t care unfavorably favorably NOTE: Did not distinguish between a broad portfolio with the intent o buy market share (e.g. a large number of ERP solutions) versus those with the intent to broaden the solution footprint (surround ERP with complementary products).
  13. 13. Concerns?The product may be discontinued, forcing us to move onto another product from the… 58%The owner of the product may not continue to invest in or evolve the product in the… 55% The product we use may not be well integrated with the rest of the product… 48% We could wind up running a collection of separate point solutions owned by the… 33% None 10% 0% 25% 50% 75%
  14. 14. About IFSIFS is a public company (OMX STO: IFS) founded in1983 that develops, supplies, and implements IFSApplications™, a component-based extended ERPsuite built on SOA technology. IFS focuses on agilebusinesses where any of four core processes arestrategic: Service & assetmanagement, manufacturing, supply chain andprojects. The company has 2,000 customers and ispresent in more than 50 countries with 2,700employees in total.
  15. 15. IFS ERP Survey : Impact of Mergers & Acquisitions Contact Information: Charles Rathmann, Analyst IFS North America 262.317.7419